October 6, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We left last week with a cash fed cattle market that trades mostly $94-$97 live and $1.47-$1.54 dressed, with the lower end of the trade taking place in the northern tier of cattle feeding country on moderate sales volume. There was some reported clean up trade in Nebraska of Friday at $1.45 dressed. An imploding futures market and falling beef market were catalysts for the lower trade. For the week, the feeder cattle market was $2-$6 lower, with most of the declines coming in fresh unweaned new crop calves. Concerns over the stock market and credit markets were also an influence in the lower feeder cattle trade. Slaughter cow markets were lower last week as well, as we begin to see more cows coming to town. Looking into this week I don’t see a lot of good in any of these markets early as we continue to see the stock market in free fall. We are going to need to see the stock market stabilize in order to restore some confidence in the marketplace (i.e. futures, beef, and cash cattle). Look for $1-$2 lower across the board on all classes of cash cattle early this week, and we will see if we can’t stabilize the market late in the week.

Cash Beef Situation and Outlook:

Last weeks cattle kill was estimated at 630,000 head and produced an estimated 495.4 mil lbs of beef. The weekly cattle slaughter was 29,000 head below the previous week and 41,000 head below the same week a year ago. The boxed beef market was $1.73 lower on the choice cutout and $2.85 lower on the select cutout through Thursday on moderate volume of 979 loads of fabricated beef cuts sold. Friday saw further losses in the beef complex with the choice cutout closing $1.27 lower to settle at $152.42 and the select cutout closing $.51 lower to settle at $146.59. Sales volume on Friday was light with 221 loads of beef sold (86.25 loads of choice fab cuts, 70.63 loads of select fab cuts, 15.09 loads of trim, and 48.67 loads of grinds). The choice/select spread settled at $5.82 a loss of $.76.

The beef market has fallen sharply in the last several trading session on a general lack of demand linked slowing demand domestically and internationally because of the economic meltdown. No one wants to step into the market unless it is on an as-need basis, because no one knows how bad the economic crisis is going to affect demand out forward. This has kept pressure on middle meats for the last several weeks, however that uncertainty has now filtered into the end meat complex. I would look for a lower beef market early this week with the outside chance we can stabilize late in the week.

Futures Market Situation and Outlook:

On Friday, October live cattle settled at $95.60 a loss of $.10, December live cattle settled at $97.77 a loss of $.30, and the February live cattle settled at $97.70 a loss of $.10. In the feeder cattle pit, October feeder cattle settled at $100.67 a gain of $.10, November feeder cattle settled at $100.80 a gain of $.20, and the January feeder cattle settled at $100.40 a loss of $.30. The reported CME feeder cattle index for 10/2/08 was $104.94 a loss of $.68.

Friday’s live cattle volume saw 28,321 contracts trade in the pit and 14,700 contracts trade on Globex. Live cattle open interest declined 5,292 contracts to come in this morning at 240,702. Friday’s feeder cattle volume saw 3,466 contracts trade in the pit and 1,461 contracts trade on Globex. Feeder cattle open interest gained 418 contracts to come in this morning at 26,021.

Live and feeder cattle futures were under pressure all week on liquidation out of commodities linked to financial woes on Wall Street. We will see more of the same early this week as the stock market and the outside commodity markets are sharply lower again early this morning. It is hard to pick a bottom in a liquidating market, but I think at least a near term bottom is close at hand in all these markets, including the stock market, and that is going to be the most important as we will need to see some stabilization in the economy in order to restore some confidence in the commodities markets. Next major support in the live cattle will be $93.50 basis front month October live and $99.30 basis front month October feeder cattle. We are going to trade on the defensive early this week; however, hopefully we can find some stability by midweek and bounce a little higher going into the weekend. Look for a $.25-$.50 lower start 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


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.