September 4, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash fed cattle trade was at a standstill yesterday as packer bids of $97 live went unmatched against feedlot offering prices of $101-$103 live and $1.62-$1.63 dressed. A late week trade is expected at what I believe will be steady to higher money. Reasons for this are a smaller showlist offering this week and packers needing cattle to fill forward beef orders in the coming weeks. Fed cattle supplies will be on the decline in the coming weeks due to smaller first and second quarter feedlot placements, at a time when both domestic and export beef demand will be on the increase. While there has been a lot of talk about the recent increase in the U.S. dollar hurting beef, pork, and poultry exports, the dollar still remains 35% off its high back in 2001 and 10% below pre-BSE levels of late 2003. From a historical standpoint our beef remains competitively priced in the global marketplace. Also of support to the beef market will be seasonal domestic demand for rib and loin cuts going into the end of the year. So from a supply/demand standpoint, I continue to remain friendly towards the late summer and fall fed cattle and beef markets. Perhaps we won’t see the highs in the market that we first thought (i.e. $110-$112), but I still think a November high of $105-$108 is still attainable. As we get past the midweek point, we see fed cattle selling through the Sioux Falls, SD auction market trading mostly steady at $94-$96 on the beef cattle and $84-$87 on the Holsteins. Slaughter cows are mostly $1-$2 lower throughout the country at $53-$63 on the cutters and boners and $62-$67 on the breakers and whites. Feeder cattle sales are mostly $1-$2 lower as well, with the majority of the 600 lbs to 800 lbs steers bringing $105-$115.

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 below the same day a year ago. The week-to-date kill now stands at 259,000 head, which is 123,000 head behind last weeks pace with the industry looking for a 555,000 head production week. The boxed beef market was lower yesterday with the choice cutout losing $.39 to settle at $159.56 and the select cutout losing $.30 to settle at $151.87. Sales volume was good with 412 loads of beef sold (153.28 loads of choice fab cuts, 152.95 loads of select fab cuts, 35.33 loads of trim, 70.20 loads of grinds). The choice/select spread settled at $7.69 a loss of $.09.

The beef market was lower again yesterday with weakness in the rib, loin, and round primals keeping cutout value under pressure. With that said though, sources indicate that inventory levels of said items were getting cleaned up and that it was thought that prices could begin to stabilize by the end of this week and first part of next. Boneless beef items were once again mixed, with strength in the boneless cow 90’s and weakness in the fed cattle 50’s. There has an increase in ground beef and coarse ground demand, and this helps to support the lean trimming’s market coming into the end of the week. I will look for beef values to find some support at current price levels and begin to move higher by the first part of next week.

Futures Market Situation and Outlook:

October live cattle settled at $103.15 a loss of $.60, December live cattle settled at $105.47 a loss of $.62, and the February live cattle settled at $105.82 a loss of $.92. In the feeder cattle pit, September feeder cattle settled at $110.55 a loss of $1.22, October feeder cattle settled at $110.27 a loss of $1.45, and the November feeder cattle settled at $110.05 a loss of $1.22. The reported CME feeder cattle index for 9/2/08 was $111.48 unchanged on the day.

Yesterdays live cattle volume saw 27,314 contracts trade in the pit and 11,799 contracts trade on Globex. Live cattle open interest declined 2,667 contracts to come in this morning at 272,328. Yesterday’s feeder cattle volume saw 3,357 contracts trade in the pit and 758 contracts trade on Globex. Feeder cattle open interest gained 116 contracts to come in this morning at 30,128.

Live and feeder cattle futures ended the day lower yesterday on fund and spec long liquidation linked to rumors of another hedge fund blowing up. Feeders were especially hit hard, led lower by a low volume electronic trade. Deliveries continued yesterday with 15 more loads of cattle posted against the August live contract as we finish squaring up open interest left on the last day on trading. MF Global put out 5 loads of cattle in Norfolk, NE and RJO put out 10 loads of cattle in Tulia, TX, all of which were received by Rosenthal. October live cattle futures look vulnerable to further long liquidation after yesterday’s performance, closing into new lows for the move. There would appear to be some support in the October live contract between $102.60-$102.80, however violating that would move us down to the $101-$101.50 area pretty quick. December needs to hold the $105 area on a closing basis, otherwise $104 is the next stop, and below that $102. October feeder cattle will need to hold $109-$109.50 to stave off a technical move down to $104. 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
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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