Klassen: Feeder cattle markets digest USDA inventory report

Western Canadian feeder cattle markets traded $5 higher to as much as $10 lower compared to week-ago levels.

The U.S. Department of Agriculture’s Cattle on Feed report, along with U.S. inventory data, confirmed larger beef supplies in upcoming months, which set a negative sentiment amongst feedlot operators. Auction markets experienced variable price ranges on similar-weight and -quality cattle; order buyers were doing their best to chip away on premium bunches but once this demand was filled, the market felt vulnerable and faltered. Direct sales from backgrounding operators to finishing feedlots stemmed buying interest in the auction ring in the higher weight categories. Major feeding operations know the quantity of backgrounded cattle will increase over the next month, so there was no need to be aggressive in the short term. Calf values were also quite variable; heavier weaned pre-conditioned calves tended to hold value but 500- to 600-pounders traded as much as $10 lower from last week. Weakness in deferred live cattle futures put buyers on the defensive and the calf market appeared to incorporate a risk discount.

Limo- and Simmental-cross larger-frame medium-flesh steers averaging 900 lbs. were quoted in the range of $172-$176 in southern Alberta. In central Alberta, 800-lb. medium-frame medium- to lower-flesh 800-lb. Charolais-cross steers were hovering around $175, while mixed medium-frame 800-lb. heifers were trading from $145 to $148 in the same region. Exotic steers weighing 575 lbs. were quoted at $208 in the Lethbridge area while mixed steers averaging 550 lbs. traded from $198 to $202 in southern Saskatchewan.

Alberta packers were buying fed cattle from $158 to $160 this past week, slightly lower than seven days earlier. The futures markets appear to be leading the cash market lower for both fed and feeder cattle. The 2016 U.S. calf crop was estimated at 35.1 million head, which was a year-over-year increase of one million head. The number of U.S. beef cows that have calved reflected a similar year-over-year increase, so the aggressive herd expansion continues.

— 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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