Klassen: Yearling demand remains firm

Compared to last week, western Canadian yearlings fresh off grass traded steady to $2 higher; backgrounded yearlings were relatively unchanged. The calf market was too thin to quote.

Major feedlot operators set the price structure and were once again very aggressive. While many feedlots are backed up with market-ready supplies of fed cattle, some feedlots are fairly current with production. For example, western Canadian average steer carcass weights for the week ending Aug. 8 were 902 lbs., down from 905 last year. Last year at this time, April live cattle futures were hovering around $111, but April 2021 live cattle closed at US$117.80 on Friday. Finally, feed barley for September delivery is about $10 per tonne below year-ago levels. There is definitely underlying support at current price levels because feedlots can lock in profitable margins in the deferred positions.

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In southern Alberta, medium- to larger-frame steers weighing just under 1,000 lbs. were quoted at $185 while similar-quality 1,000-lb. heifers were valued at $169. Medium- to larger-frame steers averaging 900 lbs. reached up to $194 in the same region. In southwestern Saskatchewan, 900-lb. heifers were quoted at $183. Near Red Deer, mixed steers weighing just over 1,000 lbs. were quoted at $178. In southern Saskatchewan, medium-frame heifers weighing 1,030 lbs. were valued at $159. In central Alberta, tan mixed steers on light grain ration, weighing 845 lbs., were quoted at $192. Red mixed heifers weighing 965 lbs. coming off pasture were quoted at $167 in the same region. The price structure appears to change for feeders over 1,000 lbs. because cattle will come on the market about one month sooner than feeders just over 900 pounds. There appears to be stronger basis for fed cattle after February of 2020.

U.S. feeder cattle markets appeared to be softer this week but the CME composite feeder price index continues to percolate higher. U.S. feeder cattle supplies outside feedlots as of July 1 were up 300,000 head from year-ago levels. U.S. auction market receipts were down from year-ago levels so the trade is wondering when there will be a surge in feeder cattle placements.

— 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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