Klassen: Feeder market takes direction from live cattle futures

(Photo courtesy Canada Beef Inc.)

Compared to last week, western Canadian yearling markets traded steady to $4 lower; midweight calves traded $3 lower to $3 higher and calves under 550 lbs. were relatively unchanged.

Yearling supplies are limited at this time of year but demand is also hard to find. These cattle will come on the fed market during the second quarter and beef supplies will be burdensome at this time. Light and mid-weight calves are quite variable for two reasons. Buyers that will push weight gain efficiencies have little room to manoeuvre because margins are very tight for finishing these cattle. On the flipside, the fed cattle market for September to December 2021 and margins look more profitable for this timeframe. The grasser market is expected to be very strong again next spring. The feeder market is feeling the effects of the prolonged negative margins in the finishing sector. Buyers are scratching their heads because current feeder prices don’t pencil profitably. The COVID-19 pandemic is hurting margins in the short term and there is a fair amount of uncertainty moving forward.

In east-central Alberta, medium- to larger-frame tan steers with lighter flesh levels coming off a light grain ration weighing 925 lbs. sold for $171 and similar quality heifers weighing 920 lbs. were quoted at $155. In central Alberta, a group of Simmental-blended steer calves averaging 850 lbs. also on light grain were quoted at $180.

In southern Alberta, Charolais-based steer calves with heavier butter levels weighing 740 lbs. were quoted at $188. North of Calgary, a group of mixed medium-frame steers with lighter flesh averaging 725 lbs. reached up to $191. In Manitoba, a group of Charolais-based steers with medium-flesh levels weighing just over 700 lbs. dropped the gavel at $194 and black heifers of similar weight were quoted at $175.

In southern Alberta, mixed black semi-weaned steers coming off a full health program weighing 650 lbs. were quoted at $194 and similar-quality heifers weighing 625 lbs. were valued at $182. In central Saskatchewan, age-verified, vaccinated black steers coming off their mothers weighing just over 500 lbs. were quoted at $230 and similar-quality and -weight heifers were valued at $201.In Manitoba, mixed steers weighing 450 lbs. were reported at $248 and mixed heifers of similar weight were quoted at $205.

These cattle are a gamble, there is no doubt about it. Feed barley prices continue to percolate higher and deferred live cattle futures are struggling to trade higher. The Canadian dollar appears to have further upside. All major currencies have appreciated against the greenback with left-wing policies set to temper U.S. economic growth longer-term. It’s difficult to secure labour and many feedlots are short-staffed. Feedlots want calves on a full health program because it may take a couple of weeks to process these cattle. Challenges are coming from every angle.

— 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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