August 28, 2008
Good Morning from the Chicago Board of Trade,
Cash Cattle Situation and Outlook:
An active fed cattle trade developed yesterday afternoon with prices generally steady with the week before. Sales volumes were moderate in Texas and Nebraska at $99 live and $1.55-$1.56 dressed, with light numbers changing hands in Kansas and Colorado at the same price. All told, the USDA is estimating close to 40,000 head of cattle were sold in all regions yesterday. Fall out from the futures board, an improvement in basis, a lower boxed beef market, and producers willing to move cattle at steady money ahead of a long holiday weekend were all catalysts for the midweek trade. I would have thought that the market would have been lower given all the negative psychology yesterday, as packers were only bidding $97 early in the morning. I would look for further cleanup trade today and tomorrow at steady money with yesterday. Most all classes of cattle selling through the sale barns as of midweek are bringing lower money and this should continue for the rest of the week.
Cash Beef Situation and Outlook:
Yesterdays kill was estimated at 128,000 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 255,000 head, which would be 5,000 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 closing $1.06 lower to settle at $160.98 and the select cutout closing $.98 lower to settle at $154.33. Sales volume was moderate with 344 loads of beef sold (121.27 loads of choice fab cuts, 105.08 loads of select fab cuts, 33.02 loads of trim, 84.84 loads of grinds). The choice/select spread settled at $6.65 a loss of $.08.
Pressure returned to the boxed beef market yesterday with more product available compared to demand ahead of the long holiday weekend. With the weekly kill running 5,000 head above last and many on the buy side citing they are comfortable with their inventories going into the weekend and packers apparently have some extra product to move with the increased production. Look for further pressure in the boxed beef complex until next week. Beef exports for the week of August 15-21, 2008 are as follows:
Beef: Net sales of 13,800 MT were primarily for Mexico (6,400 MT), South Korea (2,700 MT), Japan (1,400 MT), Canada (800 MT) the Netherlands (800 MT), Hong Kong (600 MT), and Russia (400 MT). Exports of 14,100 MT were mainly to Mexico (5,400 MT), South Korea (2,800 MT), Canada (1,600 MT), Japan (1,300 MT), Russia (1,300 MT), Vietnam (1,000 MT), and Taiwan (400 MT).
Futures Market Situation and Outlook:
August live cattle settled at $100.62 a loss of $1.07, October live cattle settled at $103.77 a loss of $1.97, and December live cattle settled at $105.22 a loss of $2.00. In the feeder cattle pit, August feeder cattle settled at $112.95 a loss of $.07, September feeder cattle settled at $111.22 a loss of $.92, and the October feeder cattle settled at $110.42 a loss of $1.17. The reported CME feeder cattle index for 8/26/08 was $113.41 a loss of $.20.
Yesterdays live cattle volume saw 28,976 contracts trade in the pit and 11,429 contracts trade on Globex. Live cattle open interest declined 1,050 contracts to come in this morning at 270,275. Yesterday’s feeder cattle volume saw 4,579 contracts trade in the pit and 1,093 contracts trade on Globex. Feeder cattle open interest declined 655 contracts to come in this morning at 32,212.
Live and feeder cattle futures melted down yesterday on the lower tone to the cash markets and the debacle in the hog pit. Late last week the USDA delisted 7 Mexican meat plants from exporting meat to the United States due to sanitation issues. Now the talk towards midweek is that Mexico will retaliate and not allow certain plants in the U.S. to export beef and pork to Mexico. This along with the sharply lower dressed pork and live hog trade had hogs limit down and that weakness spilled over into the cattle market yesterday. Here again, we find ourselves faced with stories and hype disrupting the futures market, as there is a reason Mexico is one of our largest trading partners in terms of beef and pork exports, and we have to assume that any type of import/export spat between our two countries will be resolved quickly. Look for some short covering and hedge lifting ahead of the weekend in the live and feeder cattle futures, which could provide a little support to the market. At which time we will have to come back from the long holiday weekend and reassess supply and demand factors of the market. One thing is for sure though after yesterdays market performance the charts look bearish and the technicians will be looking to sell rallies. 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
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