August 4, 2008
Good Morning from the Chicago Board of Trade,
Cash Cattle Situation and Outlook:
We left last week with a fed cattle market that trades mostly $2-$3 higher after everyone, including myself, thought the market would be lower last week. Moderate volumes of fed cattle traded in the Texas/Oklahoma market at $97-$98 live, Kansas sold decent numbers at $97 live and $1.53 dressed, Colorado sold cattle at $97 live and $1.53-$1.55 dressed, and Nebraska sold cattle at $97-$97.50 live and $1.54-$1.55 dressed. A higher futures market, better beef sales (both export and domestic-quick ship/forward delivery), and some packers being short bought were all catalysts for the higher trade. Last weeks feeder cattle market was steady to higher as were slaughter cow markets. I am probably going to have to look for more of the same this week, as I believe we likely cleaned up any backed up marketing’s last week and I think packers are getting decent export orders for beef. There was also talk late last week of good domestic inquiry for forward delivery of beef, which I think combined with tightening fed cattle numbers in the coming weeks, will keep the fed cattle market supported for the rest of the summer and trending higher into the fall.
Cash Beef Situation and Outlook:
Last weeks cattle slaughter was estimated at 662,000 head and included a Friday kill of 124,000 head and a Saturday production of 34,000 head. For the week choice boxed beef lost $1.90 and select boxed beef lost $3.60 on moderate spot movement. Friday saw the choice cutout close $.16 lower to settle at $158.323 and the select cutout close $.68 lower to settle at $151.29. Sales volume on Friday was light with 223 loads of beef sold (82.64 loads of choice fab cuts, 87.13 loads of select fab cuts, 8.19 loads of trim, 45.18 loads of grinds). The choice/select spread settled at $7.04 a gain of $.52.
While lower on the week, boxed beef prices began to find some price stability as active export interest and domestic forward sales came back into the marketplace. Packers now cite manageable inventory positions on most items they were having problems with a week ago and are more optimistic towards price levels for this week. Chuck and round cuts found decent buying interest from export orders last week as well as good buying from domestic retail interests and the grinding sector. Middle meats were still in need of some slight discounting late in the week, however interest in procuring product for middle to late August shipment was said to be a supporting factor to rib and loin values late in the week. I will look for a steady to higher beef trade for most of this week.
Futures Market Situation and Outlook:
On Friday, August live cattle settled at $100.02 a gain of $1.62, October live cattle settled at $107.80 a gain of $1.50, and the December live cattle settled at $110.12 a gain of $1.10. In the feeder cattle pit Friday, August feeder cattle settled at $115.62 a gain of $1.82, September feeder cattle settled at $117.70 a gain of $2.37, and the October feeder cattle settled at $118.65 a gain of $2.22. The reported CME feeder cattle index for 7/31/08 was $111.19 a loss of $.03.
Fridays live cattle volume saw 35,273 contracts trade in the pit and 16,239 contracts trade on Globex. Live cattle open interest declined 1,693 contracts to come in this morning at 295,080. Friday’s feeder cattle volume saw 8,150 contracts trade in the pit and 2,377 contracts trade on Globex. Feeder cattle open interest gained 1,914 contracts to come in this morning at 34,948.
Live and feeder cattle futures ended the week with solid gains on the better than expected cash fed cattle market, fund buying, short covering, and new technical buying. I would expect to see more of the same again this week as it appears we have likely put in a low in the cash fed cattle market and both cash fed cattle and beef values should begin to trend back higher into the late fall/early winter timeframe. I don’t really have too much interest in begin short cattle futures right now and would be looking for any type of early week set back in prices to use as a buying opportunity. 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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