August 15, 2008
Good Morning from the Chicago Board of Trade,
Cash Cattle Situation and Outlook:
The cash feedlot trade was untested again yesterday with the best packer bids being found at $98 live and $1.60 dressed and most feedlots priced at $102-$103 live and $1.63 dressed. I would expect to see a steady/higher trade by the end of the day today that takes place at $100-$101 live and $1.60 dressed. Packers seem to have a need for cattle this week and next as they fill beef orders ahead of the Labor Day holiday and cover export sales. Next week could be a different story though, as it seems interest for beef past next week could be diminishing a bit from domestic buyers. To see both the cutout and cash fed cattle market slow down after recent gains the last couple of weeks should not be unexpected, before we pick back up and trade higher into the end of September through Oct, Nov, and Dec. So bottom line, we will call for higher this week and look for steady lower next week. Cattle selling through the auction markets continue to bring steady to higher money going home for the weekend, however here too, we could begin to see some of those markets begin to soften a bit early next week as well. Need to keep a close eye on the cash feeder cattle market, as we are starting to see more numbers coming off of summer grass coming to town.
Cash Beef Situation and Outlook:
Yesterdays kill was estimated at 128,000 head, which would be 4,000 head above last week and 5,000 head above the same day a year ago. The week-to-date kill now stands at 512,000 head, which would be 9,000 head above the same period last week with the industry looking for a 670,000 head production week. The boxed beef market was higher yesterday with the choice cutout closing $.24 higher to settle at $164.84 and the select cutout closing $.22 higher to settle at $157.72. Sales volume was moderate with 337 loads of beef sold (105.89 loads of choice fab cuts, 121.45 loads of select fab cuts, 38.27 loads of trim, 71.43 loads of grinds). The choice/select spread settled at $7.12 a gain of $.02.
The beef market was steady to modestly higher yesterday; however the market feels like it is losing some steam. Most buyers cite that they are getting some of their near term needs covered going into the Labor Day holiday and with this weeks kill running 9,000 head above the same period last week, most are moving to the sidelines and looking for bargains to resurface in the marketplace. Yesterday saw some price discounts begin to surface in the clod, short and strip loins, and top butt markets. Ground beef and boneless beef markets were higher yesterday as demand ahead of Labor Day remains firm. I will look for beef prices to moderate going into early next week.
Futures Market Situation and Outlook:
August live cattle settled at $103.35 a gain of $.17, October live cattle settled at $107.90 a gain of $.45, and the December live cattle settled at $108.40 a gain of $.25. In the feeder cattle pit, August feeder cattle settled at $114.17 a gain of $.12, September feeder cattle settled at $115.45 a gain of $.27, and the October feeder cattle settled at $115.42 a gain of $.57. The reported CME feeder cattle index for 8/13/08 was $113.01 a gain of $.24.
Yesterdays live cattle volume saw 13,033 contracts trade in the pit and 5,416 contracts trade on Globex. Live cattle open interest declined 1,725 contracts yesterday to come in this morning at 274,555. Yesterday’s feeder cattle volume saw 4,688 contracts trade in the pit and 1,371 trade on Globex. Feeder cattle open interest declined 153 contracts to come in this morning at 34,206.
It was another slow day in the live and feeder cattle pits yesterday as the market pretty much has a higher fed cattle trade priced in for this week and waits for fresh inputs to trade off. It looks like we have another commodity meltdown this morning, with metals, grains, and energies down sharply on the overnight, some of which will likely filter into the livestock markets this morning. As pointed out above, I think we could possibly take a little money off the beef and fat cattle markets next week, which would give the market another reason to sell off either late today or Monday. I am going to look for a little correction in cash and futures prices by the middle of next week, and we will need to keep a close eye on the $106 support area in both the October and December live cattle, as this price level needs to hold on any near term pull back. Corn is will be sharply lower on the open this morning and if this were to rally the feeders anything near a dollar higher early in the trade this morning it would likely be a good sell, if nothing else for a day trade. Look for a $.10-$.20 lower open to live cattle futures and $.10-$.20 higher in the feeders 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
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Chicago, IL 60604
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