August 27, 2008
Good Morning from the Chicago Board of Trade,
Cash Cattle Situation and Outlook:
The cash feedlot trade was quiet yesterday with no meaningful packer bids being posted as of yesterday and feeders offering a smaller showlist offering at $101-$102 live and $1.62 dressed. A late week trade is expected at steady to slightly lower money this week as packers will be buying for a short kill week next week. Boxed beef values are trading better than expected as some last minute buying ahead of Labor Day supports the market. I will look for the fed cattle market to strengthen after Labor Day as fed cattle supplies will be on the decline and beef demand will pick up. Feeder cattle markets are on the defensive and will likely remain that way into next week. Slaughter cow markets are lower as well as we begin to see more numbers coming to market.
Cash Beef Situation and Outlook:
Yesterdays kill was 128,000 head, which would be 1,000 head below last week and even with the same day a year ago. The industry is looking for a 670,000 head production week. The boxed beef market was higher yesterday with the choice cutout closing $.42 higher to settle at $162.04 and the select cutout closing $.89 higher to settle at $155.31. Sales volume was decent with 340 loads of beef sold (146.52 loads of choice fab cuts, 116.67 loads of select fab cuts, 31.85 loads of trim, 44.57 loads of grinds). The choice/select spread settled at $6.73 a loss of $.47.
The beef market is acting better than expected this week on some last minute buying ahead of Labor Day and packer inventories of beef to sell coming into this week more manageable than last week. Rib cuts are said to be in a little better shape when compared to last week and this along with a better price scenario in the round complex is helping to support cutout values early this week. I will look for a mostly sideways beef trade until after we get back from the holiday, at which time I think values will improve.
Futures Market Situation and Outlook:
August live cattle settled at $101.70 a loss of $.30, October live cattle settled at $105.75 a loss of $.05, and the December live cattle settled at $107.22 a loss of $.12. In the feeder cattle pit, August feeder cattle settled at $113.02 a loss of $.07, September feeder cattle settled at $112.15 a loss of $.75, and the October feeder cattle settled at $111.60 a loss of $.95.
The futures were pretty volatile yesterday with lower settlements linked to gyrations in the grain markets and uncertainties over the cash fat and feeder cattle markets. Live cattle futures continue to find willing buyers under the market ever since early last week, as certain traders look for an improvement in cash beef and cattle values after the Labor Day holiday. Feeders got pounded on the close yesterday, and technically Oct and Nov look like they could now move down to the $109 area. I would expect to see more volatility and choppiness for the rest of this week until more is known about this week’s cash fed cattle trade. October live cattle futures will have support at $104 and December live cattle will have support at $106 today, and it will be important for these support levels to hold in order to stave off another $1-$2 lower. I do look for higher cash and futures prices in September and October so pick your chart points and trade it that way. Look for a $.20-$.30 lower 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
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