October 13, 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 $4-$5 lower live and $5-$7 lower dressed at $92-$93 in the south and $88-$90 live or $1.38-$1.40 dressed in the north. Capitulations in the futures market along with the uncertainty in the financial markets were all catalysts for the lower trade. Feeder cattle markets were lower as well to the tune of $3-$8. Here too, a futures market (both fats and feeders) in free fall and worries over the credit market and forward demand for beef, along with ample numbers of feeder cattle coming to market, had buyers looking to procure replacement cattle at lower money. Slaughter cow markets were also sharply lower last week. Looking into this week, we may be able to see the cash fed cattle market stabilize this week, as so far this week, there seems to be a little more confidence coming back into the financial and banking systems. We are by far out of the woods in this situation, however perhaps we can stem the free fall that futures and cash have been in for the last couple of weeks. Fed cattle numbers will be at their tightest of the year from now until the end of November, and with the steep losses we have seen in the beef market, we may see beef buyers step back into the market and take on some inventory. Look for a fed cattle market that trades steady to possibly $1 higher this week. Feeder cattle and slaughter cow markets look to be a little lower early this week, however could firm up towards the weekend.

Cash Beef Situation and Outlook:

Last weeks cattle slaughter was estimated at 650,000 head, which would be 20,000 head above the same period the previous week. The boxed beef market was $2.25 lower on choice and $2.70 lower on select product through last Thursday on increased movement of 1,039 loads of fabricated cuts sold. Friday saw the choice cutout down $.66 to settle at $149.51 and the select cutout down $.65 to settle at $143.24. Sales volume on Friday was light with 231 loads of beef sold (70.98 loads of choice fab cuts, 80.23 loads of select fab cuts, 19.46 loads of trim, 59.97 loads of grinds). The choice/select spread settled at $6.27 a gain of $.01.

Last weeks boxed beef market was characterized by uncertainty over how the financial fall out would affect beef demand. Buyers were only interested in buying for their absolute immediate needs, and only ordering product when they saw it moving out of their stores. As a result packers were offering deep discounts throughout the entire carcass in order to spur demand. The only bright spot in the carcass last week was choice and select ribs were in the case of select rib cuts, some closed higher on the day. There are now several bargains in the beef market in terms of certain middle meat cuts trading at or below end meat items, which should begin to spur some buyer interest. Export orders really backed off last week as well; however we could see some of that return with the sharply lower dollar this week. I would look for the boxed beef market to stabilize by the middle of this week.
Futures Market Situation and Outlook:
On Friday, October live cattle settled at $89.12, December live cattle settled at $91.30, February live cattle settled at $91.82, October feeder cattle settled at $95.45, November feeder cattle settled at $95.05, and the January feeder cattle settled at $95.05 all of which would be down the $3.00 limit.

Live and feeder cattle futures all closed down the 300 point daily limit on Friday, except for Feb 10 fats and Sept 09 feeders. The meltdown on Wall Street was to blame. This morning the Dow is expected to open 300-400 points higher on news the U.S. government as well as European governments would guarantee bank loans in order to restore confidence in the financial and credit system. This should have a profound affect on cattle futures early this week, and should help to restore some confidence in our market as well. I think once we get some of the panic out of the market we should be able to stabilize the cash cattle and beef markets, which in turn should help stabilize the futures. As I pointed out above, we aren’t out of the woods yet, but all these markets are extremely oversold and due for at least a corrective bounce. Deliveries on Friday saw 37 new loads posted against the October contracts out of Norfolk, NE. Look for a $.50-$1.00 higher open to live and feeder cattle futures this morning, and hopefully we can hold onto the gains for once by the end of the day. 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


Reproduction or rebroadcast of any portion of this information is strictly prohibited without the written permission of the Linn Group, Inc. the information reflected herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. Opinions expressed are subject to change without notice. This material and any view expressed herein are provided for informational purposes only and should not be construed in any way as an inducement to buy or sell commodity futures or options contracts. The Linn Group and its officers, directors, employees and affiliates may take positions for their own accounts in contracts referred to herein. Trading futures involves risk of loss. Past performance is not indicative of future results.