Friday November 28, 2014

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Klassen: Western Canadian feeders steady to $2 higher

Western Canadian feeder cattle prices were steady to $2 per hundredweight (cwt) higher on average, with certain auction barns reporting prices $2-$4/cwt higher, especially for lighter weight feeders under 600 pounds.

The Canadian market was led higher by prices in the U.S. major markets which were a solid $2-$4/cwt higher on average. Alberta packers were buying fed cattle in the range of $113-$114/cwt last week while southern Alberta barley prices reached an all-time high of $295 per tonne delivered.

Many feedlot operators struggle with a conflicted state of economics, balancing the nearby negative margin structure with renewed enthusiasm for the latter half of 2013.

A small group of exotic steers averaging 476 pounds sold for $172/cwt landed in the Lethbridge area; larger-frame red Simmental-cross steers weighing just under 550 lbs. sold for $158/cwt in the same region. Black Angus-cross steers weighing 700 lbs. sold for $140/cwt in the Calgary area. A smaller group of backgrounded Charolais-cross steers weighing just over 800 lbs. sold for $125/cwt f.o.b. the feedlot in southern Alberta.

Producers are encouraged to use these features as a guide to their local area in Western Canada. Subtracting the freight from the major feeding region provides the indicator for the overall price structure.

The largest factor influencing feeder cattle prices in the short term will be the cost per pound gain. Feed wheat is now trading at a discount to barley, causing more widespread use in the rations. Wheat fundamentals are not as tight as barley and the barley market needs to encourage the use of alternate feedgrains moving toward the harvest period. The barley market also needs to encourage acreage for the 2013-14 crop year.

Alberta wholesale beef prices are about $10/cwt below year-ago levels, which has stemmed the rise in local fed cattle prices. However, U.S. wholesale choice values are similar to last year, resulting in the stronger fed and feeder cattle complex. Consumer demand in Canada is contending with a prolonged winter delaying the grilling season; stagnant economic and income growth; and sluggish retail movement for higher-end cuts such as beef tenderloins.

Look for feeder cattle prices to stay trading sideways after the small bounce last week. Demand for grass cattle should be more aggressive over the next month, lifting the lighter weight categories. Feedlot margins will continue to hover in red ink until early summer, which will limit the upside on the heavier replacements.

-- 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 for questions or comments.


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