The upward trend continues in feeder cattle as prices were once again $3 to $5 per hundredweight (cwt) higher last week. Rain across Western Canada has renewed buying interest for grass cattle. Farmers with any significant amount of pasture are now shopping for feeder cattle.
The optimistic outlook for fed cattle has also brought the feedlot buyer back to the sales ring. Feedyards are liquidating larger volumes of market-ready fat cattle and these operators are anxious to reload, given the positive outlook for the fall market.
Our domestic demand has been rejuvenated now that feedlots are comfortable with their margin structure in the deferred months. There is no shortage of feedgrains around and with the poor price outlook for cereals, the smaller farm feedlot operator is also buying feeder cattle, driving demand higher. They can pencil out more value putting grain through an animal than selling grain in the domestic or export markets.
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U.S. livestock: Cattle strength continues
Cattle futures on the Chicago Mercantile Exchange were stronger on Friday, hitting fresh highs to end the week.
Feeder cattle exports are exceeding our earlier expectations. April shipments to the U.S. could reach over 40,000 head as the weekly average is above 10,000 head. U.S. feedlots are shopping north of the border as their local auction markets show a strong premium over Canadian prices.
In bullish cattle markets, cash prices lead the futures market higher. This unexplainable phenomenon is frustrating because it is difficult to hedge production. Feeder cattle futures are at historical highs and it may be prudent for producers to buy some put options on the feeder cattle futures. While there is no signal that this upward trend is over, these prices are too high not to do anything.
Table 1. Feeder steers, week ending April 30, US$ per cwt.
| Weight range, lbs. | Alta. | Sask. | Man. | Neb. | Kan. |
| 500-600 | 122 | 119 | 121 | 138 | 130 |
| 600-700 | 114 | 113 | 118 | 128 | 122 |
| 700-800 | 105 | 105 | 110 | 108 | 104 |
— 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 called Canadian Feedlot and Cattle Market Analysis for feedlot operators in Western Canada. He can be reached by email at [email protected] or 204-287-8268 for questions or comments.
The material contained herein is for information purposes only and is not to be construed as an offer for the sale or purchase of securities, options and/or futures or futures options contracts. While the information in this publication cannot be guaranteed, it was obtained from sources believed to be reliable. The risk of loss in futures trading can be substantial. The article is an opinion only and may not be accurate about market direction in the future. Do not use this information to make buying or selling decision because adverse consequences may occur. This information may be wrong and may not be correct about current market conditions in all areas of Canada. This is an opinion only and not based on verified facts.
