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Klassen: Feeder cattle prices edge higher

Western Canadian feeder cattle prices were steady to $2 higher on average last week. Alberta fed cattle prices reached $110 per hundredweight, up $3 from a week ago, and this strength spilled over into the feeder complex.

A group of 100 Charolais-cross steers averaging 875 pounds, looking green and a bit fleshy, sold for $139/cwt in southern Alberta. Calves were also stronger with a nice pen of red Limo-cross steers averaging 570 lbs. selling for $153/cwt in central Alberta.

Fed cattle futures surged higher on tight market-ready supplies. Despite packing margins dropping deeper in red ink, cash prices jumped to $124/cwt on a live basis in Nebraska; a few loads of high-quality dressed cattle traded at $200/cwt. Buying enthusiasm surged for all weight classes of feeder cattle with the U.S. market showing steady gains of $3-$5/cwt. In Kansas, a fresh group of steers weighing 431 lbs. sold for $199/cwt.

The feeder market is functioning to encourage expansion in Canada and the U.S. However, the industry continues to experience herd liquidation in the U.S. southern Plains as winter wheat conditions remain poor. This environment has created an abnormally high price structure further enhanced by record fed cattle prices.

Looking forward into next fall, western Canadian feeder cattle prices could be $10-$15/cwt above current levels. August 2012 feeder cattle futures touched record highs of $150/cwt as the market is anticipating lower available supplies. December 2012 live cattle futures also reached all-time highs over $130/cwt; the market is factoring in a risk premium due to the uncertainty in beef production in the fourth quarter of 2012.

— Jerry Klassen is a commodity market analyst in Winnipeg and maintains an interest in the family feedlot in southern Alberta. He writes an in-depth biweekly commentary, Canadian Feedlot and Cattle Market Analysis, for feedlot operators in Canada. He can be reached by email at [email protected] or at 204-287-8268 for questions or comments.

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