Weaker U.S. cattle prices and softer Alberta packer bids weighed on western Canadian feeder cattle values last week. Feedlot buying interest has been tempered as margins continue to float in various levels of red ink. Barley prices remain firm and lower live cattle futures suggest that this environment will be ongoing into the summer months. Demand for grass cattle has also subsided, with larger numbers expected on the market over the next few weeks.
Feeder cattle prices were steady to $2 lower on average, despite the Canadian dollar making six-month lows. A mixed group of steers with no special features averaging 571 pounds sold for $155 in east-central Alberta. Simmental-cross steers with medium flesh weighing 662 lbs. sold for $139 per hundredweight (cwt) in the Edmonton area. Black Angus-cross heifers weighing 761 lbs. sold for $120 at the same sale. Red British-cross steers weighing just over 800 lbs. sold for $130/cwt in the Calgary area. We are seeing backgrounded cattle move straight from the farm to finishing feedlot, thereby reducing available cattle in auction yards. This has caused the market to be quite volatile, with price discovery harder to come by.
The feeder market is feeling the effects of softer beef demand. Consumer confidence appears to have eased in January and the six-month projection is not as strong as earlier anticipated. Consumers are realizing less take-home pay in Canada and the U.S. At the same time, quick-food and full-service restaurants are starting to raise prices, which has slowed consumptive demand. It is difficult for major chains to lock in longer-term contracts for beef supplies, given the uncertainty in beef production.
Barley prices have been fluctuating in the range of $280 to $285 delivered Feedlot Alley of Alberta. Recent feed barley sales to Saudi Arabia will further tighten the fundamental structure for the 2012-13 crop year, keeping domestic barley prices firm.
I'm projecting the feeder market to stay relatively flat over the next couple months. Until we see a major change in the fed cattle market, it will be difficult to justify higher feeder prices.
-- 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.