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Klassen: Feeder market bounces off recent lows

Compared to last week, yearlings traded $5 to as much as $10 higher while calf markets strengthened by $4-$8. Southern Alberta experienced winds of extreme nature over the past few weeks, which caused buyers to shy away from the market; however, with year-end right around the corner, pent-up demand stepped forward with a vengeance in all weight categories.

April live cattle futures reached up to contract highs on Wednesday and Thursday. The stronger live cattle futures, along with the weaker Canadian dollar, allowed finishing operators to lock in a profit for the winter and spring time frame. The opportunity to lock in all legs of the margin structure is a rare event, so feedlot operators took full advantage of this “blue moon”-type opportunity.

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Calf markets followed the yearlings higher, but prices were quite variable across the Prairies. August live cattle futures continue to trade at a $10 discount to the April contract, which has been factored into the lighter weight categories.

Feedlots are having a difficult time locking in barley for the late spring and summer time frame. This environment caused buyers to exude a cautious tone. The calf market appeared to have a risk discount compared to the yearlings.

Hereford mixed steers weighing just over 900 lbs. sold for $190 in central Saskatchewan; exotic mixed red heifers averaging 890 lbs. were quoted at $180 in the same region. In central Alberta, larger-frame medium-flesh Simmental mixed steers averaging 855 lbs. were valued at $195 while Angus-based heifers weighing 850 lbs. sold for $181.

In southern Alberta, Charolais-blended calves weighing 705 lbs. were valued at $205. In southern Manitoba, mixed Limo-based steers averaging 625 lbs. were quoted at $218 while Hereford-based heifers weighing just under 600 lbs. sold for $183. In central Alberta, a larger group of Angus red and tan mixed steers weighing 500 lbs. sold for $233.

U.S. feeder cattle prices were also US$5-$8 higher. For the week ending Dec. 1, western Canadian feeder cattle exports were 5,291 head, compared to 1,382 head for the same week last year. The Canadian market is quick to respond when the U.S. market is higher, due to the stronger export pace.

— 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.

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