Klassen: Feeder cattle ratcheting higher

Western Canadian feeder cattle prices were steady to $2 per hundredweight (cwt) higher on average last week on seasonally light volumes and many auction barns in holiday mode. The market will likely be more established this week and there appears to be upside momentum in the short term.

Barley prices have been holding value but weakness in corn and wheat will likely spill over into local feedgrain prices in the next couple weeks.

At the same time, Alberta fed prices have reached highs not experienced since the spring of 2012. The focus is turning to lower first-quarter beef production and positive economic data.

The Alberta fed market was not well established last week. However, feedlots expect to sell fed cattle in the range of $118-$120/cwt over the next couple of weeks, which has caused feeding margins to move near break-even. Nebraska cattle traded at $2.05 per pound, which is near the yearly highs of 2012. Strength in the U.S. market will continue to lead Alberta values higher. Despite U.S. carcass weights running 20 pounds above last year, the fed market feels firm with lower beef production prospects for the first quarter of 2013.

Late in 2012, a small group of charolais cross silver steers weighing 650 lbs. sold for $155/cwt landed in southern Alberta feedlot. A mixed group of steer calves with no special feature weighing 750 lbs. were quoted at $137/cwt in the Lethbridge area. Light featherweight calves were relatively unchanged, which was largely due to mild temperatures and wet pen conditions. The U.S. Department of Agriculture reported that in Nebraska, 743-lb. steers sold for $154/cwt. Canadian feeder steers and heifer exports to the U.S. were up nearly 80 per cent over 2011, given the premium of the U.S. market over Canadian values. I expect this stronger export pace to continue in the first quarter of 2013.

Lethbridge barley prices slipped to $278 per tonne delivered feedlot this past week. Weakness in wheat and corn will likely spur on farmers selling barley in fear that prices will drop further. Farmers usually become aggressive sellers in a declining market and feedlot demand is basically full for January. Barley prices are expected to come under pressure, which will enhance feeder cattle prices in Western Canada.

I’m expecting the feeder cattle market to slowly trend higher in the first quarter of 2013. Seasonally, fed cattle prices peak in late March and with softer barley values, the feeder market should experience stronger buying interest.

— 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] for questions or comments.

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