November 25, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash feedlot trade was quiet yesterday as the day was spent assembling this week’s showlist. This weeks offering of fed cattle looks to be a little smaller in Nebraska and Kansas with steady numbers for sale in Texas. A look at last weeks sale volumes and prices shows Texas/OK/NM feedlots selling 37,055 head of fed cattle (48,762 previous week) for $87-$88 live. Kansas feedlots sold 27,504 head of fed cattle (23,427) for $87-$88 live and $1.39 dressed, Nebraska feedlots sold 49,079 head of fed cattle (63,173) for $88-$88.50 live and $1.39-$1.40 dressed, Colorado feedlots sold 7,045 head of fed cattle (3,361) for $87.50 live and $1.41 dressed, and Iowa/MN feedlots sold 26,394 head of fed cattle (36,318) for $86-$87 live and $1.38-$1.39 dressed. All weekly totals are negotiated cash and negotiated grid sales as reported to the USDA under MPR. As we can see weekly volumes are a little light when compared to the previous week, however there were less cattle for sale last week when compared to the previous week or year. Regardless, numbers for sale this week are certainly manageable and we shouldn’t start seeing a big build up in ready numbers of fed cattle until the last half of December. At that time we will start getting into the heavy yearling placements of cattle that came off of grass the last several months and those numbers should last until mid to late March. This increase in fed cattle marketing’s and the corresponding seasonal dip in beef demand after the holidays will likely be the catalyst for the last leg down in cash fed cattle prices until late summer 2009. This move down may or may not be exaggerated by recent weakness in Global economic conditions. For the rest of this week though, packers will be buying for a full production week next week and I am of the opinion they have forward beef sales to deliver on for the first of December, which will have them needing inventory. Last weeks cash market was overdone in my opinion so I am going to call for a steady to $1 higher fed cattle market for this week. There were no packer bids being tendered yesterday with most feedlots offering cattle at $90-$92 live and $1.43-$1.45 dressed.

A look around the auction market circuit shows fed cattle trading steady to modestly higher from last week’s steep declines. Beef fats in the Zumbrota, MN auction were bringing $82-$85 with the Holstein steers bringing $71-$73. Slaughter cows were lower with the cutter and boning utility cows bringing $35-$42 and the fatter cows bringing $43-$50. Yesterday Oklahoma City had 5,500 head of cattle on offer with early results at that sale being called $2-$4 lower, however it was said that buyer demand was picking up towards the end of the sale and prices were improving. 5 weight steers in OKC yesterday were bringing $95-$115, 6 weight steers were bringing $87-$101, 7 weight steers were bringing $86-$94, and the 8 weight steers were bringing $87-$92. I would expect to see wide price swings and large discounts on certain strings of feeder cattle depending on what the fat market does and what kind of health regimen the cattle have.

Cash Beef Situation and Outlook:

Yesterday’s cattle kill was estimated at 129,000 head, which would be 18,000 head above last week and 6,000 head above the same day a year ago. The USDA revised last Saturday’s kill up to 21,000 head, which will give us a new week-to-date total of 636,000 head. The boxed beef market was lower yesterday with the choice cutout closing $1.22 lower to settle at $154.88 and the select cutout closing $.24 lower to settle at $144.99. Sales volume was light with 181 loads of beef sold (45.26 loads of choice fab cuts, 53.96 loads of select fab cuts, 24.25 loads of trim, 57.53 loads of grinds). The choice/select spread settled at $9.89 a loss of $.98.

The beef market was lower yesterday as most in the industry turn their attention to the upcoming Thanksgiving holiday. Yesterday’s market saw most price discounts occurring within the chuck and round complex with lower values being reported on chuck rolls, knuckles, and inside/outside rounds. Short loins and tenderloin butts were also being marked lower along with select and no-roll PSMO’s. Coarse ground markets were lower yesterday, however there were a few instances of higher 90% cow beef transactions. All in all, I would expect to see a lower beef market for the balance of this week, however once we get Thanksgiving behind us, I think we could see a little appreciation in prices as buyers finish booking their end of year holiday needs and cover first of December retail adds.

Futures Market Situation and Outlook:

December live cattle settled at $86.65 a gain of $1.75, February live cattle settled at $87.60 a gain of $2.10, and the April live cattle settled at $89.25 a gain of $2.42. In the feeder cattle pit, January feeder cattle settled at $91.40 a gain of $2.00, March feeder cattle settled at $92.25 a gain of $2.10, and the April feeder cattle settled at $92.55 a gain of $2.10. The reported CME feeder cattle index for 11/21/08 was $92.71 a loss of $1.75.

Yesterdays live cattle volume saw 16,593 contracts trade in the pit and 8,371 contracts trade on Globex. Live cattle open interest declined 600 contracts to come in this morning at 214,024. Yesterday’s feeder cattle volume saw 1,940 contracts trade in the pit and 598 contracts trade on Globex. Feeder cattle open interest declined 900 contracts to come in this morning at 19,187.

Live and feeder cattle futures gapped open sharply higher yesterday and never looked back closing with triple digit gains in both pits. Higher stock and commodity markets along with a friendly cattle on feed report from Friday were catalysts for the higher trade. Overnight news shows the country of Qatar lifting a 5 year ban on U.S. beef imports and 3 of South Korea’s largest discount stores (E-mart, Homeplus, and Lottemart) will begin selling U.S. beef today after a 1 year ban due to spinal cord material being detected in a shipment of beef last year. Overnight Dow futures are up 150 points, the S & P is up 20 points, and the U.S Dollar Index is down $.86, all of which should help to support a higher open and trade in U.S. cattle futures markets. For the balance of this week, providing the Dow Jones doesn’t collapse, I think we can target the $89-$90 area for both December and February live cattle futures and the $94 area for January feeder cattle futures. Idea of a higher cash fed cattle market and the futures being extremely oversold would back up this type of trade. If the market is any good at all, we should be able to hold $84 in the Dec live, $85 in the Feb live, and $90 in the Jan feeders. Look for a $.10-$.20 higher open to live and feeder cattle futures and you could probably buy any $.25 break in the market today and risk the above mentioned support areas. 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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