Klassen: Feeder market remains vulnerable

Compared to last week, western Canadian feeder cattle prices were quite variable. Compared to seven days earlier, Alberta feeder prices were unchanged to $5 lower; however, the markets in northern Alberta, Saskatchewan and Manitoba were down $5 to as much as $10 in some cases.

Weakness in the yearling markets spilled over into the lighter weight categories. There were light volumes of calves under 600 lbs. in certain locations, which limited the slippage in the grasser market. Alberta fed cattle prices were quoted from $145 to $147 on live basis late in the week, up from the range of $140-$144 seven days earlier. However, this did little to support the feeder market, with finishing margins deep in red ink. Feedlot inventories are 18 per cent above the five-year average. Limited pen space, along with the softer fed cattle outlook, has finishing feedlots on the sidelines. While corn futures are trending lower, cash barley values in Western Canada have held value.

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In central Alberta, medium- to larger-frame mixed steers on light grain ration weighing 920 lbs. were quoted at $154 and medium-frame red steers weighing 840 lbs. were valued at $164. In Manitoba, black steers weighing 825 lbs. reportedly sold for $141. Outside the major feeding areas, yearlings were down sharply. In southern Alberta, black mixed heifers weighing just over 800 lbs. were quoted at $148, while Charolais-based heifers averaging 810 lbs. were quoted at $140 in southern Manitoba. Eastern Prairie markets traded in line with U.S. feeder prices, which were down $8-$10 from last week.

The market for mid-weight calves was hard to define. In central Alberta, steers weighing 720-750 lbs. traded from $170 to $180. In eastern Prairie regions, there were bursts of buying interest in certain pockets. One auction in Manitoba reported Charolais-blended steers averaging 720 lbs. reaching up to $187. North of Calgary, black mixed heifers weighing 750 lbs. were valued at $151 while similar-weight and -quality heifers in eastern Saskatchewan were quoted at $146.

Prices for calves under 650 lbs. were relatively flat across the Prairies. Once these feeder cattle reach the fat market, hopefully the economy is back to normal so the risk discount isn’t quite as severe. Steers weighing 550 to 600 lbs. were readily quoted at $205-$215 with heifers a solid $25 discount to steers. It appears the cow-calf producer is holding back on sales and it’s also that time of year when calf volumes tend to decline.

It now looks like one in five Americans are required to stay at home. Wholesale values surged last week, but this was likely meat being sold out of the freezers as most meat sales are on longer-term contracts. Restaurant traffic has come to a halt and the main question is how long this coronavirus pandemic will last. At this stage, the pandemic is still getting worse and not improving.

— 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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