September 25, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash cattle market turned active on the southern plains and Colorado yesterday with prices coming in fully steady at $99 live and $1.56 dressed in Texas and Kansas, and $1 higher in Colorado at $99 live. There were a couple thousand head of fed cattle that traded in Nebraska at $98 live in the east and $99 live in the west. Trade volumes look to be about 20,000 head apiece between Texas and Kansas and 2,000-4,000 head in Colorado and Nebraska. Once again packers are a little harder to do business with this week as they continue to pull from contract and formula supplies. It was reported yesterday that some packers were pulling their bids after getting moderate numbers of fed cattle bought yesterday. I would look for further trade to develop today at steady money with yesterday. Fat cattle selling through the upper Midwest auction markets were higher yesterday as well, with both Sioux Falls and Yankton, SD calling their markets steady to $1 higher at $92-$95. Slaughter cows remain mostly lower throughout the country as do cash feeder cattle sales. Cows and feeders should stay under pressure for the rest of the week.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 128,000 head, which would be 1,000 head above last week and 1,000 head above the same day a year ago. The week-to-date kill now stands at 381,000 head, which would be steady with last weeks pace with the industry looking for a 670,000 head production week. The boxed beef market was lower yesterday with the choice cutout closing $.80 lower to settle at $159.61 and the select cutout closing $.28 lower to settle at $151.96. Sales volume was good with 305 loads of beef sold (97.93 loads of choice fab cuts, 100.19 loads of select fab cuts, 41.76 loads of trim, 65.23 loads of grinds). The choice/select spread settled at $7.65 a loss of $.52.

The beef market was lower yesterday as buyer demand for middle meats continues to be soft. With the kill running even with last week many are of the opinion that there will be discounts surfacing for rib and loin meat given the softer demand for these items and this keeps buyers procuring meat in a hand-to-mouth fashion. This is especially true given a larger hog slaughter the last couple of weeks. There were also a few instances of price markdowns in round cuts, which added weight to overall cutout values. Coarse ground values were under some moderate pressure yesterday, which kept boneless beef values pressured. I don’t think we will see a big drop in beef values in the near term, as buyers seem to turn into willing purchasers on any price declines. However, given the level of demand currently the beef market may drift sideways going into early next week.

Futures Market Situation and Outlook:

October live cattle settled at $102.17 a loss of $.02, December live cattle settled at $104.20 a gain of $.75, and the February live cattle settled at $104.32 a gain of $.65. In the feeder cattle pit, September feeder cattle settled at $107.70 a gain of $.10, October feeder cattle settled at $107.60 a gain of $1.00, and the November feeder cattle settled at $107.45 a gain of $1.50. The reported CME feeder cattle index for 9/23/08 was $108.06 a loss of $.10.

Yesterdays live cattle volume saw 24,182 contracts trade in the pit and 14,808 contracts trade on Globex. Live cattle open interest gained 295 contracts to come in this morning at 256,294. Yesterday’s feeder cattle volume saw 2,922 contracts trade in the pit and 1,121 contracts trade on Globex. Feeder cattle open interest gained 527 contracts to come in this morning at 27,318.

Live and feeder cattle futures settled higher yesterday on a continuation of the rally that started late last week. Short covering and technical buying were the main features of the day, with most of the strength showing up in the feeder cattle market. The market perceives that the CME feeder index in going to find some support around $103-$104 for the October/November time frame, and the futures have had a nice rally from that price level since last Thursday. Another supporting factor to the live cattle futures yesterday was that cash fed cattle were trading steady in Texas and Kansas yesterday and $1 higher in Colorado and Nebraska. The cattle futures market has went through some huge liquidation the last several weeks and I think with friendly fundamentals going into October and November that the market has further upside. I continue to want to use breaks in the market as buying opportunities. In the near term October feeder cattle will find some resistance at $109 and December live cattle will find some resistance at $105. These would be price targets on the upside for the rest of this week. Support on the downside today will be found at $103 in the December live cattle and $106 in the October feeder cattle. Look for a $.10-$.20 lower open to trading this morning. 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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