Klassen: Feeder market grinds lower

Compared to last week, western Canadian feeder cattle prices traded $4-$6 lower; however, yearlings and heavier calves experienced a week-over-week decline of $4 to as much as $8 with significant weakness noted in the eastern Prairie regions.

Finishing feedlots continue to sit on their hands. Order buyers were active on a scale-down basis and surprised by the number of cattle they bought by the end of the week. Fleshier backgrounded cattle were sharply discounted and these cattle were a severe drag on the market. Moderate temperatures enhanced selling interest, with ranchers moving larger volumes than anticipated. Alberta markets traded at a $3-$5 premium over eastern Saskatchewan and Manitoba, which is in sharp contrast to the market structure during November and December. Orders from Ontario have gone quiet for the time being.

In eastern Saskatchewan, Simmental-cross steers weighing just over 870 lbs. traded for $177 while black Angus-cross heifers in the same region were quoted at $160. It was interesting to note that smaller groups of fleshier steers around the same weight traded as low as $160-$165. Feedlots are concerned about the margin structure in the deferred positions and they’re not taking on the risk of lower-performing cattle.

Calf prices were also quite variable. In central Alberta, Charolais-cross 550-lb. steers traded for $234; exotic 550-lb. heifers were quoted at $192. In southern Alberta, medium-flesh, medium- to larger-frame tan steers weighing just over 700 lbs. were quoted at $192.

Alberta packers were buying fed cattle in the range of $162-$164 on a live basis and feedlot margins are hovering around $120 per head. We need to see finishing feedlots liquidate a larger number of fall-placed yearlings before they step forward more aggressively on replacements. Major operations are content with ownership levels for the time being.

— 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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