October 31, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We saw further cleanup trade in the fed cattle market yesterday with Kansas feedlots reporting 1,900 head of cattle sold for $89-$92.50, Texas feedlots selling 1,600 head of fed cattle for $92.50 ($.50 higher than Wednesday), Nebraska feedlots selling 6,300 head of fed cattle for $1.37-$1.42, and Iowa/MN feedlots selling 9,700 head of fed cattle for $1.36-$1.40. That should probably wrap things up for this week and we will now focus our attention towards next week’s trade. Feedlot showlists should continue to be manageable for the next couple of weeks and the market still anticipates some end of the year holiday beef buying coming into the first of November. This along with the fact that packers have pre-sold beef orders that they are delivering on now, should keep them in the market for fed cattle to kill. Providing we don’t see an extreme implosion in cattle futures between now and next Wednesday, chances are we could see another steady to higher fed cattle trade for next week. Heading home for the weekend, fed cattle selling through the sale barns are bringing mostly steady to $1 lower money. Slaughter cows are also trading at lower money, however as expected, feeder cattle markets have improved with most sales reporting $2-$3 higher money.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 128,000 head which would be 2,000 head above 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 10,000 head below last weeks pace with the industry looking for a 635,000 head production week. The boxed beef market was higher yesterday with the choice cutout closing $.10 higher to settle at $141.81 and the select cutout closing $.26 higher to settle at $135.42. Sales volume was light with 273 loads of beef sold (97.10 loads of choice fab cuts, 89.24 loads of select fab cuts, 27.37 loads of trim, 59.28 loads of grinds). The choice/select spread settled at $6.39 a loss of $.16.

The beef market was mostly steady yesterday, however inquiry for beef into next week was said to be a little better. As mentioned in previous writing’s, market participants expect to see at least some holiday buying of rib and loin packages, and this is thought to be a supportive factor to cutout values going into the middle of November. I would look for a steady to higher trend to the boxed beef market going into next week.

Futures Market Situation and Outlook:

October live cattle settled at $93.50 a gain of $1.85, December live cattle settled at $91.45 a gain of $.45, and the February live cattle settled at $93.25 a gain of $.72. In the feeder cattle pit, October feeder cattle expired at $96.07 a gain of $.27, November feeder cattle settled at $97.85 a gain of $1.35, and the January feeder cattle settled at $97.25 a gain of $1.35. The reported CME feeder cattle index for 10/29/08 was $95.87 a loss of $.15.

Yesterdays live cattle volume saw 19,849 contracts trade in the pit and 12,314 contracts trade on Globex. Live cattle open interest declined 921 contracts to come in this morning at 211,000. Yesterday’s feeder cattle volume saw 2,234 contracts trade in the pit and 897 contracts trade on Globex. Feeder cattle open interest declined 196 contracts to come in this morning at 20,568.

Live and feeder cattle issues settled with solid gains yesterday on continued short covering linked to better cash cattle markets and ideas both beef and cash cattle markets could be higher again next week. It’s the end of the month and the outside markets are a little lower, so we have to be careful of a selloff today. With that said though, if we can keep the December live cattle above $90 and November feeder cattle above $96 by the close of trade today I think that would look a little positive on a weekly chart and could bode well for higher prices going into next week. I don’t think we will see any kind of runaway rally to the upside, but I do think we could get Dec, Feb, and April fats back into the middle $90’s and Nov and Jan feeders back up to $100. Unfortunately, given the current state of the economy and given the fact that we are living in a different world than we were a couple of months ago, we are likely going to want to sell rallies up against the above mentioned price targets. There were 3 new loads of cattle posted against the October live cattle contract last night. ADM delivered the cattle out of North Platte, NE and Newedge USA received them. Keep in mind that October live cattle will expire at noon today. Look for a $.10-$.20 higher open to live and feeder cattle futures this morning. Have a Good Weekend and 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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