September 12, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We saw more cash fed cattle trade in the north yesterday at $1.52 dressed. Packers continue to bid cattle at $97 in the south but most feedlots remain priced at $101-$102 live, and the standoff continues. With the mini-rally on the board late yesterday producers in the south will be holding steadfast with higher offering prices. The lower Nebraska trade may make it hard for southern feeders to get higher money for their fed cattle this week, but considering we are only $.90 off of last Friday’s close on the October live cattle contract, the market in that part of the country shouldn’t be any worse than $.50-$1 lower at $98-$98.50. If we were to see further strength in the board today the market might be able to hold steady. So that’s how we will call it steady to $.50-$1 lower for the remainder of this week, and then we will have to reassess the situation early next week. I would still look for the market to be supported going into the end of September/first of October as fed cattle supplies will be shrinking and beef demand will be increasing.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 128,000 head, which would be even with a week ago and 5,000 head above the same day a year ago. The week-to-date kill now stands at 510,000 head, which would be 123,000 head below the same period a week ago, with the industry looking for a 665,000 head production week. The boxed beef market was lower yesterday as we see the choice cutout closing $.01 lower to settle at $160.08 and the select cutout closing $.07 lower to settle at $153.84. Sales volume was good with 380 loads of beef sold (114.80 loads of choice fab cuts, 140.61 loads of select fab cuts, 46.23 loads of trim, 78.10 loads of grinds). The choice/select spread settled at $6.24 a gain of $.06.

The beef market held mostly steady yesterday with just a few price markdowns on bone-in and boneless ribeyes that kept the cutout values from settling higher. Chuck rolls continue to be supported by export interest from Asia and this keeps supplies of said cuts off the domestic market resulting in higher prices. Boneless beef markets were mixed with weakness in the 90% cow beef and strength in the 50% fed cattle trim. I will continue to look for a steady to higher beef market going into next week.

Futures Market Situation and Outlook:

October live cattle settled at $102.05 a gain of $.40, December live cattle settled at $103.25 a gain of $.22, and the February live cattle settled at $104.75 a gain of $.07. In the feeder cattle pit, September feeder cattle settled at $109.65 a loss of $.20, October feeder cattle settled at $108.57 a loss of $.32, and the November feeder cattle settled at $108.57 a loss of $.10. The reported CME feeder cattle index for 9/10/08 was $111.32 a loss of $.25.

Yesterday’s live cattle volume saw 39,558 contracts trade in the pit and 20,207 contracts trade on Globex. Live cattle open interest declined 2,046 contracts to come in this morning at 269,451. Yesterday’s feeder cattle volume saw 5,289 contracts trade in the pit and 1,369 contracts trade on Globex. Feeder cattle open interest declined 231 contracts to come in this morning at 27,171.

After an initial lower open and subsequent lower early trade, live and feeder cattle futures managed to claw their way back from early session lows to settle modestly lower, to instances of higher in terms of the front four live cattle futures contracts. Short covering and hedge lifting were the main reasons for the late rally yesterday, however there was some heavy call option buying in the December live cattle, which had option locals buying the board to cover the short calls they were selling. It seems like the pattern of last week is carrying over into this week, where we spent the first part of the week trading lower in anticipation of a lower Nebraska fed cattle trade and then higher on a steady southern trade. The USDA released new supply/demand data this morning, and the report looks a little friendly the grain market as they lower both corn and soybean yields to 152.3 bu acre and 40 bu acres respectively. For the most part the USDA left beef numbers alone with 2008 production estimated at 26.790 bil lbs and 2009 production estimated at 26.652 bil lbs. They did raise 2008 beef exports 116 mil lbs and 2009 beef exports 145 mil lbs, reflecting better than anticipated demand from Asia. Futures are going to be choppy here until the market gets better news regarding the cash markets. I think both the cash cattle and beef markets will find support in the near term and begin to trade higher into the end of this month and first of next month. This will give futures the shot in the arm they need to move higher. Look for a $.20-$.30 higher open to live and feeder cattle futures. Have a Good Weekend and 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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