November 10, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We left last week with a fed cattle market that finally trades at $94 live and $1.49 dressed in Texas, Oklahoma, New Mexico, and Kansas and mostly $92- $94 live and $1.45-$1.46 dressed in Nebraska and Colorado. All of this would be $2 higher on a live and dressed weight basis. Movement looks to be moderate in all trading areas and I will report on weekly totals in the morning once everything is counted and reported to the USDA. Last weeks feeder cattle market was mostly $1-$4 higher on the yearling cattle and fully $5 higher on the calves. Buyer demand was described as good in all trading areas as yearling numbers begin to dry up and calf demand for winter grazing remains robust. For the week slaughter cows were off by $2-$4 as increased marketing’s and lower demand for boneless beef weighed on values. Looking into this week I think we could see a better tone to cash cattle values early in the week and depending on well beef demand holds up possibly put another dollar on fed cattle values. Fed cattle numbers remain manageable and beef demand is still firm, although some buyers were saying they had some of their orders filled for a couple of weeks coming out of last week. Feeder cattle demand should remain firm for the first part of this week as buyers continue to fill orders for winter grazers. Slaughter cows will likely start the week on a softer tone and remain that way for most of the week.

Cash Beef Situation and Outlook:

Last weeks cattle slaughter was estimated at 621,000 head, which would be 17,000 head below the previous week and 22,000 head below the same week a year ago. The weekly slaughter produced an estimated 488.9 mil lbs of beef. The year-to-date cattle slaughter now stands at 29.346 mil head or .3% above last year and ytd beef production stands at 22.718 bil lbs, which would be .7% above a year ago. Through Thursday of last week, choice boxed beef gained $6.82 to settle at $149.03 and select boxed beef gained $5.02 to settle at $141.34. Sales volume increased last week with 1,227 loads of choice/select fabricated cuts sold. Friday saw another higher day in the beef trade with the choice cutout closing $1.22 higher to settle at $150.25 and the select cutout closing $1.16 higher to settle at $142.50. Sales volume on Friday was light with 246 loads of beef sold (97.85 loads of choice fab cuts, 62.90 loads of select fab cuts, 37.20 loads of trim, 47.63 loads of grinds). The choice/select spread settled at $7.75 a gain of $.06 for the week and a gain of $1.80 for the week.

Last week saw decent gains in the beef market as buyers reentered the market to take on a portion of their holiday needs. Choice rib items led the charge higher gaining close to 25% in value last week. There was also increased demand in rib, chuck, and round cuts not only from domestic retail interests, but it was also said that there was some increased export business as well. As mentioned above, some buyers were of the opinion that prices have moved too high too fast last week and were moving to the sidelines to see how early week demand was going to play out before committing to further purchases. I will call for a higher steady to higher beef market for at least the first part of this week until more is know about near term demand.

Futures Market Situation and Outlook:

For the week, December live cattle gained $.10 to settle at $92.80, February live cattle lost $.70 to settle at $93.55, and April live cattle gained $.05 to settle at $94.80. In the feeder cattle pit, November feeder cattle settled at $98.95 a gain of $.32, January feeder cattle gained $1.17 to settle at $99.22, and the March feeder cattle gained $1.15 to settle at $99.67. The reported CME feeder cattle index for 11/6/08 was $96.45 a loss of $.14 for the day and a gain of $.39 for the week.

Friday’s live cattle volume saw 33,840 contracts trade in the pit and 13,247 contracts trade on Globex. Live cattle open interest declined 2,198 contracts to come in this morning at 216,252. Friday’s feeder cattle volume saw 1,711 contracts trade in the pit and 629 contracts trade on Globex. Feeder cattle open interest gained 258 contracts to come in this morning at 19,010. For the week live cattle open interest increased 3,019 contracts and feeder cattle open interest declined 1,068 contracts.

The latest commitment of traders report showed the funds net short 6,024 contracts of live cattle futures/options a decline of 6,529. The commercials were net short 72,465 a gain of 4,337, the index funds were net long 107,035 a decline of 551, and the small spec trader was net short 28,546 a gain of 1,641. In the feeder cattle, the funds were net short 2,804 a decline of 1,430, commercials were net long 2,051 a decline of 1,386, index funds were net long 5,594 a gain of 298, and the small spec trader was net short 4,840 a gain of 342.

Live cattle futures ended the week mostly steady with moderate gains in feeder cattle. The market spent the week anticipating a higher fed cattle trade and was able to achieve it, so we will now work to price in the possibility of another higher trade this week. Friday was the first day of the “Goldman Roll” for December live cattle with an estimated 6,000 contracts reportedly done on the close. The Dec/Feb spread lost $.75 on the close as reportedly there was no one on the other side to absorb the December sales. The cash fundamentals of the fed cattle market still feel pretty good and I still think we can trade fed cattle higher into the end of the month. That being said, we will have weeks when we will be higher and weeks when we will be lower, but overall I still like buying some breaks in December cattle on near term weakness. I would have liked to see feeder cattle close above $100 on Friday and we are going to have to keep an eye on them early this week for price direction. I still think $102-$103 is attainable in Jan feeders by the end of the month. Look for a $.10-$.20 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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