August 5, 2008

Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

As is typical for a Monday the cash feedlot trade was non-existent. There were no packer bids available as of last night with feedlots pricing a mostly larger showlist offering at $100 live and $1.58 dressed. A recap of last weeks feedlot prices and volume shows Texas/Oklahoma cattle feeders selling 37,675 head of fed cattle for $97-$98, mostly $98, Kansas feedlots selling 52,734 head of fed cattle for $97 live and $1.53 dressed, Nebraska feedlots selling 57,473 head of fed cattle for $97-$97.50 live and $1.54-$1.55 dressed, Colorado feedlots selling 7,185 head of fed cattle for $97 live and $1.54-$1.55 dressed, and Iowa/MN feedlots selling 31,205 head of fed cattle for $96-$97 live and $1.53-$1.54 dressed. The above mentioned prices and volumes include negotiated cash and negotiated grid sales as reported to the USDA. Sales volumes look good enough to clean up some of the backlogged cattle in Kansas, which has their showlist coming in this week much smaller. Seems like we got boxed beef prices low enough late last week to spur some domestic and export demand and I think some of this will spill over into this week. This should keep packers in the market for fed cattle this week and paying steady to better for them. Fed cattle numbers start to get tight going forward and this is going to be supportive to the market going into fall/winter. We will look for a $97-$98 live and $1.55-$1.57 trade by the end of the week. To start the week fed cattle selling through the northern Midwest auction markets bring steady to higher money as does slaughter cows. Feeder cattle sales over the weekend were higher and are starting out that way early this week with Oklahoma City calling their market $1-$3 higher with very good buyer demand.

Cash Beef Situation and Outlook:

Yesterday’s cattle slaughter was estimated at 126,000 head, which would be 1,000 head above last week and 3,000 head above the day a year ago. The industry is estimating a 665,000 head production week. The boxed beef market was higher yesterday with the choice cutout closing $1.20 higher to settle at $159.52 and the select cutout closing $.86 higher to settle at $152.15. Sales volume was moderate with 284 loads of beef sold (153.64 loads of choice fab cuts, 84.31 loads of select fab cuts, 7.43 loads of trim, 39.04 loads of grinds). The choice/select spread settled at $7.38 a gain of $.34.

The beef market was higher yesterday as weekend beef clearance was rated above average thus prompting active fill-in business yesterday. It was said that there were a few packers that still had ample inventories of certain loin cuts to move, especially select product, and as such were still offering discounts on said items during yesterday’s session. End meats were said to be in good demand from both domestic and foreign buyers and higher prices were being reported there. Ground beef also remains in good demand supporting coarse ground and boneless beef items. I will look for further sideways to higher price action in the cash beef complex into midweek.

Futures Market Situation and Outlook:

August live cattle settled at $100.17 a gain of $.15, October live cattle settled at $107.50 a loss of $.30, and the December live cattle settled at $109.42 a loss of $.70. In the feeder cattle pit, August feeder cattle settled at $115.42 a loss of $.20, September feeder cattle settled at $117.82 a gain of $.12, and the October feeder cattle settled at $118.20 a loss of $.45. The reported CME feeder cattle index for 8/1/08 was $110.79 a loss of $.40.

Yesterdays live cattle volume saw 44,370 contracts trade in the pit and 13,282 contracts trade on Globex. Live cattle open interest gained 969 contracts to come in this morning at 295,590. Yesterday’s feeder cattle volume saw 6,357 contracts trade in the pit and 1,051 contracts trade on Globex. Feeder cattle open interest declined 257 contracts to come in this morning at 34,691.

Yesterday was first notice day for the August live cattle contract with 8 deliveries against that contract. Prudential delivered 3 loads out of Pratt, KS and RJO delivered 5 loads out of Tulia, TX. C&B trading received 3 loads and Rosenthal received 5, with a last date of 12/24/07. Live cattle futures were under pressure for most of the session on profit taking and selling linked to sharply lower corn futures. The front end of the board held up better than the back on ideas the cash fed cattle market would be firm for the next couple of weeks. Feeder cattle gains were limited due to the lower deferred month fed cattle futures. I would probably look for more of the same again this morning as corn is another $.16 lower and is in a massive liquidation mode. I still like December live cattle from a fundamental standpoint and feel this contract will hold up better than Feb or April. We can probably see a bigger correction in live cattle futures today as we get the August live cattle a little more in line with cash. Feeder cattle will struggle with lower back month cattle again and here too, we could see feeders set back a bit as we get the August closer to the CME index. Front month live and feeder futures should be supported on a break due to positive cash fundamentals later in the week though. Look for a $.10-$.20 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

1-888-299-1477 Toll Free

1-312-896-2068 Direct

1-708-224-5985 Mobile

tvetterkind@linngroup.com

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.