August 8, 2008

Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We started to see a few cattle trade in the northern feeding areas of the country yesterday, with prices running another $3-$4 higher when compared to last week. There were cattle trades reported in eastern Nebraska and western Iowa at mostly $1.58-$1.59, with a few cattle changing hands at $1.60 dressed and $100 live. Texas and Kansas feeders did not sell any cattle yesterday as packers were only biding $96-$98 with offering prices ranging from $100-$102. It looks like the trade in the south should be $100 live by the end of trading today. As mentioned in previous writing’s this week, good packer demand for cattle because of active domestic and export sales of beef and a smaller feedlot offering of fed cattle are combining to push prices higher. I will continue to look for a firm cash cattle market for the rest of this week and into next. Going home for the weekend, slaughter and feeder cattle selling through the nations auction markets are higher and this also should carry over into early next week.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 124,000 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 503,000 head, which would be 1,000 head below the same period a week ago with the industry looking for a 665,000 head production week. The boxed beef market was higher yesterday with the choice cutout closing $1.06 higher to settle at $161.94 and the select cutout closing $.31 higher to settle at $155.09. Sales volume was good with 321 loads of beef sold (123.94 loads of choice fab cuts, 96.85 loads of select fab cuts, 45.45 loads of trim, 55.00 loads of grinds). The choice/select spread settled at $6.85 a gain of $.75.

The beef market was higher yesterday as active export buying of end meats has taken product away from the domestic market, thus prompting packers to offer product at higher price levels. The market for middle meats was also trading at higher money for both quick ship and forward delivery. The beef market feels in good shape to me and I will look for higher money going into next week.

Futures Market Situation and Outlook:

August live cattle settled at $101.45 a loss of $.90, October live cattle settled at $107.20 a loss of $1.35, and the December live cattle settled at $106.82 a loss of $.42. In the feeder cattle pit, August feeder cattle settled at $114.07 a loss of $1.42, September feeder cattle settled at $115.87 a loss of $1.32, October feeder cattle $115.35 a loss of $2.17. The reported CME feeder cattle index for 8/6/08 was $111.21 a gain of $.03.

Yesterdays live cattle volume saw 38,307 contracts trade in the pit and 23,587 trade on Globex. Live cattle open interest gained 434 contracts to come in this morning at 290,408. Yesterday’s feeder cattle volume saw 6,812 contracts trade in the pit and 1,635 contracts trade on Globex. Feeder cattle open interest gained 39 contracts yesterday to come in this morning at 35,783.

Live cattle deliveries last night saw 19 new loads posted against August live (15-Dodge City, KS, 4-Texhoma, OK), and 30 retenders from Wednesday. Once again we see the 30 retenders demanded for by Rosenthal. Delivering yesterday were MF Global 4 loads, RJO 15 loads, and Penson 30 loads. Receiving loads yesterday were Rosenthal 49 loads. Live and feeder cattle futures settled lower yesterday on renewed technical and commercial selling. I think front month live cattle futures got a little ahead of the cash fed cattle market the last day or two and once we saw the higher cash cattle trades yesterday morning, the market sold off in a buy the rumor/sell the fact type trade. I also believe another factor in yesterday’s futures trade was shorts that were pushed out of the market on Wednesday were put back out yesterday. Feeder cattle futures feel heavy and are trading premium to the CME index and as such I want to be looking at that market from the short side, especially in Oct and Nov futures. I still like Dec live cattle and want to be looking for an opportunity to buy in that contract month. Wait for a rally in back month live cattle futures before putting on any hedges. Look for a $.10-$.20 higher open to live cattle futures and $.10-$.20 lower in the feeder cattle. Trade Well!!!

I will be out of town this weekend and will not return until Monday night. As such there will be no opening cattle wire on Monday morning. Have a Great Weekend!!!

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

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