Klassen: Feeder market in summer mode

Set-aside program not having much effect yet on prices

(Photo courtesy Canada Beef Inc.)

Compared to last week, western Canadian feeder cattle prices were relatively unchanged. Volumes are quite thin at this time of year, which makes the market hard to define. Steady demand surfaced on quality groups of yearlings and calves, while late stragglers and heavier-flesh feeders were severely discounted.

Pasture conditions are favourable across the Prairies and there is no shortage of forage and feed. Feedlots in central Saskatchewan and certain parts of Alberta are contending with poor pen conditions and feedlots have skeleton crews working due to holidays.

Feedlot margins continue to hover in negative territory so there is a cautious tone moving forward. Major operations are still holding large supplies of market-ready cattle and the fed cattle set-aside program isn’t have much of an effect on Alberta fed prices so far. Current feeder cattle prices don’t quite pencil profitably, but feed grain prices are expected to be lower in the fall period, which will decrease the cost per pound gain. This appears to be underpinning the feeder market in the short term.

In central Alberta, larger-frame medium- to lower-flesh mixed steers just under 1,000 lbs. reached up to $161 while similar-quality heifers averaging 980 lbs. were quoted at $154. In southern Alberta, a small group of medium-frame thinner mixed steers averaging 845 lbs. were quoted at $182; medium-frame mixed heifers weighing 800-825 lbs. were quoted at $163-$168 in the same region. In most cases, small groups of steers weighing 800-825 lbs. were trading from $178 to $185 across Alberta. Again, low volumes made the market hard to define and prices were quite variable on similar weight yearlings.

There were too few calves to quote a market this past week. Ranchers are contending with excellent pasture conditions. Secondly, many cow-calf operators believe the COVID pandemic is still depressing calf prices. These two factors may delay calf marketings during the fall period, especially if the ranch is well supplied with forage. In some cases, the rains have deteriorated quality of freshly cut hay and the timing of hay processing has been difficult this summer. In central Alberta, a small group of mixed steers weighing 650 lbs. were quoted at $212 and mixed heifers averaging 600 lbs. were reported at $188. Small groups of mixed steers weighing 575 to 625 lbs. were quoted from $220 to $228 across Alberta. Buying interest for calves is also non-existent at this time of year.

Feeder cattle futures were percolating higher last week. Keep in mind the October feeders are the April live cattle. It appears the cattle complex is anticipating the COVID pandemic will be largely behind us by the time next spring rolls around.

— 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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