May 31, 2011

 

Western Canada's feeder cattle prices drop lower

 

 

Feeder cattle prices in Western Canada fell continuously to US$2 lower last week.

 

Lighter-weight grass cattle held up fairly well, with heavier replacements moving in line with the slaughter market.

 

Alberta fed steers were US$2 lower trading at the US$100 per hundredweight (cwt) level, down US$16/cwt from the highs in early April. Feeder steers weighing 620 pounds sold around in the range of US$134-$135/cwt in central Alberta while 900-pound cattle traded at US$122/cwt, solidly US$2 lower than last week.

 

The Canadian market was led lower by weak US prices. Cattle-on-feed numbers were 10% higher on the May 20 report, which caused the US feeder market to trade US$6-$8/cwt lower and in some cases down as much as US$10/cwt.

 

Nature is taking a toll on the feeder cattle market. Alberta feedlots had to contend with three major cold spells since February followed by a slow spring melt and ongoing rains. Cattle rates of gain are down sharply from normal conditions.

 

In addition to the lower live cattle futures, feedyard managers are factoring in lower efficiencies when purchasing replacement cattle. The US Midwest and southern Plains are also contending with a record number of tornadoes and a series of spring storms. US feedlot margins are now struggling in red ink and some of the equity made this past winter will likely erode through the summer.

 

Corn futures are back near historical highs and cash barley prices are percolating higher. We could see a larger region of land go unseeded in eastern Saskatchewan and southwestern Manitoba, which could cause barley prices to increase sharply. The feeder cattle market has some tough weeks ahead. Consumer beef demand has waned, market-ready cattle supplies are growing and this feedgrain rally is not over.

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