Saturday November 22, 2014

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Klassen: Favourable weather supports West's feeder market

Favourable weather in southern Alberta, along with stronger fed cattle prices, were the main factors causing the feeder market to trade $2 to $4 per hundredweight (cwt) at most auction barns in Western Canada. Alberta packers were buying slaughter cattle in the range of $118-$119/cwt last week, up a solid $5/cwt from seven days earlier, and it now looks like feedlot margins are near breakeven.

Wholesale beef prices reached historical highs, with choice product trading at $193/cwt. Stronger beef demand is anticipated in upcoming weeks as spring grilling season gets underway. Consumers have been anxiously awaiting warmer temperatures to start the barbecues and it appears the pent-up demand has resulted in stronger food expenditures. Temperatures across the U.S. and Canada look favourable for the upcoming week and retailers were quick to feature beef products, resulting in better overall beef movement. Restaurant patios are also busier after an extremely slow start earlier in April.

A small group of black Angus-cross steers weighing just under 500 pounds traded for $168 landed in southern Alberta. This was the first week of the year that featured aggressive buying interest for grass cattle. Charolais-cross heifers weighing 700 lbs. were quoted at $125 in the Calgary area. Larger-frame Simmental steers weighing 700 lbs. traded at $136/cwt in the same region. Prices for bred cows and heifers or cow-calf pairs were also stronger but overall volumes on these cattle were quite thin.

Barley was trading at $290 delivered in the Lethbridge area last week. The tighter fundamental structure will keep values firm until new-crop, but usage of lower-protein milling wheat in rations is becoming more widespread. Wheat continues to trade actively into feed markets at $290 in southern Alberta. Statistics Canada's seeding intentions survey showed 2013 barley acres at 7.2 million, down 2.2 per cent from 2012, which will keep barley prices competitive with wheat in 2013-14.

I'm surprised by the number of small- to medium-sized feedlots up for sale in southern Alberta and the number of feedlots running at 50 per cent capacity or less. Calendar year-to-date exports of Canadian feeder cattle and calves to the U.S. for the week ending April 6 were 90,000 head, up a whopping 65 per cent over last year. The increase in age verification and documentation of premises ID amongst Canadian cow-calf producers will caused this trend to continue.

The sharp jump in fed cattle prices has provided a base of support for the feeder market. Look for lighter-weight grass cattle to stay firm to higher while heavier cattle are expected to trade at steady values. We need to see further upside in beef wholesale values in order for 800-lb.-plus cattle to move higher.

-- 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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