Klassen: Feeder cattle market experiences mixed tone

(Photo courtesy Canada Beef Inc.)

Compared to last week, western Canadian feeder cattle sold $2 higher to as much as $4 lower. Larger groups of uniform cattle once again carried a premium but the bulk of feeders were small packages of various quality. Buyers were more aggressive on the 700- to 850-lb. weight categories as they target the fed cattle market for late 2020 or the first quarter of 2021. Many feedlot operators believe the COVID-related backlog of fed cattle should be cleaned up by this time and the demand should resume some type of normalcy.

Frontline comments from east-central Alberta had 725-lb. medium- to larger-frame tan steers with lower flesh levels dropping the gavel at $205 while similar quality 710-lb. heifers sold for $184. In the Lethbridge area, medium-frame greener red steers weighing 830 lbs. were quoted at $187; similar-quality 813-lb. heifers brought back $175. South of Edmonton, black mixed medium- to larger-frame thinner steers averaging just over 900 lbs. were valued at $178.

Pastures are in excellent shape across the Prairies but we’re heading into the period when conditions deteriorate in the Palliser Triangle. Calf prices are being held up by the strong yearling market and the anticipation of burdensome feed grain prices this fall. The available yearling supply seems to be tighter each year so feedlot operators are extending ownership in the lighter weight categories. In southern Alberta, red mixed steers averaging just under 600 lbs. were reported at $227 and a smaller group of black heifers weighing 675 lbs. were quoted at $187. In central Saskatchewan, larger-frame tan steers weighing 515 lbs. were quoted at $232; in central Alberta, 530-lb. Angus blended steers were quoted at $228.

Feedlot margins are struggling in severe red ink in the short term; there is no doubt about it with Alberta packers taking ownership in the range of $120-$127 on a live basis. Break-even pen closeouts are in the high $150s. This is a very difficult time but you wouldn’t know it by western Canadian feeder cattle prices. We’ve seen the weekly slaughter pace improve over the past month but we have a serious backlog of fed cattle on both sides of the border. This is a “sellers” market for feeder cattle.

— 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 or via his website at ResilCapital.com.

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