October 24, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We saw further clean up trading of fed cattle yesterday with prices generally steady with Wednesday’s market. There was 1,500 head of fed cattle reportedly sold in Kansas at $89-$90, 10,000 head of fed cattle sold in Nebraska at $1.34-$1.37, 3,000 head of fed cattle sold in Texas at $90-$91, and 10,000 head of fed cattle sold in Iowa at $1.34-$1.36. That is probably going to wrap things up for the week and any more cattle that need to be sold will likely take place at the bottom end of yesterdays range. Going home for the weekend fat cattle, feeder cattle, and slaughter cows are all trading higher in the auction markets, however if the stock futures and cattle futures don’t straighten out by early next week, prices for all classes of cattle will likely be lower.

Cash Beef Situation and Outlook:

Yesterday kill was estimated at 126,000 head, which would be 1,000 head below last week and 2,000 head below the same day a year ago. The week-to-date kill now stands at 507,000 head, which would be 14,000 head above the same period last week with the industry looking for a 630,000 head production week. The boxed beef market was lower yesterday with the choice cutout closing at $143.30 a loss of $1.08 and the select cutout closing at $135.82 a loss of $1.74. Sales volume was good with 390 loads of beef sold (159.74 loads of choice fab cuts, 162.30 loads of select fab cuts, 14.88 loads of trim, 52.73 loads of grinds). The choice/select spread settled at $7.48 a gain of $.66.

The beef market was lower yesterday on a lack of buyers due to a lack of demand. Packers are killing to many cattle given current spot market demand and with a lack of exports right now beef prices are going to be under pressure. We need to see the economic condition of the country straighten out before we can see any type of meaningful rally in the beef and as of right now we haven’t seen signs of that yet. Look for a softer tone to the beef market into next wee.

Futures Market Situation and Outlook:

October live cattle settled at $89.75 a loss of $1.40, December live cattle settled at $89.87 a loss of $2.00, and the February live cattle settled at $90.95 a loss of $1.82. In the feeder cattle pit, October feeder cattle settled at $97.77 a loss of $1.20, November feeder cattle settled at $96.77 a loss of $2.15, and the January feeder cattle settled at $96.07 a loss of $2.47. The reported CME feeder cattle index for 10/22/08 was $97.93 a gain of $.42.

Yesterdays live cattle volume saw 24,386 contracts trade in the pit and 11,976 contracts trade on Globex. Live cattle open interest declined 1,880 contracts to come in this morning at 224,044. Yesterday’s feeder cattle volume saw 3,057 contracts trade in the pit and 672 contracts trade on Globex. Feeder cattle open interest declined 614 contracts to come in this morning at 21,822.

Live and feeder cattle futures settled sharply lower on long liquidation and spec selling linked to economic concerns. Today doesn’t look much better with stock futures trading limit down ahead of the open of the equities trading. Overseas markets are all sharply along with most other commodities markets, which is pointing to a limit down open to cattle futures. Yesterday’s close in the cattle futures markets opens the door to the upper $70’s to lower $80’s basis front month live cattle and the upper $80’s to lower $90’s basis front month feeder cattle. The way the market is falling apart we should be there sooner rather than later, so again if I need to hedge cattle I would do so via put options and leave the upside open in the market for the time being, at which point you can either sell call options or futures on rallies. We are getting into some levels where rolling short futures hedges into put options might also make some sense and resell the futures on a rally. And no matter what start buying cheap breakevens!!! Look for a $2.00-$.300 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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