October 2, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We saw some light fed cattle trading begin to develop on the southern plains yesterday morning with early prices trending about a dollar lower when compared to last week. There were a couple thousand head of cattle reportedly sold in Texas for $98 live with some cattle changing hands in Kansas at the same money. There was also a couple thousand head of cattle reportedly sold in the eastern Nebraska/western Iowa dressed market for $1.48-$1.49. Most other feedyards were resisting the lower packer bids in hopes of a rally on the futures board in the coming days in an attempt to get higher money. The board did rally back from early morning lows yesterday once word of the Texas cattle trades started filtering in, however I don’t know if it was enough of a rally to stave off a lower fed cattle trade in the north for the rest of the week. I will continue to look for a mostly $97-$98 live and $1.48-$1.49 dressed market for the rest of this week. As we get past the midweek point, fed cattle, feeder cattle, and slaughter cows selling through the nations auction markets are all trading $1-$2 lower.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 125,000 head, which would be 3,000 head below last week and 1,000 head below the same day a year ago. The week-to-date kill now stands at 376,000 head, which would be 5,000 head below the same period a week ago with the industry looking for a 640,000 head production week. The boxed beef market was lower yesterday with the choice cutout closing $.40 lower to settle at $155.00 and the select cutout closing $.70 lower to settle at $147.76. Sales volume was light with 296 loads of beef sold (72.27 loads of choice fab cuts, 121.30 loads of select fab cuts, 30.34 loads of trim, 71.67 loads of grinds). The choice/select spread settled at $7.24 a gain of $.30.

The beef market was lower yesterday on active discounting on cuts throughout the all the major primal areas of the carcass. Once again we find the biggest culprit to cutout losses in the middle section of the animal, where sharp discounts were surfacing on choice and select rib roasts, ribeye’s, and strip loins. Demand for these higher end cuts is rated as dismal due to retail accounts having more margin on chuck, round, and ground product. It is thought that with the purging of product the last several trading sessions and packers talking about cutting production hours towards the end of the week, that this will go a long way in helping to stabilize cutout values going into next week. Coarse ground beef was also under a moderate degree of pressure yesterday and this along with more boneless beef available kept 90% and 50% boneless values under pressure. We will look for beef values to stabilize for a moment and begin a more sideways to higher pattern into the first part of next week. Beef exports for the week of September 19-25, 2008 are as follows:

Beef: Net sales of 8,800 MT were primarily for South Korea (2,800 MT), Mexico (2,200 MT), Vietnam (1,500 MT), Japan (1,000 MT), and Canada (1,000 MT). Exports of 12,400 MT were mainly to Mexico (4,400 MT), South Korea (3,600 MT), Canada (1,500 MT), Japan (1,000 MT), Vietnam (800 MT), Russia (500 MT), and Taiwan (300 MT).

Futures Market Situation and Outlook:

October live cattle settled at $98.57 a loss of $.32, December live cattle settled at $100.47 a gain of $.10, and the February live cattle settled at $100.62 a loss of $.10. In the feeder cattle pit, October feeder cattle settled at $103.55 a loss of $.45, November feeder cattle settled at $103.60 a loss of $.12, and the January feeder cattle settled at $103.70 a gain of $.05. The reported CME feeder cattle index for 9/30/08 was $106.17 a loss of $.02.

Yesterday’s live cattle volume saw 24,723 contracts trade in the pit and 10,498 contracts trade on Globex. Live cattle open interest declined 2,185 contracts to come in this morning at 244,064. Yesterday’s feeder cattle volume saw 3,652 contracts trade in the pit and 1,143 trade on Globex. Feeder cattle open interest declined 457 contracts to come in this morning at 25,856.

Fat and feeder cattle futures settled mixed yesterday but well off the early morning lows. Short covering and hedge lifting were one of the bigger catalysts for the rally going into the close. We keep making new lows in the feeder cattle but come back dramatically from those lows by the end of the day or the next day. I think we are getting close to putting in a low for awhile in the feeder cattle, and as long as the stock market doesn’t fall out of bed again, $100 on the futures might be able to hold the feeders. I think we need to close November feeders back above $104 in order to confirm a near term low could be in. Fat cattle futures are going to be choppy until we can see some strength come back into the cash cattle and boxed beef markets. October fats should be able to hold $97.50 for the rest of this week, and keeping December above $100 looks positive. However, we really need to get December live cattle back above $101 on a closing basis to get some technical buying back into the market. 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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