Klassen: Feeder market faces many headwinds

Compared to last week, western Canadian feeder cattle prices were relatively unchanged. Feedlot operators and order buyers were contending with a number of variables which resulted in a defensive tone.

First, the Canadian dollar rallied late in the week, derailing any buying interest from south of the border. U.S. feeder cattle markets were also trading $2-$4 below week-ago levels as auction markets absorb a sharp year-over-year increase in available supplies. Secondly, barley prices continue to percolate higher and feedlot operators were constantly recalculating their cost per pound gain. The final knock-out punch came Thursday, when Alberta fed cattle traded $7 below week-ago levels, at $155. Feeding margins are now hovering in negative territory and with the weaker live cattle futures, it looks like this environment will continue into the summer. The southern Alberta premium from last week has eroded.

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Prices were flat across the Prairies. In central Alberta, medium- to larger-frame 940-lb. tan steers with minor to heavier butter levels traded for $170. Barkier Charolais-based steers averaging just under 850 lbs. were quoted at $177 in western Saskatchewan. Black larger-frame medium-flesh heifers weighing 844 lbs. were quoted at $159 in the same region.

Medium to lighter weight categories experienced a mixed tone. Manitoba and eastern Saskatchewan haven’t seen any precipitation since March but the market held value in these drier areas. Red heifers averaging just over 600 lbs. were quoted at $187 in east-central Alberta; tan mixed steers weighing 620 lbs. were quoted at $225 south of Edmonton. Angus-based steers weighing just over 600 lbs. were quoted at $218 in southwestern Manitoba. Conditions in Manitoba are such that feeder cattle could come on the market sooner than normal this summer, because forage supplies will be extremely tight.

— 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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