Wednesday August 27, 2014

QUESTION OF THE WEEK

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Klassen: Cattle market digests StatsCan, USDA reports

Western Canadian feeder cattle prices were steady with week-ago levels as most auction barns are either closed for holidays or sold minimal volumes of feeder cattle. The weaker Canadian dollar should be supportive to the feeder complex, but there wasn't enough trade to define the market.

Cargill's High River, Alta. beef plant was not actively buying cattle this week, resulting in a softer fed market; therefore, most feedlots pulled back on offerings and were not looking for replacements, given the adverse pen conditions. Pasture conditions are excellent across the Prairies and cow-calf operators have no incentive to sell feeder cattle at this time.

The U.S. Department of Agriculture estimated U.S. corn acres at 97.4 million, which was higher than the March intentions survey of 97.3 million and 2012 planted area of 97.2 million. Given the current crop ratings, the corn market will function to encourage demand in the 2013-14 crop year. I'm projecting a surge in Canadian imports of U.S. corn and DDGS next year, which will pull barley prices lower as well. The Canadian barley crop has suffered in wet regions but the crop is in good shape overall. Statistics Canada estimated barley acres at 7.15 million; while this is down from 2012 acres of 7.4 million, yields are expected to be higher than last year's, resulting in a crop size of 8.4 million tonnes, compared to 8.1 million in 2012. The feedgrains situation is bullish for feeder cattle prices during the fall of 2013.

Recent economic data has been supportive for cattle prices, with U.S. consumer confidence reaching 81.4, the highest reading since January 2008. Stronger consumer spending should bode well for wholesale and retail beef prices later in the year.

Given the current outlook for feedgrains and fed cattle prices, I'm expecting a slow upward trend in feeder cattle prices from now until the end of the 2013.

-- 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 gklassen7@hotmail.com for questions or comments.


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