Klassen: Uncertain beef demand weighs on feeder market

Compared to last week, western Canadian prices for yearling and heavier calves were down $2-$4 on average. The calf market was hard to define; Alberta markets traded $3 lower to $4 higher but notable strength was evident in Saskatchewan and Manitoba where values were steady to $4 higher.

Favourable weather contributed to higher auction market volumes over the past week. Steady demand was noted for grassers but the market had limited upside once the buying crowd switched over for feedlot placement. Many ranchers are running low on feed at this time of year, forcing some to bring cattle to market. This usually results in variable calf quality. Feedlot shopping lists included some type of pre-conditioning with weaning of 30-60 days earlier. Backgrounding buyers are on the sidelines and feedlots want cattle that will perform from Day One without extensive care and attention. At the same time, silage supplies are considered tight in some areas of Alberta and some feedlots can’t bring in cattle that won’t be on full feed in short order. Buying interest for yearlings was sluggish. According to market comments, yearlings are carrying heavier flesh levels this winter and feedlots are on the defensive with the recent slide in the fed market.

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In central Alberta, Simmental-cross steers averaging just over 810 lbs. on light grain diet weaned last fall with full shots dropped the gavel at $184; Charolais-blended heifers averaging 835 lbs. backgrounded with silage only with full shots carrying low flesh reportedly sold for $165.

In eastern Alberta, Angus-blended steers weighing just under 500 lbs. reached up to $245 while their older brothers averaging 550 lbs. were quoted at $234. In southeastern Saskatchewan, mixed steers weighing 530 lbs. reached up to $238 while mixed red heifers weighing 510 lbs. reached up to $199. A group of exotic heifers averaging just over 500 lbs. were valued at $203 landed in southern Alberta feedlot.

Alberta packers were buying fed cattle on a live basis in the range of $152-$155, down from last week’s range of $157-$158. Feeding margins have slipped into negative territory by $60-$80 per head. There is a serious concern over exports into Southeast Asia due to the novel coronavirus outbreak. If earlier beef export projections don’t come to fruition, the fed cattle market will have serious downside; therefore, feedlot operators are factoring in a risk discount on yearlings.

— 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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