September 15, 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 lower on a dressed basis in the north at $1.52 and mostly steady in the rest of the country at $98 to mostly $99 live in Texas, Kansas, and Colorado. Sales volume for the week looks moderate and I will report on weekly totals once everything is counted and reported to the USDA in the morning. Packers having ample supplies of contract and formula cattle in the north, an increase in country marketing’s in that part of the country, and lower futures boards early in the week were all catalysts for the lower northern trade this week. Conversely, numbers in the southern feeding states remain more manageable and packers don’t have as many contract cattle down there and this helped to promote a steady trade in that part of the country. Last weeks feeder cattle market was mostly $2-$3 lower as an increase in receipts due to more cattle coming off of summer pasture weighed on prices. Slaughter cow markets were mixed last week with steady to $1 higher and steady to $1 lower being the call depending on what sale you were at in the country. Looking into this week, I would say that showlists will be a little larger in the north and steady to a little smaller in the south. The beef market, while not a run away to the upside, does seem to have a level of support underneath it. Numbers of market ready fed cattle will remain manageable going forward and we should see a gradual increase in domestic and international beef demand going forward as well. We will call for a mostly steady fed cattle trade this week depending on how well early week beef demand and futures perform. Feeder cattle markets should be steady to a little lower early this week along with slaughter cow values.

Cash Beef Situation and Outlook:

Last weeks cattle kill was estimated at 657,000 head, which would be 64,000 head below the previous week and 12,000 head below the same week a year ago. The weekly slaughter included a Friday kill of 111,000 and a Saturday kill of 36,000, and produced an estimated 513.7 mil lbs of beef. Last week the boxed beef market gained $1.78 on the choice cutout to settle at $160.08 and $1.79 on the select cutout to settle at $153.84 on decent movement of 1,296 loads of fabricated beef cuts sold. Friday saw a mixed day in the beef market with the choice cutout closing $.49 higher to settle at $160.57 and the select cutout closing $.23 lower to settle at $153.61. Sales volume on Friday was good with 295 loads of beef sold (127.38 loads of choice fab cuts, 107.69 loads of select fab cuts, 20.63 loads of trim, 39.36 loads of grinds). The choice/select spread on Friday settled at $6.96 a gain of $.72.

Last weeks beef market was led higher by decent export demand for chuck items in particular the chuck roll. Higher thin meat markets (briskets, plate, flanks, etc) also lent support to higher cutout values. Middle meats were again under pressure for most of the week, however interest and demand were said to be improving by the end of the week. There was also some active interest in short loins and strip loins to deliver into October, which helped stave off further losses in that complex. Boneless beef markets were mostly steady last week, however 50% fed cattle trim was starting to firm up late in the week on concern over deliver on product in certain spots of the country due to the impending hurricane. I will look for a mostly steady to higher beef market by the end of this week.

Futures Market Situation and Outlook:

For the week, October live cattle lost $.80 to settle at $102.15, December live cattle lost $1.18 to settle at $103.77, and the February live cattle lost $.25 to settle at $105.55. In the feeder cattle pit for the week, September feeder cattle lost $1.22 to settle at $109.90, October feeder cattle lost $1.75 to settle at $108.92, and the November feeder cattle lost $1.45 to settle at $108.77. The reported CME feeder cattle index for 9/11/08 was $110.98 a loss of $.34.

Fridays live cattle volume saw 39,687 contracts trade in the pit and 20,179 contracts trade on Globex. Live cattle open interest gained 6,180 contracts to come in this morning at 275,592. Friday’s feeder cattle volume saw 4,739 contracts trade in the pit and 1,273 contracts trade on Globex. Feeder cattle open interest gained 267 contracts to come in this morning at 27,426.

Live and feeder cattle futures settled mostly higher on Friday as late week short covering and ideas of a steady southern fed cattle trade supported values going into the close. The Goldman Roll concluded on Friday with an estimated 5,000 contracts of October live cattle rolled into deferred months and 1,000 contracts of October feeder cattle rolled into deferred month contracts. The Texas Farm Bureau over the weekend is reporting that thousands of head of cattle were lost due to hurricane Ike, and that thousands more on running loose in search of feed and water. News of Lehman Brothers filing bankruptcy over the weekend has the stock market sharply lower this morning, and some of this weakness is likely to spill over into the commodity complex this morning, especially the meats. Look for a $.10-$.20 lower open to live and feeder cattle futures this morning and look for some support at last weeks lows of $101.35 in October live cattle and $107.50 in October feeder cattle. 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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