November 5, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash fed cattle market was quiet yesterday, with trade limited to that of cattle selling through the sale barns, which by the way are bringing higher money. Packer bids were few and far between with most feedlot offering prices starting at $95/$1.50. A late week trade is expected for this week and with the positive action in the beef market and on the board I don’t see any reason right now why we can’t trade cattle at higher money. Barring any kind of stock market or futures meltdown, I would think feedlot cattle could be worth $93-$94 live and $1.44-$1.46 dressed by Friday. Most all classes of feeder cattle are trading at higher money this week and that too should continue for the balance of the week. Attitudes have changed a little bit in the feeder cattle market, as not only are yearling numbers getting tight, which supports prices in that arena, but many of these calves coming to town are penciling a breakeven as either a yearling this spring or a fat early this summer. Look for a better tone to the cash fed cattle and feeder cattle markets for the balance of the week. Slaughter cows remain a little defensive coming into midweek as numbers abound and packers have some boneless to sell. This should remain the case for another couple of weeks, and if producers have the feed, it might not hurt to hold onto cows until after the first of the year when the market should be a little higher.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 121,000 head, which would be 6,000 head below last week and 12,000 head below the same day a year ago. The week-to-date kill now stands at 236,000 head, which would be 19,000 head below the same period last week, with the industry looking for a 635,000 head production week. The boxed beef market was higher yesterday with the choice cutout closing $1.97 higher to settle at $144.71 and the select cutout closing $.93 higher to settle at $137.85. Sales volume was light with 266 loads of beef sold (101.51 loads of choice fab cuts, 90.53 loads of select fab cuts, 15.04 loads of trim, 58.90 loads of grinds). The choice/select spread settled at $6.86 a gain of $1.04.

The boxed beef market was higher yesterday led that way by active interest in procuring choice and select middle meats ahead of the holidays. As we have been mentioning for the last couple of days, many beef cuts throughout the rib and loin are trading at or below year ago price levels and that many of these cuts are offering value. Many on the buy side of the market are now realizing this and have stepped in to procure some of their needs. End meats, clods and inside rounds in particular, have also benefited the last couple of days from this way of thinking and higher prices were printed on these items as well yesterday. Coarse ground beef sales were higher on active interest from retail. Boneless markets remain mixed with higher prices on the 50’s due to reduced fed cattle slaughters and lower prices on the 90’s due to higher cow slaughters. We will continue to look for a higher trend to choice and select boxed beef and cutout values for the balance of the week.

Futures Market Situation and Outlook:

December live cattle settled at $93.85 a gain of $.52, February live cattle settled at $94.97 a gain of $.82, and the April live cattle settled at $96.00 a gain of $.85. In the feeder cattle pit, November feeder cattle settled at $100.50 a gain of $.80, January feeder cattle settled at $100.30 a gain of $1.12, and the March feeder cattle settled at $100.50 a gain of $1.07. The reported CME feeder cattle index for 11/3/08 was $96.19 a gain of $.45.

Yesterdays live cattle volume saw 26,986 contracts trade in the pit and 11,987 contracts trade on Globex. Live cattle open interest gained 1,337 contracts to come in this morning at 216,468. Yesterday’s feeder cattle volume saw 2,671 contracts trade in the pit and 781 contracts trade on Globex. Feeder cattle open interest gained 179 contracts to come in this morning at 19,266.

Live and feeder cattle futures settled with solid gains yesterday on renewed fund buying and the futures attempting to price higher cash fed cattle and feeder cattle market’s for this week and next. Overnight news is pretty quiet with no major moves in any of the outside markets. Deliveries against the October live cattle settlement continued last night with a total of 92 loads posted in Norfolk, NE. MF Global delivered 8 loads, Cadent delivered 18 loads, RJO delivered 29 loads, Rosenthal delivered 24 loads, and ADM delivered 13 loads. Newedge USA received all loads. Option trading was active again in the February puts, with the biggest feature being the selling of the $94 straddle and buying the $86 puts for protection. Options volatility came down to 20.5% in the Dec atm straddles, 21.5% in the Feb atm straddles, and increased to 20.5% in the April atm straddles. The futures market feels pretty good and it appears as though Dec, Feb, and April live cattle want to go fill gaps left on daily price charts at $97-$98. Feeders had a positive close yesterday as well getting back over the $100 mark. Holding above this price level by the end of the week keeps $102-$103 in the cards. The market looks like it could start a little lower this morning, and I would be interested in buying both fats and feeders on a $.50 lower type trade, keeping the above mentioned price targets in mind. Look for a $.10-$.20 lower open to cattle futures trading 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.