Klassen: Feeder market banks on fed cattle recovery

Compared to last week, western Canadian yearling prices were $4 higher to $4 lower, with the exception of southern Alberta where quality packages were unchanged to $6 higher. Calves and grass cattle traded $2 lower to as much as $5 higher. Certain auctions in Western Canada reported calves trading $4 to as much as $8 higher.

It’s that time of year when yearling supplies are limited, which caused prices for 900-plus-lb. cattle to be quite variable. Small packages of fleshier yearlings were heavily discounted. On Thursday and Friday, the bounce in feeder cattle futures appeared to renew buying enthusiasm from major feedlot operations, especially in the Lethbridge area. Mid-weight feeders in the 650- to 850-lb. category were well bid late in the week. Order buyers were surprisingly busy with strong interest in the lighter weight categories. The buying sentiment moved through a transition phase this past week. Ideas are that the major Alberta packing plants will start bidding for fed cattle next week, which contributed to positive tone.

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In southern Alberta, a larger group of medium- to larger-frame black steers averaging 977 lbs. were quoted at $160 and similar-quality steers weighing 887 lbs. were valued at $172. In central Alberta, medium- to larger-frame black heifers weighing 875 lbs. were quoted at $161. In central Saskatchewan, Charolais-based steers averaging 750 lbs. dropped the gavel at an astonishing $196, while a smaller group of similar-quality 733-lb. steers reached up to $197. Northwest of Winnipeg, a smaller group of Angus-blended steers averaging 900 lbs. were quoted at $169.

Cattle buyers were surprised by the jump in calf prices. In the Lethbridge area, smaller group of red steers weighing 586 lbs. dropped the gavel at $242 and black steers weighing just over 600 lbs. were quoted at $237. In central Saskatchewan, Charolais-based steers weighing 680 lbs. reportedly sold for $210 and similar-quality heifers averaging 675 lbs. were valued at $186. In southern Manitoba, red heifers weighing just over 600 lbs. were quoted at $191.

Despite the despair in the finishing feedlot sector, feeder cattle prices were surprisingly strong this past week. Sometimes, the feeder market is hard to explain. Given the current price structure of feeder cattle, feedlot operators appear to have a friendly outlook for fed cattle prices in the fourth quarter of 2020 and first quarter of 2021. No one wants to be left out when the fed market starts to recover.

— Jerry Klassen manages the Canadian office of Swiss-based grain trader GAP SA Grains and Produits Ltd. and is president and founder of Resilient Capital, specializing in proprietary commodity futures trading and market analysis. Jerry consults with feedlots on risk management and writes a weekly cattle market commentary. He can be reached at 204-504-8339 or via his website at ResilCapital.com.

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