Klassen: Feeder market recovery continues

Strength in fed cattle prices the main driver

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Compared to last week, western Canadian yearling prices were $6-$8 higher on average while calves were unchanged to $4 higher. Strength in fed cattle prices was the main factor driving the feeder cattle market this week. Alberta direct fed cattle sales were reported on a live basis from $150 to $153 f.o.b. the feedlot, up from last week’s range of $140-$147. Break-even pen closeouts are in the range of $155-$160 so margins remain in negative territory, albeit not as severe as earlier in April.

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Backgrounding operators that were holding back on sales earlier in spring continue to liquidate. There were decent volumes of yearlings on offer last week in Alberta but calf numbers were limited. Smaller packages of “late stragglers” were heavily discounted off average prices. Some of the backgrounded cattle were quite fleshy and the quality was variable. Smaller volumes were available in Manitoba and Saskatchewan. Southern Alberta was once again a hot pocket with feedlot operators focusing on local cattle. Keep in mind that Alberta and Saskatchewan feedlot inventories as of May 1 were 14 per cent above the five-year average.

In the Lethbridge area, medium- to larger-frame black steers with medium flesh levels averaging 874 lbs. dropped the gavel at $187 and similar-quality cattle weighing 823 lbs. sold for an astonishing $193. In central Alberta, a larger group of mixed steers weighing just over 900 lbs. were quoted at $176 while mixed heifers weighing 920 lbs. were valued at $159. In west-central Alberta, tan heifers weighing 875 lbs. were quoted at $163. There was no shortage of demand for good-quality yearlings, especially if the feedlot knew the backgrounding operation.

Calf numbers were down from previous weeks but quality packages were very strong. In west-central Alberta, a larger group of black steers weighing 500 lbs. sold for a whopping $253 while red heifers weighing 500 lbs. were reported at $210. In central Alberta, mixed steers weighing 620 lbs. were valued at $213 while 600-lb. red heifers were quoted at $196. In southern Alberta, red heifers weighing 709 lbs. dropped the gavel at $181. In west-central Alberta, Simmental-based steers weighing just under 750 lbs. were valued at $205.

Feedlots want to have some cattle on offer for the fourth quarter; despite the larger feedlot inventories, there appears to be steady demand on quality yearlings. We could see the Canadian feeder market divorce from that of the United States. The number of U.S. feeder cattle outside feedlots as of April 1 was 20.539 million head, up 3.3 per cent or 657,000 head from April 1, 2019. In the U.S., there is a backlog of cattle in feedlots and in the cow-calf/backgrounding sectors, whereas in Western Canada, the backlog is more confined to finishing feedlots.

— 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.

About the author

Markets Analyst

Jerry Klassen

Jerry Klassen is the manager of Canadian operations for Swiss-based grain trading house GAP SA Grains & Products.

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