October 7, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We saw a few cattle start to trade yesterday afternoon in Kansas, Nebraska, and Iowa at lower money when compared to the previous week. There were a couple thousand head sold in Kansas at $93-$94 live, a couple thousand head of cattle sold in Nebraska at $1.42-$1.44 dressed, and a couple thousand head of cattle sold in Iowa at $1.42-$1.44 dressed. The rest of feedlot country was willing to wait to see if the market would stabilize before making any marketing decisions. A look at last weeks feedlot sales shows Texas selling 32,912 head of fed cattle for $96-$97, Kansas feedlots selling 35,861 head of fed cattle for $96-$97 live and $1.52-$1.53 dressed, and Nebraska feedlots selling 49,125 head of fed cattle for $94-$97 live and $1.45-$1.49 dressed. Volume looks a little light in all trading areas when compared to the previous week, which is leading to a little larger showlist offering in the north and steady to smaller in the south. All classes of cash cattle selling through the auction markets were lower yesterday as we see fat cattle off $2-$3, feeders off $4-$5, and cows off $1-$2. I would look for another lower feedlot trade when everything is said and done this week, with the market staying under pressure until we get some of these big cattle cleaned up in the north.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 123,000 head, which would be 2,000 head below last week and 4,000 head below the same day a year ago. The industry will be looking for a 635,000 head production week. The boxed beef market was higher yesterday with the choice cutout closing $3.74 higher to settle at $156.16 and the select cutout closing $.42 higher to settle at $147.01. Sales volume was light with 181 loads of beef sold (72.32 loads of choice fab cuts, 49.92 loads of select fab cuts, 10.05 loads of trim, 48.41 loads of grinds). The choice/select spread settled at $9.15 a gain of $3.32.

The beef market was mostly steady to lower yesterday, however the USDA was marking the choice cutout $3.74 higher due to a large package of ribeyes that traded at higher money versus light volume and trade, which skewed the value of the cutout. Private sources indicate that beef prices were mostly lower yesterday, most notably again in the middle meats (i.e. ribs and loins). There was also some discounting throughout the chucks and rounds yesterday, however not to the extent of the middles. Demand for beef has slowed considerably at the restaurant level, however retail and wholesale demand isn’t all that bad. Look for the beef market to find some support by midweek.

Futures Market Situation and Outlook:

October live cattle settled at $92.60 a loss of $3.00, December live cattle settled at $94.77 a loss of $3.00, and the February live cattle settled at $94.70 a loss of $3.00. In the feeder cattle pit, October feeder cattle settled at $97.67 a loss of $3.00, November feeder cattle settled at $97.80 a loss of $3.00, and the January feeder cattle settled at $97.40 a loss of $3.00. The reported CME feeder cattle index for 10/6/08 was $104.11 a loss of $.83.

Yesterdays live cattle volume saw 32,205 contracts trade in the pit and 8,978 contracts trade on Globex. Live cattle open interest declined 1,414 contracts to come in this morning at 240,407. Yesterday’s feeder cattle volume saw 3,506 contracts trade in the pit and 1,816 contracts trade on Globex. Feeder cattle open interest declined 59 contracts to come in this morning at 25,945.

Live and feeder cattle futures settled limit down yesterday on further liquidation linked to worries over the economy. The lower futures trade is leading the cash markets lower and just exactly where the bottom is at has yet to be determined. It’s hard to pick a bottom in a liquidating market; however I can’t help but think we are getting close to finding some stabilization in the stock market by midweek, which would go along way in helping the cattle futures post a near term low. Weekly support will be found at yesterday’s limit down settlements on all live and feeder cattle futures contracts. Taking yesterdays lows out opens the door for more downside, however I think as long as the stock market holds together, cattle futures will as well. Look for a $.50-$1.00 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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