September 17, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash cattle market was quiet yesterday with trade confined to that of contract cattle and sale barn cattle. There were no packer bids being reported as of late last night with cattle feeders remaining priced at $102-$103 live and $1.62 dressed. A late week trade is expected with prices no worse than steady in the south and steady to a little lower in the north. Showlist numbers are a little larger in some of the northern feeding states and smaller in the south, which will give southern feeders some bargaining power in this week’s price negotiation and should make that market premium to the north. For right now I will still call for a $99 live trade in the south and $98/$1.52 in the north. Fat cattle selling in the auction markets are mostly steady with last week with $93-$94 tops noted on the beef fats. Feeder cattle markets are mostly $1-$2 lower across the country as we work our way through the end of summer grass run of yearling cattle. Slaughter cow markets are steady to a little lower as we start to see more cows coming to market towards the end of summer. Continue to look for a softer trend in the feeder cattle and slaughter cow markets for another couple of weeks.

Cash Beef Situation and Outlook:

Yesterday’s kill was estimated at 126,000 head, which would be 1,000 head below last week and 4,000 head below the same day a year ago. The week-to-date cattle slaughter stands at 254,000 head, which would be steady with the same period last week. The boxed beef market was mixed with the choice cutout closing $.08 lower to settle at $160.75 and the select cutout closing $.50 higher to settle at $154.02. Sales volume was light with 224 loads of beef sold (72.05 loads of choice fab cuts, 101.41 loads of select fab cuts, 5.47 loads of trim, 45.27 loads of grinds). The choice/select spread settled at $6.73 a loss of $.58.

The beef market was pretty quiet again yesterday as participants try to gauge demand given what is going on with the latest news about the economy and the aftermath of the weekend storm. Given both scenarios, spot market demand is rather light, however wherever discounts are offered from the packing plant on certain items, buyers seem eager to take advantage. During yesterday’s session there was some active trading taking place on choice, select, and no-roll rib, chuck, and round items all of which appeared to take place at higher money. The drag on the market was loin cuts, where short loins, strip loins, and PSMO’s were all under pressure. The boneless beef market was moderately lower yesterday, with 50’s losing more than the 90’s. There will be a little more pressure in the boneless market in weeks to come, as an increase in the domestic cow kill, along with the higher U.S. dollar the last couple of weeks, which will entice more imports of boneless manufacturing beef, will keep pressure on that market. The rest of the complex should be in fairly good shape going forward, as dwindling fed cattle supplies and increased demand, both foreign and domestic, should support beef values going into November. Continue to look for steady to higher in the beef market for the rest of the week.

Futures Market Situation and Outlook:

October live cattle settled at $102.75 a loss of $1.00, December live cattle settled at $104.62 a loss of $.70, and the February live cattle settled at $103.72 a loss of $2.02. In the feeder cattle pit, September feeder cattle settled at $108.90 a loss of $.80, October feeder cattle settled at $107.67 a loss of $1.15, and the November feeder cattle settled at $107.60 a loss of $1.27. The reported CME feeder cattle index for 9/15/08 was $110.04 a loss of $.39.

Yesterdays live cattle volume saw 44,150 contracts trade in the pit and 21,197 contracts trade on Globex. Live cattle open interest declined 1,759 contracts to come in this morning at 276,655. Yesterday’s feeder cattle volume saw 4,090 contracts trade in the pit and 1,494 trade on Globex. Feeder cattle open interest declined 337 contracts to come in this morning at 26,824.

The futures market was under a lot of turmoil again yesterday; too which I think most of it was linked to what was going on in the financial sectors of the market. We had a huge short covering rally on Monday as the futures opened sharply lower and couldn’t get through last weeks low’s, and probably rallied too much going into the close as participant’s couldn’t figure out why the market was rallying and wanted out. With that said, and all of the bearish news out about the world coming to an end yesterday morning, the market opened sharply lower and never looked back until the end of the day when we saw a pretty good short covering rally develop again. The bottom line to this erratic behavior of the live and feeder cattle futures market the last couple of day’s is that more of these fund guy’s are in trouble with there other investment’s in the equity world, and are being forced out of their commodity trade’s, (trade’s by the way that were making them money), in order to finance what they lost in the other sectors of the economy. We are on a huge break in price and open interest in both live and feeder cattle futures (i.e. –20,000 plus in LC open interest, -5,000 plus in feeder cattle open interest, and - $10-$15 cwt plus in flat price on both). The point being if you are selling this stuff because of what’s going on in unrelated markets, you’re probably going to be wrong in the long run. But when you are in a liquidating market, whether its corn, beans, oil, or cattle you have to get out of the way and let the market settle out before you can come back to trading fundamentals. For the rest of this week, it looks like perhaps the stock market might have found a little stability as the government seems to be going to step in and save AIG from bankruptcy. This had both Dow and S&P futures rallying late in the day yesterday and closing higher. So far this week we have managed to hold last week’s low of $101.35 in October live cattle and $102.40 in December live cattle and these will be very important price points for the rest of this week’s trading. If you’re bullish I would buy down against this support and risk a new low close for the week, and if you’re bearish I would have sell stops underneath these price points to get short. The feeder cattle are a different story as this market looks weak closing into new lows for the latest move down. Anymore in the feeder cattle it appears like we are not going to get any kind of short covering bounce and instead will go and test old contract lows of $104.30 in the October and $103.80 in the November. For those of you still short from the $118-$119 area basis Oct and Nov feeders, I would look to cover shorts on any $1-$2 move lower from yesterday’s settlements, and wouldn’t mind taking a shot at the long side against the above mentioned contract lows, risking a new contract low on a closing basis. Look for a $.10-$.20 higher open this morning in live and feeder cattle futures and we will see if we can hold onto any early strength. 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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