September 11, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash fed cattle market was quiet again yesterday as packer bids of $97 in the south and $95/$1.51-$1.52 in the north remain dollars apart from feedlot offering prices of $102 live and $1.62 dressed. There were some cattle trading for $1.51-$1.52 dressed in western Iowa and eastern Nebraska late Tuesday afternoon, however numbers looked light. The sale barn cattle were lower yesterday, with Sioux Falls and Yankton, SD calling their markets $1-$2 lower on the beef fats with $92-$93 tops being noted. The Holstein steer top was quoted at $83-$85, and here too, that market was being called $1 lower. The fed cattle market certainly isn’t shaping up to be what I thought it was going to be this week. While the beef has been holding together fairly well the first part of this week, the futures market hasn’t and has been subject to more liquidation along with the rest of the commodity complex. I am still of the opinion that we should be able to trade cash cattle at steady money this week, and let the futures clear some of the extreme premium out of the market that it has been carrying for the last several months, and we’ll be alright going forward. But when you get the futures capitulating like they have been, everyone’s psychology turns negative and they think they should accept lower packer bids for their cattle. It certainly seems like the northern fed market is going to have a hard time rallying, or even holding steady this week as packers in that part of the country cite they have ample supplies of contract and formula cattle to work through, and there are plenty of cattle showing up in the country in states like SD, MN, WI, IA, and NE, more than what we thought would be around for this time of year. The market is still in good shape going forward from a supply standpoint, and Canadian fed cattle imports have backed off quite a bit, all of which is going to be supportive towards the end of September and going through October and November. However, it is quite apparent the market has some issues to work through in the next week or so, and this is going to keep rally potential at bay. I would now look for a two-tiered market to develop this week with lower money in the north and stead to slightly lower in the south. Cash feeder cattle markets continue to trade along mixed line, with some sales reporting steady to lower and others reporting steady to higher. We are getting into the yearling run of cattle coming off of grass in the northern plains sale barns, and the market is actually holding up fairly well. There were several strings of 9 weight cattle in Phillip, SD Tuesday that were still bringing $104-$109, despite that market being called $2-$5 lower. The slaughter cow market is holding up a little better this week with many sales reporting steady to higher. The bulk of your better yielding cutter and boner cows bring $53-$63. We are probably close to seeing the best of the slaughter cow market for the rest of the year in the next couple of weeks.

Cash Beef Situation and Outlook:

Yesterday’s cattle kill was estimated at 128,000 head, which would be even with a week ago, and 1,000 head above the same day a year ago. The week-to-date kill is estimated at 382,000 head, which would be 123,000 head above the same period last week, with the industry looking for a 665,000 head production week. The boxed beef market was higher yesterday with the choice cutout closing $.24 higher to settle at $160.09 and the select cutout closing $1.44 higher to settle at $153.91. Sales volume was good with 463 loads of beef sold (200.67 loads of choice fab cuts, 139.26 loads of select fab cuts, 45.65 loads of trim, 77.05 loads of grinds). The choice/select spread settled at $6.18 a loss of $1.20.

The beef market was mostly higher yesterday on renewed export interest on chuck items, in particular chuck rolls. Middle meats held mostly steady yesterday and it was said that interest for rib and loin cuts into the end of this month and October was picking up. The round complex of the beef carcass was lower as a lack of Russian business keeps values there under pressure. There was good sales volume yesterday as buyers are more willing to take on extra product at current price levels. Boneless beef markets were mostly steady yesterday as supply and demand were in balance. The beef market feels in pretty good shape and I would continue to look for steady to higher prices going into next week. Beef exports for the week of August 29-September 4, 2008 are as follows:
Beef: Net sales of 6,500 MT were primarily for South Korea (3,600 MT), Canada (1,400 MT), Mexico (800 MT), Japan (300 MT), Taiwan (200 MT), and Hong Kong (200 MT). Exports of 12,100 MT were mainly to Mexico (4,500 MT), South Korea (3,000 MT), Canada (1,300 MT), Russia (900 MT), Japan (900 MT), Vietnam (800 MT), Taiwan (300 MT), and Hong Kong (200 MT).
Futures Market Situation and Outlook:

October live cattle settled at $101.65 a loss of $1.00, December live cattle settled at $103.02 a loss of $1.10, and the February live cattle settled at $104.67 a loss of $1.12. In the feeder cattle, September feeder cattle settled at $109.85 a loss of $1.00, October feeder cattle settled at $108.90 a loss of $1.52, and the November feeder cattle settled at $108.67 a loss of $1.07. The reported CME feeder cattle index for 9/9/08 was $111.57 a loss of $.33.

Yesterdays live cattle volume saw 40,221 contracts trade in the pit and 23,787 contracts trade on Globex. Live cattle open interest declined 763 contracts to come in this morning at 271,498. Yesterday’s feeder cattle volume saw 6,635 contracts trade in the pit and 1,518 contracts trade on Globex. Feeder cattle open interest declined 486 contracts to come in this morning at 27,402.

It was another day of liquidation in the cattle market as technical’s and outside market influences weighed on futures values. The “Goldman Roll” continued yesterday with an estimated 8-10,000 contracts of live cattle moving into deferred months and 1,000-2,000 contracts of October feeder cattle moving into November. Technically the market has taken out several areas of support and I don’t see anything to support the futures now except for short covering and hedge lifting. From a fundamental standpoint I think we are getting close to a near term bottom as fed cattle supplies remain manageable and the beef market is in pretty good shape. Where exactly the low in the futures is at remains to be seen yet as it is hard to pick a bottom in a liquidating market. I would say off the top of my head though that we could easily see another $1-$2 lower in the live cattle futures and $3-$4 lower in the feeder cattle futures. Look for another lower start to futures trading this morning, with the market firming up a bit once we get a better handle on the southern fed cattle trade. 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
Vetterkind Cattle Brokerage, LLC
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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