For the week ending February 8, the Western Canadian feeder cattle market was hard to define. Prices were softer earlier in the week but were creeping higher by Friday. Sales volumes were limited for two main reasons. First, temperatures dipped to minus 40 degrees Celsius in Central Alberta with some locations showing minus 45. It was too cold to market cattle or operate sale barns. Secondly, the threat of U.S. tariffs caused producers to hold back on sales. Although the implementation of U.S. tariffs and Canadian retaliatory measures were delayed for 30 days, it was too late to plan for the week.
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On February 3, the report from the Killarney Auction Mart had a smaller package of Charolais steers weighing 972 pounds selling for $330. A smaller package of Charolais steers weighing just under 800 pounds sold for $367.
At Yorkton, there were half as many cattle as expected with adverse winter conditions limiting off-farm logistics. In Lloydminster, there were only 250 head on offer. Prices in Saskatchewan were down $20-$25 from week-ago levels on average. Cattle merchants didn’t view last week’s price action as a true representation of the market. In Central Saskatchewan, a smaller package of good quality red steers weighing 725 pounds were valued at $390. Similar weight feeders were valued at $430 seven days earlier.
In late November 2024, the U.S. closed their border to Mexican feeder cattle after a positive detection of New World Screwwarm (NWS) in southern Mexico. On February 1, the U.S. Department of Agriculture’s Animal and Plant Health Inspection Service (APHIS) announced the resumption of cattle imports from Mexico. During the first quarter of 2024, exports to the U.S. were at 105,000 head per month. Given the backlog of cattle in Mexico, we’re expecting Mexican feeder cattle exports to the U.S. to reach 150,000 head per month. This will weigh on both Canadian and U.S. feeder markets in short term. This may also cause pressure on the October and December live cattle futures.
On January 21, the managed money long on the feeder cattle futures reached a record of 27,983 contracts. On February 4, the funds had only sold off about 2200 from the peak. We expect the managed money to sell about 15,000-20,000 contracts on the feeder cattle futures over the month. This will weigh on the replacements over 700 pounds while lighter calves should hold value.
Alberta packers were buying fed cattle on a dressed basis at $460-$465/cwt. Alberta prices have strengthened by $15-$20/cwt over the past couple of weeks. Using a 60 per cent grading, this equates to a live price of $276-$279/cwt delivered. Break-even pen closeouts are around $265/cwt. Cattle on feed 120 days or longer as of January 1 were down 42 per cent from year-ago levels in Alberta and Saskatchewan. The Alberta fed market has strengthened and carcass weights are below year-ago levels.
— Jerry Klassen 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.
