December 18, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

Cash fed cattle trading in the nations feedlots was at a standstill yesterday as packer bids of $84 live and feeder offering prices of $88-$89/$1.40 plus remain dollars apart as of the midweek point. Weather and margin issues have kept this weeks cattle slaughter running 10,000 head behind last weeks pace, however it is said that certain plants could be getting close to the knife on inventory as they purchased only moderate numbers of fed cattle last week. This could have fed cattle buyers moving their bids closer to steady as early as today in the north as they look to secure some inventory ahead of another stormy weekend slated for northern feeding states. The beef market continues to hold up fairly well early this week and we are seeing some business develop on end meats ahead of the holiday shortened production weeks that lie ahead. Futures managed to hold onto recent gains yesterday, which should be supportive to this week’s cash trade as well. I will continue to look for a steady to $1 higher fed cattle trade for this week at $85-$86 live in the south and $1.36-$1.38 dressed in the north. Cattle selling through the auction markets are all bringing at least $1-$2 higher money on fat cattle, slaughter cows, and feeder cattle. That strength in the salebarn trade should carry over into next week.

Cash Beef Situation and Outlook:

Yesterday’s cattle slaughter was estimated at 105,000 head, which would be steady with a week ago and 22,000 head below the same day a year ago. The week-to-date kill now stands at 345,000 head, which would be 10,000 head below the same period a week ago with the industry looking for a 612,000 head production week. The boxed beef market was mixed yesterday with the choice cutout closing $.05 lower to settle at $144.14 and the select cutout closing $.72 higher to settle at $135.30. Sales volume was good with 303 loads of beef sold (107.88 loads of choice fab cuts, 100.33 loads of select fab cuts, 14.97 loads of trim, 80.19 loads of grinds). The choice/select spread settled at $8.84 a loss of $.77.

The beef market was higher yesterday with decent buyer demand noted on chuck, round, and loin cuts. Rib items were mostly lower yesterday as buying for the holidays has all but dried up. Pricing on ribs into the end of January also takes place at lower money, which weighs on spot prices as well. Boneless beef markets were slightly lower yesterday on an increase of product offered to the market. The beef market should be supported into the first of next week on moderate demand from retail ahead of the holidays. The market will get pretty slow through the holidays, however should pick back up past New Years. With the dollar falling out of bed (i.e. $78.35 as of this morning), I would expect to see an increase in export orders in January as well. Beef exports for the week of December 5-11, 2008 are as follows:

Beef: Net sales of 2,400 MT resulted as increases for Mexico (2,800 MT), Canada (900 MT), and Japan (100 MT), were partially offset by decreases for Vietnam (700 MT), South Korea (400 MT), and Hong Kong (200 MT). Net Sales of 4,900 MT for delivery in 2009 were primarily for South Korea (1,300 MT), Vietnam (1,300 MT), Japan (1,100 MT), and Hong Kong (400 MT). Exports of 8,500 MT were primarily to Mexico (4,100 MT), Canada (1,800 MT), South Korea (700 MT), Japan (500 MT), and Taiwan (400 MT).

Futures Market Situation and Outlook:

December live cattle settled at $86.45 a loss of $.12, February live cattle settled at $86.87 a gain of $.07, and the April live cattle settled at $89.45 a gain of $.30. In the feeder cattle pit, January feeder cattle settled at $93.45 a gain of $2.32, March feeder cattle settled at $92.97 a gain of $2.05, and the April feeder cattle settled at $93.85 a gain of $2.00. The reported CME feeder cattle index for 12/16/08 was $89.81 a gain of $.38. Live cattle spreads: Dec/Feb settled at -$.42 a loss of $.20, Feb/April settled at -$2.57 a loss of $.22, and April/June settled at $3.65 a gain of $.05. Feeder cattle spreads: Jan/March settled at $.47 a gain of $.27, March/April settled at -$.87 a gain of $.05, and April/May settled at -$1.00 a loss of $.15.

Yesterdays live cattle volume saw 21,643 contracts trade in the pit and 9,837 contracts trade on Globex. Live cattle open interest gained 555 contracts to come in this morning at 212,788. Yesterday’s feeder cattle volume saw 4,856 contracts trade in the pit and 1,361 contracts trade on Globex. Feeder cattle open interest declined 265 contracts to come in this morning at 20,593.

It was choppy day in the live cattle futures yesterday as the market opened higher, broke through midsession, only to rally back going into the close. Feeder cattle held onto most of their gains throughout the session and acted very well all day. All in all the futures act pretty well and I think we will continue to see support under the market on minor breaks. There remain no deliveries against the December live cattle contract. Keep in mind there will be a cattle on feed report out after the close tomorrow. Estimates for the report at on feed 93.9%, placed 93.8%, and marketed 88.8%. Support on any weakness early today should be found at $86 in Feb live, $88.50 in April live, and $91 in March feeders. Keeping front month live cattle futures above $86 and front month feeders above $90 by Friday’s close will look positive going into next week. Look for a $.10-$.20 lower 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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