Klassen: Feeder market eyes feed grain rally

Western Canadian feeder cattle prices were relatively unchanged from week-ago levels. Limited cattle were on offer with the shortened holiday week, but quality groups were well bid. Feedlot operators have been aggressively selling fed cattle, freeing up pen space.

Although feedlot inventories decline in the summer, many operations want to carry sufficient numbers into the fall. At this time of year, there’s not many cattle available so the few buyers stepping forward are sufficient to support the overall price structure. Keep in mind, we’ve seen significant equity recovery in the feedlot sector over the past six months.

In northern Alberta, a small group of mixed steers weighing just under 700 lbs. traded for $225. In southern Alberta, mixed steers in the range of 525 to 560 lbs. were quoted from $240 to $246. Mixed heifers averaging around 530 lbs. were quoted at $228 in the same region.

Canadian feedlot operators were also watching prices south of the border, where feeder cattle prices have been rather resilient. The U.S. Department of Agriculture reported that 736-lb. yearling steers traded for US$171 at Valentine, Nebraska.

Barley prices have rallied approximately $30-$40 per tonne over the past week, which has caught many feedlot operators off guard. Alberta fed cattle prices were reported from $144 to $146 this week, down from $171 in early June. The Canadian dollar has strengthened to US77.75 cents.

Feedlot margins remain in positive territory, but we could see deterioration later in fall, which would set a negative tone for the feeder market.

— 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.

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