Western Canadian feeder cattle prices were steady to $3 per hundredweight (cwt) lower last week. Negative feeding margins appear to be the largest factor weighing on the feeder market.
Optimism for fed cattle prices for the April-through-June period has also waned, with live cattle futures $7 to $8 off contract highs. There is potential for red ink in the feedlot sector to continue over the next few months if we don't see a $6 to $8 increase in the slaughter market. Alberta packers were buying fed cattle at $115 last week and breakeven values are near $120/cwt.
North of Calgary, Charolais-cross steers with light flesh sold for $174/cwt; similar cattle weighing 642 pounds sold for $148 at the same sale. Exotic large-frame medium-flesh steers that were lightly fed weighing 780 lbs. sold for $135/cwt. East of Edmonton, black steers weighing 840 lbs., with medium flesh and well backgrounded, sold for $124.
There appeared to be spurts of demand for lighter-weight grass cattle which kept cattle under 600 lbs. well supported but heavier cattle were under pressure.
Wholesale beef prices are approximately $10/cwt off the highs in January, which has set a negative tone to the fed cattle market. The average American consumer is suffering with less take-home pay due to the increase in social security tax and disposable income is only marginally higher than last year.
The market is not experiencing the strength that I projected earlier in January. Consumer spending is not increasing at the rate expected. The beef and cattle markets are functioning to ration demand due to the tighter supply situation. For example, ground beef prices are approximately 10 per cent higher than last year but with incomes stagnant, consumers can't afford the higher prices and are eating less beef.
Only time will tell when this economic environment will change because there is a fair amount of uncertainty moving forward.
-- Jerry Klassen is a commodity market analyst in Winnipeg and maintains an interest in the family feedlot in southern Alberta. He writes an in-depth biweekly commentary, Canadian Feedlot and Cattle Market Analysis, for feedlot operators in Canada. He can be reached by email at email@example.com for questions or comments.