Klassen: Feeder cattle market enters summer doldrums

Western Canadian feeder cattle prices steady to $5 lower across all weight categories last week with most auction barns starting their summer holiday schedule. Most sales rings are closed next week. Limited numbers were on offer across the Prairies, which caused diverse price action in certain regions. Heavier feeders are hard to come by this time of year and feedlot operators are content to conserve their purchasing power. A small group of mixed steers with no special features and with medium to heavier flesh levels averaging around 840 lbs. were quoted $200 in central Alberta.

Small groups of higher-quality cattle and lighter-weight feeders tended to hold value with week-ago levels in the major feeding regions. Mixed steers averaging just over 700 lbs. were quoted at $215 landed in southern Alberta. Medium- to larger-frame red heifers averaging 525 lbs. were trading at $225 landed in the same region.

Pasture conditions are quite favourable and it appears there’ll be no shortage of forage supplies this year. This usually underpins the price structure in the short term. All eyes are on the drought-like conditions in the U.S. northern Plains. This could be a major factor if placements are larger than anticipated during the summer.

Statistics Canada’s recent report was constructive for the barley market, and with spring wheat futures skyrocketing, feed grain prices in Western Canada could rally $40-$60 per tonne. This could add about $50 per head of additional input costs next fall. Feedlot operators are getting nervous holding high-priced feeders from late April and May. Feeding margins are about $150-$200 per head but are expected to erode in the fall period. The market outlook has changed over the past few weeks. All of a sudden, these cattle are not a blind bargain at the current levels. Buyers are trembling on the balance and not found wanting.

— Jerry Klassen manages the Canadian office of Swiss-based grain trader GAP SA Grains and Produits Ltd. and is president and founder of Resilient Capital, specializing in proprietary commodity futures trading and market analysis. Jerry consults with feedlots on risk management and writes a weekly cattle market commentary. He can be reached at 204-504-8339.

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