Klassen: Feeder cattle market momentum eases

(Photo courtesy Canada Beef Inc.)

The upward momentum in the feeder cattle complex appears to have subsided over the past week. Western Canadian prices were relatively stable with week-ago levels but there were cases of quality yearling packages (800-plus lbs.) trading $2 to $4 higher. Excellent pasture conditions and optimal weather have delayed feature sales this year in the eastern Prairies; therefore, central Alberta auction markets are setting the price structure for Western Canada. Local and southern Alberta operations are buying the bulk of the feeders at this time; U.S. and eastern Canadian orders were relatively quiet, with the U.S. market continuing on a softer trajectory path.

Quality larger-frame Charolais-cross steers averaging 900 to 925 lbs. were quoted in the range of $262 to $266 landed in the Lethbridge area. Black Angus-based steers averaging around 850 lbs. were reported at $272 in the same region. These cattle are coming straight off the grass and hungry with precious, costly gains through the drought-like summer of east central Alberta. The variation or discounts for fleshier yearlings can be in the range $5 to $8, especially in the heavier weight categories over 900 lbs.

Backgrounding operations have yet to step forward with the grain harvest in the final stages. In central and southern Alberta feedlots, mixed steer calves in the range of 500-530 lbs. were quoted at $332 to $338; smaller steer packages in the range of 600-630 lbs. were $295 to $300. The June live cattle futures are trading at an $8 discount to the April contract, making it difficult to pencil in a profit on these calves. Feedlots appeared to be shying away on these longer-time-frame cattle, tempering further upside.

The upcoming federal election is playing havoc on the Canadian currency outlook. If the NDP or Liberals get into play, the loonie is expected to drop faster than a guillotine while left-leaning policies also chop off any potential economic growth. This may be influencing the delayed marketing schedule for cow-calf producers in hopes that the weaker Canadian dollar will enhance export demand from south of the border. The offset is growing unemployment rates and surging food inflation on the heels of a sharp drop in disposable income for the average Canadian worker.

Jerry Klassen is manager of the Canadian office for Swiss-based grain trader GAP SA Grains and Produits. He is also president and founder of Resilient Capital, which specializes in proprietary commodity futures trading and commodity market analysis. Jerry owns farmland in Manitoba and Saskatchewan but grew up on a mixed farm/feedlot operation in southern Alberta, which keeps him close to the grassroots level of grain and cattle production. Jerry is a graduate of the University of Alberta. He can be reached at 204-504-8339.

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