Feeder cattle market outlook

Market Talk with Jerry Klassen


By Jerry Klassen, Columnist, Canadian Cattlemen

November 15, 2021


Iíve received many inquiries from cow-calf producers and backgrounding operators regarding the price outlook for feeder cattle. Western Canadian yearling prices made fresh 52-week highs earlier in fall; however, calf prices have been rather sluggish. In many cases, Alberta calf markets have been trading $5 to $10 below year-ago levels. Cow-calf producers are asking when would be an opportune time to sell their calves; backgrounding operators are asking what weight category they should purchase and when yearling prices will make seasonal highs next spring.


When looking at any market, one has to start by asking what does the market need to accomplish over the next year. At extremely low prices, the market discourages production and encourages consumption; at extreme highs, the market encourages production and rations demand. High prices discourage consumption.


The feeder market is somewhat unique for three reasons. First, there is no real equilibrium price range where we can say supply and demand are in balance. Second, at extreme highs, the feeder market has an inverted supply curve. In a normal market, higher prices pull more supply onto the market. With regard to feeder cattle, there is a period where higher prices restrict market supplies because of heifer retention. Third, in a normal market, low prices result in less supply coming on the market. With regard to feeder cattle, low prices boost higher beef production. The higher cow slaughter and larger beef production tend to drop feeder cattle prices to abnormal lows. This is a basic theory of the feeder cattle market.


To start, one has to look at the year-to-date cow slaughter and the longer-term historical pattern. The U.S. cow slaughter from January 1 through August 31 was 2.35 million head. This was up 175,700 head from the same time frame of 2020 and up 273,800 from the same time frame of 2019. The U.S. cow herd is contracting; this is sure...


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