Klassen: Various views on the feeder cattle market

If you talked to three Western Canadian cattle buyers this week, you probably would receive four different views on the market. Certain auction barns were reflecting an average week-over-week decline of $3 to $5 but feature strings of cattle were back up to historical high prices. Early sales in the season are like tryouts at a hockey camp, every player has a feature shift during the scrimmage but coaches evaluate on the average overall game. Feather-light fancier calves averaging 400 pounds from the drought stricken parts of Alberta were trading in the range of $380 to $390. Buyers were scratching their heads with quality silver and black steers just over 700 pounds trading from $290 to $300. Similar cattle in the Edmonton area were quoted from $285 to $290. Steers 700 pounds plus were trading on average $4 to $6 lower this week in Central Alberta. Major feedlot operators picked up where they left off 2 months ago however the environment is totally different. The yearling market should be more defined next week with certain auction markets advertising feature sales. U.S. feeder cattle prices continue to trend lower trading down $7 to $10 from seven days earlier.

The Canadian dollar has no friends for the time being with the media hyping up further weakness in the energy sector. Negative news can become a self fulfilling prophecy as it weighs on all aspects of consumer sentiment. One would think peak grilling season would support wholesale beef prices but North American packers are well covered for their nearby requirements. Bids from South of the Border equated back to Alberta at $179 to $181 on a live basis which is a far cry from the May highs of $204. Local packer bids on a dressed basis were reported from $306 to $307, down $3 from last week. Fed cattle values remain under pressure and consumer confidence is fading faster than the financial energy index. As soon as there is recession, people look to the government for redistribution of wealth. There is no doubt we’ll see equity transfer from the feedlot sector to the cow calf producer over the next couple months because it’s hard to pencil a profit on the feeders sold this week. Feedlots are in summer clearance mode with plenty of pen space available; the first months of season are always characterized by “lets just get’em in”.

Silage season is in full swing across the prairies and the barley harvest is right around the corner. Barley delivered Lethbridge on Friday dropped a whopping $20/mt from last week selling for $220/mt delivered. Feedlot operators are hoping for some reprieve in input costs with pen closeouts moving into negative territory. Adverse hail storms have hurt the silage crop in Southern Alberta which could cause higher forage prices longer term.

 – Jerry Klassen is manager of the Canadian office for Swiss based grain trader GAP SA Grains and Produits Ltd. He is also President and founder of Resilient Capital which specializes in Proprietary Commodity Futures Trading and Commodity Market Analysis. Jerry owns farmland in Manitoba and Saskatchewan but he grew up on a mixed farm feedlot operation in Southern Alberta, which keeps him close to the grassroots level of grain and cattle production. Jerry is a graduate of the University of Alberta. He can be reached at 204-504-8339.

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