Klassen: Lower seasonal trend continues in feeder cattle

Western Canadian feeder cattle prices were down $3-$5 per hundredweight on average last week; feedlot buying interest dropped off sharply for replacement cattle as the fed market dipped to $110/cwt, which was down $4-$6/cwt from prices earlier in April.

Comments from the industry suggest that packers experienced one of the worst weeks in history with wholesale choice beef prices dropping to six-month lows. U.S. feeder cattle prices were $4-$8/cwt lower and cattle under 500 pounds were as much as $15/cwt lower.

A small group of silver age-verified 635-pound steers topped out at $165/cwt in central Alberta but cattle of similar weight regularly traded from $158-$160/cwt in the same region. A sale in east-central Alberta saw 835-pound medium-flesh replacement steers bring back $135/cwt. Southern Alberta feedlot operators were preparing for Easter weekend and most will run skeleton crews, limiting processing capability until the third week of April.

Negative media reports over the so-called "pink slime" or lean finely textured beef is actually scaring away consumers from all grades of retail ground beef in Canada and the U.S. An online study suggested 25 per cent of consumers either stopped or slowed ground beef purchases. The cattle market is always one "media scare" or "consumer panic" from falling apart and this problem may take another three to four weeks to dissolve amongst the general population.

October live cattle futures are down $12 from the early March highs, which suggests fed cattle revenues for August through October delivery have deteriorated by $175 per head. U.S. feedlot owners are currently in red ink by $120 per head and Alberta feedlots are below breakeven values of $50 per head. Feedlot operators are anxious to get the cost down on replacement cattle to balance financial positions.

— Jerry Klassen is a commodity market analyst in Winnipeg and maintains an interest in the family feedlot in southern Alberta. He writes an in-depth biweekly commentary, Canadian Feedlot and Cattle Market Analysis, for feedlot operators in Canada. He can be reached by email at [email protected] or at 204-287-8268 for questions or comments.

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