August 1, 2008

Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We started to see a few fed cattle trade in eastern Nebraska yesterday afternoon at $1.52-$1.53 dressed, which would be steady/better with last week. Packers in Texas were continuing to bid $92 live and in Kansas at $94 live, with most feedlot managers priced at $98 live and $1.55 dressed. Volumes of cattle traded in the north yesterday look light so far, however one major account in that part of the country was saying they were a little short on inventory for this week, which could support values in that part of the country. Also I think feedlots in the north have done a better job of marketing cattle in the last couple of weeks, which could give us a two-tiered market this week, with steady better up north and steady lower in the south until we get some of those backed up marketing’s moved. As I keep mentioning, my negativity towards the cash market is for the very short term only as I remain very friendly cash fed cattle and beef prices going into the fall and winter timeframe. There has been renewed export business to Korea and Russia this week, which has helped to stabilize cutout values and in turn could help support the cash fed cattle market as well. I will continue to call for a $94-$95 market in the south and $1.50-$1.53 dressed in the north.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 125,000 head, which would be 1,000 head below last week and even with the same day a year ago. The week-to-date kill now stands at 504,000 head, which would be 4,000 head above the same period a week ago, with the industry looking for a 670,000 head production week. The boxed beef market was lower yesterday with the choice cutout losing $.04 to settle at $158.48 and the select cutout closing $.68 lower to settle at $151.97.Sales volume was moderate with 355 loads of beef sold (138.66 loads of choice fab cuts, 126.11 loads of select fab cuts, 44.61 loads of trim, 45.37 loads of grinds). The choice/select spread settled at $6.52 a gain of $.64.

The beef market was mostly steady yesterday with gains in the end meats complex offsetting losses in middle meat values. Boneless beef values were under some pressure yesterday, however ground beef values held their own as demand from domestic interests remains robust for hamburger meat. The story in the beef complex remains largely the same, buyers look for opportunities in rib and loin cuts, export and domestic demand has helped to stem some of the losses in the chuck and round complex, and retailers have margin and want to continue to aggressively feature ground beef in their supper markets. All of this together should keep cutout values trading mostly steady to sideways going into next week.

Futures Market Situation and Outlook:

August live cattle settled at $98.40 a gain of $.52, October live cattle settled at $106.30 a gain of $.15, and the December live cattle settled at $109.02 a gain of $.87. In the feeder cattle pit, August feeder cattle settled at $113.80 a gain of $1.27, September feeder cattle settled at $115.32 a gain of $1.67, and the October feeder cattle settled at $116.42 a gain of $1.80. The reported CME feeder cattle index for 7/30/08 was $111.32 a loss of $.09.

Yesterdays live cattle volume saw 25,932 contracts trade in the pit and 11,856 contracts trade on Globex. Live cattle open interest gained 2,599 contracts to come in this morning at 296,773. Yesterday’s feeder cattle volume saw 4,709 contracts trade in the pit and 1,367 trade on Globex. Feeder cattle open interest gained 921 contracts to come in this morning at 33,025.

Live and feeder cattle futures settled higher yesterday on continued fund buying, short covering, and ideas the northern fed cattle trade may not by any worse than steady, which as we saw after the close some cattle were trading that way in Nebraska. Active bear spreading in October live cattle vs. December live cattle kept October under pressure throughout the session. I still don’t know if I am thoroughly convinced we have seen a low in the cash market yet, although I do think it is getting close. Perhaps today will tell the story as I would like to see a lower trade in the south on good volume get a break in the August live cattle futures and then I think you could buy all the futures you wanted to. For today, August live cattle will find resistance from $98.50-$99 and of course they will have good support at $97. Closing below $97 I think would take us down to $96 real quick where we would end up filling a gap from $96.40-$96.80 from back in April. October will find a little resistance at $107, however closing above that for whatever reason would probably take us back up to fill a gap left on the charts at $108.37. Again though, my overall opinion of the cattle market is to buy breaks in both live and feeder futures for a long term move higher in cash cattle and beef markets going into fall. Look for a $.10-$.20 higher open to live and feeder cattle futures this morning. 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

tvetterkind@linngroup.com

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