July 25, 2008
Good Morning from the Chicago Board of Trade,
Cash Cattle Situation and Outlook:
The cash fed cattle market was quiet again yesterday with no reported trade out of any of the major feeding areas. Packers continue to bid $94-$95 live and $1.52 dressed for cattle with feedlots offering cattle at $99-$100 live and $1.58 dressed. Trade will no doubt get going at some point today; however I don’t imagine we will trade many cattle until after the on-feed and inventory reports, set to be released after the close. I will still call for a mostly steady to lower trade for this week, with the possibility of the cash market stabilizing next week. The beef market remains under pressure; however we could begin to see some stabilization in that market as well next week. I am going to look for a mostly $96 live and $1.52-$1.54 dressed trade by the end of the day and then we will have to come back next week and see how many cattle were sold and reassess beef demand. Going home for the weekend cash fed cattle selling through the auction markets are lower, slaughter cows are mostly higher, and feeder cattle are mixed, lower on the light weight cattle and higher on the heavier weight cattle. We should probably see more of the same early next week.
Cash Beef Situation and Outlook:
Yesterdays kill was estimated at 126,000 head, which would be even with a week ago and 1,000 head below the same day a year ago. The week-to-date kill now stands at 500,000 head, which would be even with the same period a week ago, with the industry looking for a 685,000 head production week. The boxed beef market was lower yesterday with the choice cutout closing $3.21 lower to settle at $160.38 and the select cutout closing $2.30 lower to settle at $155.57. Sales volume was moderate with 337 loads of beef sold (183.64 loads of choice fab cuts, 82.89 loads of select fab cuts, 27.30 loads of trim, 43.06 loads of grinds). The choice/select spread settled at $4.81 a loss of $.91.
It was another lower day in the boxed beef complex as packers try to find a price level for middle meats that will clear building inventory levels. Choice boneless ribeyes, short loins, boneless strips, and PSMO’s were all the leaders on the downside as retail demand for these items is said to be dismal. There were a few price markdowns on clods, two-piece chucks, inside rounds, and peeled knuckles, however not to the extent of that which occurred in the middle meats and sources feel there could be some support that comes into the end meat complex as export buyers and grinders will begin to find some value in these items after the recent price break. Coarse ground beef prices were in need of some price discounting yesterday as well, and this kept some slight pressure on boneless beef items. With yesterday’s close we are now currently on a $13 cwt break from the highs on the choice cutout and $11 cwt on the select cutout. We could begin to see some of the losses begin to slow down a bit going into next week.
Futures Market Situation and Outlook:
August live cattle settled at $98.55 a gain of $.40, October live cattle settled at $105.95 a gain of $.45, and the December live cattle settled at $108.30 a gain of $.37. In the feeder cattle pit, August feeder cattle settled at $112.37 a loss of $.22, September feeder cattle settled at $112.35 a gain of $.05, and the October feeder cattle settled at $113.60 a loss of $.15. The reported CME feeder cattle index for 7/23/08 was $111.45 a gain of $.07.
Yesterdays live cattle volume saw 26,101 contracts trade in the pit and 12,163 contracts trade on Globex. Live cattle open interest gained 750 contracts to come in this morning at 299,501. Yesterday’s feeder cattle volume saw 4,794 contracts trade in the pit and 586 contracts trade on Globex. Feeder cattle open interest gained 97 contracts to come in this morning at 32,448.
Live and feeder cattle futures were under pressure most of the day yesterday, however late fund buying and short covering brought most front month live cattle contracts back into positive territory going into the close. I would imagine that today will be another slow day with position evening ahead of the cash trade, the cattle on feed report, and the cattle inventory report. My ideas on the cash market are laid out in the cash cattle section of the letter. Estimates for the reports are as follow; on feed July 1, 2008 95.5%, Placed during June 91.8%, and marketed during June 95%. For the inventory report the market is looking for all cattle and calves 99.3%, annual calf crop 99.4%, total cows and heifers 99.2%, beef cows 98.8%, milk cows 100.6%. Another big number in the report will be the beef replacement number, which is estimated at 96.1%. As I mentioned earlier in the week, if the numbers come out as expected it would be supply friendly for the market late this year and the balance of next year as we have a growing demand base for our beef overseas and a shrinking cattle herd. The futures market is on a pretty good break and we have a lot of bearish news already priced in (i.e. lower cash, lower beef, etc.). We have some bullish inventory reports ahead of us and it seems as though we are seeing some decent buying under the market as of late. All of which leads me to believe we could see a more pronounced bounce in the market early next week, so you might want to be a little careful about being short. If we don’t trade any cattle until after the reports are released and we have some surprises in the numbers, Monday could be a pretty volatile day. Look for a $.10-$.20 lower open to live and feeder cattle futures this morning. Have a Good Weekend and Trade Well!!!
Any one wanting a more detailed report on the cattle and beef markets including fundamental, chart and technical analysis, plus spec/hedge recommendations for packers, processors, producers, and meat buyers feel free to contact me by phone or e-mail to set up a free trial.
There is risk in trading futures and options.
Have a Good Day,
Troy Vetterkind
Chicago Board of Trade
141 West Jackson Blvd.
Suite 1220A
Chicago, IL 60604
1-888-299-1477 Toll Free
1-312-896-2068 Direct
1-708-224-5985 Mobile
Reproduction or rebroadcast of any portion of this information is strictly prohibited without the written permission of the Linn Group, Inc. the information reflected herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. Opinions expressed are subject to change without notice. This material and any view expressed herein are provided for informational purposes only and should not be construed in any way as an inducement to buy or sell commodity futures or options contracts. The Linn Group and its officers, directors, employees and affiliates may take positions for their own accounts in contracts referred to herein. Trading futures involves risk of loss. Past performance is not indicative of future results.
No comments:
Post a Comment