Klassen: Sluggish consumer demand tempers feeder cattle

Alberta feeder cattle prices were steady to $2 per hundredweight (cwt) higher last week while values in the eastern Prairies were slightly softer. Buying interest for grass cattle was noted at many auction markets which caused lighter feeders to trade with a stronger tone.

The cattle complex seems to be suffering from sluggish consumer spending patterns. Lower-priced pork and poultry is attractive to the average price-conscious consumer. Wholesale beef prices jumped $10/cwt, with choice product reaching $195/cwt, which is near yearly highs. In the past, these higher prices for wholesale beef have been short-lived as consumer demand tends to drop off considerably, especially for higher-end cuts.

A small group of mixed steers weighing 475 pounds sold for $174/cwt east of Edmonton, which was considered good value. Exotic steers with medium flesh weighing 630 lbs. sold for $156/cwt in central Alberta. Top-quality Charolais-cross steers weighing 882 lbs. were quoted at $126/cwt, landed in southern Alberta feedlot. Red Angus-cross heifers weighing 750 lbs. traded at $123 landed in the Lethbridge area.

Despite the weaker Canadian dollar, Alberta packers were buying slaughter cattle in the range of $112-$115/cwt, down about $3/cwt on average from last week. Feedlot operators appear to be holding back on sales in hopes the stronger wholesale prices will eventually translate into higher fed prices. Feedlot margins are now in red ink by approximately $6/cwt. The ongoing drain of equity has caused feedlot operators to lower buying ideas for feeder cattle.

Record-high feedgrain prices have caused feeder cattle to trade $15-$20/cwt below year-ago levels. Barley acres for 2013 are expected to be unchanged to down 10 per cent, so Western Canada will experience another tight year of barley supplies. However, record corn acreage and average yields would result in a tidal wave of U.S. corn and DDGS imports into Western Canada next fall.

I’ve softened my view on the feeder market, as prices could remain relatively stagnant until late summer, when new-crop feedgrains start to come on the market. Replacement cattle are not getting any help from the fed market with the summer months showing a discount to nearby delivery.

— 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] for questions or comments.

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