Klassen: Feeder market starts year with cautious tone

(Photo courtesy Canada Beef Inc.)

Western Canadian feeder cattle prices were relatively unchanged to slightly softer compared to mid-December. The market was lightly tested, with direct off farm to feedlot trade, but auction market activity was rather quiet.

Winter conditions in southern Alberta caused buyers to be on the defensive, with lighter calves reflecting small discounts; however, vaccinated feeders on stable diets experienced limited slippage.

This was the first major bout of adverse weather and many feedlots were running a skeleton crew. Instead of adding to the stress of bedding and pen checking, feedlot managers held off on purchases to ease the processing burden. Strength in the Canadian dollar also set a negative tone and overshadowed all weight categories. Although the Nebraska market was US$2-$4 higher, U.S. buyers were not actively shopping in Western Canada last week. All these factors contributed to the weaker market sentiment.

Steers and heifers weighing 850 lbs. were hard to define, but feedlot buying ideas were $3-$5 below month-ago averages. In central and southern Alberta, medium- to larger-frame mixed steers averaging 700 lbs. were quoted in the range of $190-$196. In southern Alberta, steers averaging 600 lbs. were valued in the range of $205 to as high as $210; heifers weighing 600 lbs. were valued from $180 to $185 in the same region. There were not many cattle on offer but these values are indications where feedlots would show interest.

Prior to the year-end, there appeared to be an anxious tone in the market, with some buyers waiting until the last minute to cover their 2018 requirements. This caused the market to be quite variable and purchases were made even if the cattle didn’t quite pencil out. This week, one could sense the change in market sentiment. Buyers were sharpening their pencils and if the economics and the risk/reward didn’t look favourable, they were content to sit back and wait.

— 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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