November 6, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash fed cattle market was at a standstill yesterday with packer bids of $92.50/$1.41-$1.42 going unmatched against feedlot offering prices of $95 live and $1.50 dressed. Trade could start to get a little more active today as packers in the south may be getting a little short on inventory. While the stock markets performance yesterday may be a little concerning, I still feel that with fed cattle numbers remaining relatively snug and a better demand tone out of the beef market that fed cattle prices should be supported for this week. I don’t know if we can have a very big rally in the cash fed cattle market, but I do think we can still trade some mid-$90’s fat cattle by the end of the month. I will continue to look for a cash feedlot trade that takes place at $93-$94 live and $1.44-$1.46 dressed. Fat cattle selling in the auction markets remain firm this week, with Sioux Falls, SD calling their market $4 higher at $86-$88.50 on the beef cattle and $80-$81 on the Holsteins. Slaughter cows were being marked $3-$4 lower with the cutters and boners bringing $39-$49 and the breakers and whites bringing $50-$53. Feeder cattle markets are still on solid footing for this week with yearling cattle being called $2-$4 higher and calves being called $4-$5 higher. Depending on where you are in the country, most 4 weight calves in the northern plains bring $110-$130, 5 weight calves bring $103-$118, 6 weight calves bring $96-$106, 7 weight steers bring $96-$101, 8 weight steers bring $94-$98, and 9-10 weight steers bring $85-$94. Demand for feeder cattle remains strong and should stay that way into next week.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 122,000 head, which would be 12,000 head above last week and 4,000 head below the same day a year ago. The week-to-date kill now stands at 358,000 head, which would be 7,000 head below the same period a week ago, with the industry looking for a 635,000 head production week. The boxed beef market was higher yesterday with the choice cutout closing $2.93 higher to settle at $147.64 and the select cutout closing $2.47 higher to settle at $140.32. Sales volume was good with 466 loads of beef sold (166.10 loads of choice fab cuts, 142.20 loads of select fab cuts, 60.20 loads of trim, 97.98 loads of grinds). The choice/select spread settled at $7.31 a gain of $.46.

The beef market continued to move higher yesterday on strong movement of over 400 loads of beef sold. Sharply higher pricing was noted on choice rib cuts yesterday, which has been the main driving force behind the higher cutout values as of late. Along with the higher rib prices were decent gains in end meats, especially round cuts as retailers step up to the plate and take on inventory at higher money into the end of the month. Loin prices were also higher yesterday along with a few chuck items, however not to the extent of ribs and loins. Boneless beef markets were mixed again with higher fed cattle 50’s and lower 90’s. Attitudes within the beef market have changed and buyers are more optimistic towards out front demand and with many beef items at or below year ago price levels, they are now willing to take on some extra product. Packers report being able to sell certain cuts out into the end of November at higher money then where they are at today. I will look for firm beef prices into next week. Export sales for the week of October 24-30, 2008 are as follows:

Beef: Net sales of 4,700 MT were primarily for Mexico (2,300 MT), Canada (900 MT), Vietnam (700 MT), and Japan (400 MT). Net Sales of 200 MT for delivery in 2009 were for Canada (100 MT) and Taiwan (100 MT). Exports of 20,700 MT were mainly to Mexico (10,400 MT), South Korea (5,400 MT), Japan (2,200 MT), Canada (1,000 MT), Vietnam (600 MT), and Hong Kong (400 MT).

Futures Market Situation and Outlook:

December live cattle settled at $94.27 a gain of $.42, February live cattle settled at $94.45 a loss of $.52, and the April live cattle settled at $95.55 a loss of $.45. In the feeder cattle pit, November feeder cattle settled at $100.65 a gain of $.15, January feeder cattle settled at $100.77 a gain of $.47, and the March feeder cattle settled at $101.17 a gain of $.67. The reported CME feeder cattle index for 11/4/08 was $96.33 a gain of $.14.

Live and feeder cattle futures came under pressure early yesterday on some profit taking and spec selling, however many contracts were able to close $.50 off their lows, and in the case of the feeder cattle, $1.00-$1.70 off their lows. Feeders were propelled higher late in the session on fund buying and sharply lower corn markets and put in another strong performance. Feeder cattle are fast approaching overhead price targets of $102-$103, and I would assume that they would slow their rate of ascent once they get there. Fed cattle didn’t act all that great yesterday when compared to the feeders. December was the strongest contract month all day on cash strength and active bull spreading with February. I believe part of the weakness in the fat cattle futures yesterday was probably linked to the post election day plunge in the Dow Jones. I still think $96-$97 is attainable for Dec, Feb, and April live cattle futures, however all three contracts will need to hold above $91, $92, and $93 respectively by the close on Friday. Option trading was rather quiet yesterday with no real features to speak of. Option volatility did come down a little yesterday with Dec atm straddles now trading at 19.75%, Feb atm straddles at 21%, and April atm straddles at 19.80%. The last 40 loads of October live cattle open interest were delivered last night in Norfolk, NE. Vision Financial delivered 3, MF Global delivered 6, Cadent delivered 17, RJO delivered 6, and ADM delivered 8. Newedge USA received them all. Dow futures as of 8:00 am are down about 100 points, which has Globex futures trading $.20-$.60 lower in the fat cattle and $.55 lower in the feeders. I would look for a $.20-$.30 lower open across the board to live and feeder cattle futures, with some recovery coming into the market by the close. 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.