Klassen: Feeder cattle remain vulnerable

Western Canadian feeder cattle prices were once again quite volatile this past week as market continues to digest overwhelming fed cattle supplies and lacklustre beef demand. In Alberta, calves under 700 lbs. were steady to $5 lower on average while heavier calves and yearlings were $3 to as much as $10 lower. In the eastern half of the Prairies, the market appeared to hold value trading in line with week-ago levels.

Volatility in the currency markets had U.S. buyers on the defensive, with feeder markets south of the border down $3 to $10 on average. Feeding margins continue to suffer and hope is fading that margins will recover. Wholesale beef values have failed to strengthen during this period of seasonal strong beef demand and packers are well covered into January.

The old saying that even a priest lies about his gas mileage is analogous to buyers’ market reports this fall, spurring on demand in a declining market. Top-quality cattle don’t set the tone in the market because most feeder cattle are average quality. Heavier discounts were noted on unweaned calves this week and there also appears to be a weather discount moving into the winter period. Cattle that can withstand the stress drew aggressive buying interest but outside major feeding regions, the market felt sluggish, factoring in transportation stress. Some of these cattle don’t gain well in the first 30 days which is costly.

Larger-frame mixed medium-flesh steers averaging 760 lbs. sold for $228 in central Alberta but the variance on 700-800 lbs. was quite extreme across Western Canada. Weaned Angus-cross steers averaging 650 lbs. were quoted at $243 landed in southern Alberta; black heifers averaging 635 lbs. were quoted at $230 in central Alberta whereas similar heifers in Manitoba were about $233-$240. A larger sale in central Alberta had mixed steers averaging 500 lbs. dip down to $258; however, in southern Manitoba, similar-weight larger-frame Charolais-cross steers were quoted up to $278 going to a local operation.

Statistics Canada last week estimated the barley crop at 8.2 million tonnes, compared to earlier estimates ranging from 7.3 to 7.8 million tonnes. Despite drought-like conditions in June, feed grain supplies are not as tight as earlier anticipated.

Alberta packers were buying fed cattle from $155 to $158 and breakeven pen closeouts are closer to $195. Feedlots are now carrying sufficient numbers and the longer this environment continues, the more vulnerable the feeder market will be later in winter.

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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