• • • Klassen: Feeder cattle demand softens
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. His analysis of the market over the past week is as follows.
Weakness in the fed cattle market continues to spill over into the feeder complex, as margins drift further into red ink. Small packages of lower-quality cattle are coming on the market at this time of year, which contributed to the softer tone. Discounts were quite severe on cattle with “straggle” characteristics because feedlots know these feeders will not perform well.
Western Canadian hay prices are rather hot, and forage is hard to buy in certain areas. Lethbridge-area barley was quote in the range of $280-$290 per tonne delivered, up from week-ago levels of $275-$280. However, if a feedlot needs 2,000 tonnes, it would probably have to pay up to $300.
This feed grain complex has potential to run higher, which will continue to weigh on the feeder market. Don’t be deceived by the sharp year-over-year increase in barley acres, because the U.S. corn market sets the price for world coarse grains.