Klassen: Feeder cattle market searching for direction

Feedlots expecting barley prices to drop

Western Canadian feeder cattle prices continue to trade in a sideways pattern. Compared to last week, prices were quoted $2-$3 on either side of unchanged. Most auction barns were on holidays last week and arenas that did hold sales experienced limited volumes. Therefore, the market was hard to define. U.S. feeder cattle markets were steady to $2 higher on average and October feeder cattle futures closed up $1.97 for the week.

These two factors were supportive for Canadian domestic prices. Bids from Alberta packers ranged from $220 to $223 delivered on a dressed basis, up $5-$8 from last week. Domestic fed cattle prices are equivalent or a small premium over U.S. fed cattle prices. Feedlot margins remain deep in red ink but the minor bounce last week was considered a positive signal. The quality of feeders moving through the ring was quite variable and buyers reflected a subdued risk sentiment.

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In central Alberta, a small group of medium-frame red- and white-face steers weighing just under 950 lbs. was quoted at $167 and similar-weight and -quality heifers were quoted at $149. In southern Alberta, a small group of mixed medium-frame steers averaging 900 lbs. was quoted at $172 and mixed heifers averaging 850 lbs. were valued at $164. In east-central Alberta, a small group of exotic steers weighing 830 lbs. were quoted at $188 and exotic heifers averaging 825 lbs. were quoted at $168.

Feeders under 800 lbs. were firm, because the COVID backlog of fed cattle should be alleviated once these animals are in the processing line. Secondly, feedlots are factoring a $20-$30 drop in barley prices over the next three to four months. In eastern Alberta, a small group of tan steers averaging 720 lbs. were valued at $206 and black heifers weighing 745 lbs. were quoted at $184. In southern Alberta, Angus-blended steers weighing 775 lbs. were quoted at $198 and similar quality 780 lb. -heifers were reported at $172.

Calves are hard to come by at this time of year and buyers are eager to secure ownership. In central Alberta, a small group of exotic steers weighing just over 500 lbs. were valued at $236 while a small group of exotic heifers averaging 475 lbs. were quoted at $203. In southern Alberta, mixed steers averaging 675 lbs. were reported at $208 and mixed heifers weighing 600 lbs. were reported at $194.

Canadian farmers planted 7.5 million acres of barley this spring, according to Statistics Canada, up from 7.4 million last year and up from the five-year average seeded area of 6.5 million acres. Crops are in good shape across the Prairies and above-average yields are expected.

— 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.

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