November 20, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We saw a moderately active fed cattle trade develop in Nebraska and Colorado yesterday with prices running $3-$5 lower at $87-$88 live and $1.39-$1.40 dressed. A light trade was being reported in Texas/OK/NM at $88-$88.50 live, which would be about $5 lower from the bulk of last weeks trade. Numbers of cattle sold looks to be about 20,000 head in the north and a couple of thousand head in the south. Kansas feedlots have not sold many cattle yet but I would expect to see some trade develop down there today at $88 money. Coming into the end of the week we also see markets for feeder cattle trading sharply lower as well as slaughter cows, and I would expect to see further weakness in all classes of cattle markets early next week.

Cash Beef Situation and Outlook:

Yesterday’s cattle kill was estimated at 125,000 head, which would be 12,000 head above last week and 6,000 head below the same day a year ago. The week-to-date kill now stands at 363,000 head, which would be 19,000 head below last weeks pace with the industry looking for a 625,000 head production week. The boxed beef market was higher yesterday as we see the choice cutout closing $.73 higher to settle at $158.22 and the select cutout closing $.35 higher to settle at $147.87. Sales volume was light with 250 loads of beef sold (78.52 loads of choice fab cuts, 76.77 loads of select fab cuts, 10.94 loads of trim, 84.22 loads of grinds). The choice/select spread settled at $10.35 a gain of $.38.

The beef market was higher yesterday on continued buying of rib and round meat by the retail sector. Chuck meat was still being marked lower as a lack of export demand keeps more product on the domestic market. Loin meat was rated as mostly steady yesterday. Boneless cow beef and fed cattle trim were trading at lower price levels as well yesterday. I would continue to look for the boxed beef market to begin to move sideways to lower going into early next week as retail and wholesale buyers turn their attention to moving turkey product ahead of the Thanksgiving holiday. Beef exports for the week of November 7-13, 2008 are as follows:

Beef: Net sales of 4,200 MT were primarily for Canada (1,400 MT), Mexico (1,400 MT), South Korea (500 MT), and Japan (400 MT). Net Sales of 500 MT for delivery in 2009 were primarily for Japan (200 MT) and Taiwan (200 MT). Exports of 8,300 MT were mainly to Mexico (3,200 MT), Canada (1,600 MT), South Korea (1,500 MT), Japan (900 MT), Vietnam (300 MT), and Taiwan (300 MT).

Futures Market Situation and Outlook:

December live cattle settled at $84.20 a loss of $2.95, February live cattle settled at $85.15 a loss of $2.45, and the April live cattle settled at $86.55 a loss of $2.52. In the feeder cattle pit, November feeder cattle settled at $95.57 a loss of $.17, January feeder cattle settled at $89.85 a loss of $1.40, and the March feeder cattle settled at $90.10 a loss of $2.00. The reported CME feeder cattle index for 11/18/08 was $96.78 a loss of $.48.

Yesterday’s live cattle volume saw 29,540 contracts trade in the pit and 13,331 contracts trade on Globex. Live cattle open interest declined 705 contracts to come in this morning at 215,731. Yesterday’s feeder cattle volume saw 3,505 contracts trade in the pit and 1,362 contracts trade on Globex. Feeder cattle open interest declined 32 contracts to come in this morning at 19,960.

Live and feeder cattle futures settled on new 4 year lows yesterday as the market continues to unwind and follows equity markets lower. There were also some rumors being floated about a possible BSE cow in Arizona that gave another excuse to sell the market. I thought we could possibly see some sort of short covering rally, but that’s not going to happen with the stock market shedding 500 points a day. Next stop for live cattle futures would likely be psychological support at $80, and below that we could see a move down to May 2006 lows of $73. Holding January feeder cattle under $90 keeps the market poised to make a move down to $80. Keep in mind November feeder cattle futures will go off the board today and January will take over as lead contract month. Dow and S & P futures look sharply lower again this morning and this will continue to drag cattle futures lower as well. Look for a $.20-$.40 lower open to live cattle and $.50-$1.00 lower in feeder cattle 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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