September 26, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We saw further trade in the nation’s feedlots yesterday at steady to slightly higher money when compared to earlier in the week. Texas and Kansas feedlots reported selling more cattle yesterday morning at $99 live, steady with the day before, and Nebraska feedlots reported selling several thousand head of cattle yesterday at $97 live and $1.52 dressed, which would be about a dollar higher when compared to Wednesday afternoon’s dressed transactions. That should about clean things up for the week and if there is any more cleanup trade it should take place at steady money with yesterday. Looking into next week, I am going to look for a little softer tone to the fed cattle market, especially if the beef wants to keep acting sloppy. Going home for the weekend, feeder cattle are actually firming up a bit in certain sales throughout the country and slaughter cows continue to trade a little lower. Look for a little lower in both markets early next week.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 127,000 head, which would be 1,000 head above last week and 4,000 head above the same day a year ago. The week-to-date kill stands at 508,000 head, which would be 1,000 head above the same period a week ago with the industry looking for a 670,000 head production week. The boxed beef market was lower yesterday with the choice cutout closing $1.61 lower to settle at $158.00 and the select cutout closing $1.29 lower to settle at $150.67. Sales volume was moderate with 343 loads of beef sold (106.04 loads of choice fab cuts, 118.32 loads of select fab cuts, 56.00 loads of trim, and 63.04 loads of grinds). The choice/select spread settled at $7.33 a loss of $.32.

The beef market was lower yesterday as building inventories of rib and loin meat forced some packers to offer deep discounts on ribeye’s and PSMO’s. End meats for the most part traded steady to instances of moderately lower, however the weakness in the rib primal outweighed any kind of price support for the chucks or rounds. Thin meats were lower yesterday along with boneless beef markets and this helped in lower cutout values as well. There was an uptick in sales volume on the lower trade and it was felt that packers were getting problem inventories cleaned up at the lower money. We just haven’t seen the seasonal buying for middle meats kick in yet and this will keep rallies in the cutout value in check until we see better demand for rib and loin meat. An increase in middle meat buying should start in another couple of weeks. Look for a sideways to lower beef trade early next week.

Futures Market Situation and Outlook:

October live cattle settled at $100.95 a loss of $1.22, December live cattle settled at $102.62 a loss of $1.57, and the February live cattle settled at $103.50 a loss of $.82. In the feeder cattle pit, September feeder cattle expired at $107.87 a gain of $.17, October feeder cattle settled at $106.85 a loss of $.75, and the November feeder cattle settled at $106.37 a loss of $1.07. The reported CME feeder cattle index for 9/24/08 was $107.63 a loss of $.43.

Yesterdays live cattle volume saw 32,048 contracts trade in the pit and 15,261 contracts trade on Globex. Live cattle open interest declined 2,707 contracts to come in this morning at 253,536. Yesterday’s feeder cattle volume saw 2,594 contracts trade in the pit and 901 contracts trade on Globex. Feeder cattle open interest gained 21 contracts to come in this morning at 27,332.

Live and feeder cattle futures values came under pressure yesterday on profit taking from the recent rally off of last Thursday’s lows. The market was anticipating a steady to higher cash fed cattle trade for this week, and once that came to fruition, traders decided to take some money off of the table ahead of the weekend. I think we could possibly take a dollar or two off the cash fed cattle market next week as well, which also could have been part of the reason we sold off yesterday. I don’t think the cash market will be a wreck, however we have traded cattle basically steady for the last 4 weeks and I would suspect the market will move one way or the other and I just think we could move lower before we end up going higher into November. I would like to see the cash market trade a couple of dollars lower next week and get some of these heavier cattle cleaned up in the north, break the futures $1-$2, and then I think we can see the market make a pretty good move higher into the first of November. Closing October live cattle under $102 and December live cattle under $103 looks a little bearish technically for the near term and we can probably expect to see a retest of last weeks lows as a result by early next week. Feeder cattle managed to hold $106 in both Oct and Nov, and that will act as support for today. Taking $106 out will likely push us down to $105 real quick, where I think feeders would find some value again. Look for a $.10-$.20 lower open to live and feeder cattle futures 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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