October 29, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash fed cattle market was quiet yesterday with bids and poorly defined. There were a few loads of cattle reportedly sold in Nebraska at $1.37, which would be at the top end of last weeks trading range, however volume was too light to establish a trend. Most packer bids will start out at $88 live and $1.32-$1.34 dressed, with feedlot offering prices holding firm at $92-$93 live and $1.42-$1.43 dressed. We could see some short bought packers begin to enter the market as early as today in the south, however suspect that most of this week business won’t commence until Thursday or Friday. The way things look right now the trade shouldn’t be too much worse then last week’s $90-$91/$1.36-$1.37 trade. Packers in the south don’t have as many contract cattle around them as they do in the north, and this along with having some pre-sold beef orders to fill will keep them in the cash market for cattle to kill to fill those orders. Sale barn cattle continued to carry a mostly steady to lower undertone yesterday, however if we see the futures board hold onto some of their early week gains we could begin to see fat and feeder cattle values stabilize.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 127,000 head, which would be even with a week ago and 5,000 head below the same day a year ago. The week-to-date kill now stands at 255,000 head, which would be 1,000 head above the same period a week ago with the industry looking for a 635,000 head production week. The boxed beef market was higher yesterday with the choice cutout closing $1.31 higher to settle at $142.95 and the select cutout closing $.16 higher to settle at $135.41. Sales volume was good with 293 loads of beef sold (101.48 loads of choice fab cuts, 93.12 loads of select fab cuts, 40.74 loads of trim, and 58.12 loads of grinds). The choice/select spread settled at $7.54 a gain of $1.15.

Near term demand for boxed beef continues to fall short of expectations; however we did see some accounts step in and secure some rib packages yesterday, which led to higher prices on choice rib roasts and ribeyes. Chuck items were under some pressure yesterday, especially select short ribs, which reflect the immediate lack of export business. Round items were mostly steady to higher yesterday as inventories of said cuts are reportedly well clear. Boneless beef markets were off just a little yesterday. Cutout values feel like they could at least stabilize at current price levels, and perhaps move modestly higher going into the first of November.

Futures Market Situation and Outlook:

October live cattle settled at $89.75 a gain of $.82, December live cattle settled at $88.87 a gain of $.10, and the February live cattle settled at $90.32 a gain of $.15. In the feeder cattle pit, October feeder cattle settled at $95.55 a loss of $.35, November feeder cattle settled at $95.42 a loss of $.12, and the January feeder cattle settled at $94.10 a loss of $.60. The reported CME feeder cattle index for 10/27/08 was $96.41 a loss of $.52.

Yesterdays live cattle volume saw 20,835 contracts trade in the pit and 13,817 trade on Globex. Live cattle open interest declined 40 contracts to come in this morning at 214,044. Yesterday’s feeder cattle volume saw 2,451 contracts trade in the pit and 1,503 contracts trade on Globex. Feeder cattle open interest declined 327 contracts to come in this morning at 21,109.

Live and feeder cattle settled mixed after a sharply higher open faded throughout the day on technical and spec selling. However, after the close of the pit trade yesterday afternoon, the Dow surged to over 800 points higher on the cash and 1,000 points higher on the futures, which had most live and feeder cattle issues rallying back to 100 points higher by the 4:00 pm close of electronic trading. Globex futures opened sharply higher last night because of the strength in the Dow Jones, and so far this morning have been able to hold onto those gains. Although the futures run into willing sellers on any rally attempts, they do feel like they have a little support under the market for the time being, and perhaps we could see a couple of dollar rally into the first part of next week. Especially if the Dow can hold onto its gains from yesterday and we trade cash fat cattle steady to higher this week. Support for December live cattle will come into play at $88 this morning with plenty of resistance being found at $90. As mentioned yesterday, December will need to close back above $90 by the end of the week in order to negate some of the recent bearishness. November feeder cattle should find some support at $94.50 this morning with resistance being found at $96.80. Closing November feeder cattle above $96 by the end of the week would keep rally potential alive going into next week. Keep in mind Oct feeders go off the board tomorrow and October fats expire Friday afternoon. Deliveries last night saw another 28 loads posted against the October live contract in Norfolk, NE. Cadent delivered 10 loads and RJO delivered 18 loads with Rosenthal receiving them. We will see if the loads are stopped tonight. Look for a $.50-$.75 higher 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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