Negative feedlot margins weigh on feeder cattle market

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Looking down on cattle in pens in a large feedlot.

For the week ending April 4, western Canadian feeder cattle were quite variable.

Backgrounded replacements were relatively unchanged, but fleshier groups experienced sharper discounts compared to a week earlier.

Genetic quality appeared to influence the market on a larger scale for feeders weighing less than 700 pounds.

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Medium to larger frame preconditioned calves appeared to trade steady to $10 higher on average, but “run of the mill” bawlers were steady to $10 lower.

If feeders had more risk on feed efficiencies or health, the market priced these cattle with appropriate discounts.

The TEAM market report included a group of 305 black steers with a mean weight of 1,000 pounds on barley, silage and supplement diet with full herd health records including implants that sold for $455 per hundredweight f.o.b. farm near Allan, Sask.

Northwest of Saskatoon, a pen-sized group of medium to larger frame mixed steers averaging 910 lb. carrying various butter levels on barley and silage diet with full processing records traded for $470 f.o.b. farm.

South of Edmonton, a half pen of larger frame Angus cross heifers on rolled barley and barley silage diet with full processing and implants averaging 875 pounds traded for $464 f.o.b. farm.

At the Ste. Rose auction, a smaller package of red mixed steers averaging 826 lb. traded for $507. At the same sale, a 10-pack of red and black heifers evaluated at 826 lb. sold for $459 per cwt.

In Ponoka, Alta., a group of eight lower flesh 810 lb. Simmental cross steers on barley and silage diet for two weeks with full processing records traded for $525 per cwt.

The Vermilion Livestock Exchange reported that five tan steers scaled at 723 lb. traded for $573 per cwt., and 14 tan heifers averaging 737 lb. dropped the gavel at $515 per cwt.

The VJV report from Rimbey, Alta., included a group of 14 mixed steer calves weighing 611 lb. coming off a diet of cereal silage, chopped hay and oats with full processing data that were last bid at $655 per cwt.

In central Alberta, a producer reported a group of mixed weaned heifers averaging 620 lb. with full preconditioning records on silage and limited rolled barley that exited the ring at $620 per cwt.

At the Vermilion sale, a six-pack of 550 lb. tans steers traded for $734 per cwt. and 11 red/white-face 500 lb. steers sold for $768 per cwt.

At the Ste. Rose auction, a pair of red and black steers weighing 432 lb. silenced the crowd at $842 per cwt.

The volume of calves weighing less than 550 lb. was limited across the Prairies, which made the market hard to define.

Alberta packers were buying fed cattle on a live basis at $325 per cwt. f.o.b. feedlot in the Lethbridge area. The break-even price on these finished cattle is around $355 per cwt.

This is the fifth consecutive month of negative margins for Alberta feedlots.

Currently, feedlots have bid up the price of backgrounded cattle (800 lb. plus) so that margins for August through October barely cover feed costs.

The deferred live cattle futures need to trade $10-$15 per cwt. higher for nearby feeder cattle prices to experience additional upside.

Restaurant traffic in the United States was running 20-25 per cent above year-ago levels this past week, while Canadian visits were up 25-28 per cent.

Higher energy prices have not changed consumer behaviour so far.

About the author

Jerry Klassen - Analysis

Jerry Klassen - Analysis

Jerry Klassen graduated from the University of Alberta in 1996 with a degree in Agriculture Business. He has over 25 years of commodity trading and analytical experience working with various grain companies in all aspects of international grain merchandising. From 2010 through 2019, he was manager of Canadian operations for Swiss based trading company GAP SA Grains and Products ltd. Throughout his career, he has travelled to 37 countries and from 2017-2021, he was Chairman of the Canadian Grain and Oilseed Exporter Association. Jerry has a passion for farming; he owns land in Manitoba and Saskatchewan; the family farm/feedlot is in Southern Alberta. Since 2009, he has used the analytical skills to provide cattle and feed grain market analysis for feedlot operators in Alberta and Ontario. For speaking engagements or to subscribe to the Canadian Feedlot and Cattle Market Analysis, please contact him at 204 504 8339 or see the website www.resilcapital.com.

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