August 22, 2008
Good Morning from the Chicago Board of Trade,
Cash Cattle Situation and Outlook:
The live cattle trade continued in the southern feeding states yesterday with most business getting done at $99 live and $1.56 dressed, steady with earlier in the week. Northern cattle traders haven’t done much in the way of moving inventory yet this week as most major packers are only bidding $98/$1.56. Cattle feeders in the north are looking for $100 live and $1.60 dressed, and with the rally on the board yesterday, it is going to be hard for packer buyers to pry cattle from the producer’s hands for anything less than steady money with last week. There were some reports of a few cattle trading in Nebraska at $99 live, but numbers looked pretty light. The beef market is still on the ropes, which is going to give packers all the more incentive to try and buy cattle cheaper this week in the north, however showlists are quite a bit smaller in that part of the country so it is going to be interesting to see how everything plays out. I would say that we are probably going to see the board get beat up early this morning and cattle will eventually trade for $99 live and $1.58 dressed in Nebraska by this afternoon. If the beef stays on the defensive, which it seems like it will through next week, and given the fact that packers will be buying cattle for a short kill week on the following week, I would say right now that a lower fed cattle trade is in store for next week as well. Going home for the weekend slaughter cows and feeder cattle selling through the sale barns are bringing steady to lower money, and I would look for that to continue into next week also.
Cash Beef Situation and Outlook:
Yesterdays kill was estimated at 128,000 head, which would be even with a week ago and 3,000 head above the same day a year ago. The week-to-date kill now stands at 505,000 head compared to 512,000 head for the same period a week ago with the industry looking for a 665,000 head production week. The boxed beef market was lower yesterday with the choice cutout closing $1.57 lower to settle at $161.52 and the select cutout closing $.56 lower to settle at $156.48. Sales volume was moderate with 342 loads of beef sold (161.05 loads of choice fab cuts, 98.02 loads of select fab cuts, 32.17 loads of trim, 51.12 loads of grinds). The choice/select spread settled at $5.03 a loss of $1.01.
The boxed beef market was led lower once again yesterday by sharp price reductions in the rib complex. Choice and select boneless ribeyes were under extreme pressure as mounting inventories at the packinghouse and lackluster retail and export demand the last couple of days forced packers to offer deep discounts in order to move product. Yesterday also saw some price reductions for the inside round, boneless strips, top butts, and tri-tip. Short ribs, briskets, and most ground beef and boneless beef items were higher yesterday as export demand for the short ribs and domestic demand for ground beef remains firm. As I have been mentioning for the last couple of days, consumer demand ahead of Labor Day is a little lackluster and most on the retail and wholesale level of the beef complex say they are comfortable with their inventory positions. This will likely keep the beef market under moderate pressure into the first of September, at which time we will likely see the retail and wholesale buyer reload the pipeline after the holiday and foodservice buyers will get a little more serious about procuring their middle meat needs for end of year celebrations. Continue to look for a sideways to lower trend in the boxed beef complex.
Futures Market Situation and Outlook:
August live cattle settled at $101.45 a gain of $.75, October live cattle settled at $106.30 a gain of $1.30, and the December live cattle settled at $107.45 a gain of $1.10. In the feeder cattle pit, August feeder cattle settled at $112.82 a loss of $.25, September feeder cattle settled at $112.67 a loss of $.57, and the October feeder cattle settled at $112.52 a loss of $.65. The reported CME feeder cattle index for 8/20/08 was $113.26 a gain of $.04.
Yesterdays live cattle volume saw 12,937 contracts trade in the pit and 6,470 contracts trade on Globex. Live cattle open interest declined 1,440 contracts to come in this morning at 271,953. Yesterday’s feeder cattle volume saw 2,904 contracts trade in the pit and 838 contracts trade on Globex. Feeder cattle open interest declined 304 contracts to come in this morning at 32,735.
Live cattle futures saw another solid performance yesterday on renewed fund buying of deferred month contracts and short covering. The biggest factor in the live cattle rally the last couple of days has been the strength in the corn market, which of course has been detrimental to the feeder cattle futures. However, with that said, the feeders have managed to come back into the close as we find buyers in Oct and Nov feeders under $112. The cash cattle and beef markets are and will likely remain under pressure until the end of the month, which will keep both August live and August feeders from participating in any near term rally that is likely to unfold if corn continues to move higher. Participants in the cattle futures market will be eagerly anticipating the conclusion to this weeks cash fed cattle trade and the cattle on feed report set to be released after the close of trading today. The report is likely to show 96% on feed, 107% placements, and 101% marketing’s. Placements will of course be the wild card in the report again and I think we are going to see month over month increases in placement patterns now until the end of the year as summer nears an end and cattle are moved off of grass. This increase in placement activity will be skewed towards heavier cattle until October and November, which means that those cattle will finish during the late 4th quarter of this year and into the first quarter of next year. This will make it all the more important to use a rally in cash cattle and subsequent rally in futures after Labor Day, to get January through April cattle hedged via Feb and April live cattle futures and options. We will likely open a little lower this morning and chop around until more is know about the northern fed cattle trade. I wouldn’t expect futures to do very much until we get the on feed report behind us, however the way it feels right now, Wednesday’s lows in live and feeder cattle futures should hold for a little bit. Look for a $.10-$.20 lower open to futures trading this morning. Have a Good Weekend and as always 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