December 19, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash fed cattle market began to turn active yesterday afternoon in the northern feeding regions of Nebraska and Iowa at prices generally $1-$2 higher compared to the pervious week at $1.32-$1.34. There was also a moderate trade that developed in Kansas at $84, which would be steady with last week. Numbers that sold look moderate with about 20,000 head of cattle changing hands in Nebraska and 5,000 head in Kansas. Most feedlots in Texas were passing lower packer bids and as such there was no cattle trade down there yesterday. Packers were bidding up to $84 in Texas with feedlots looking for $88-$89, and I would expect to see trade develop down there at $85-$87 by this afternoon, and we may not trade cattle until after the on feed report is released. I would look for further cleanup trade in Kansas and Nebraska, Iowa, and Colorado at steady money with yesterday. Going home for the weekend markets on feeder cattle and slaughter cows are mostly $2-$4 higher, and I would expect that strength to carryover into next week as many sales will be shut down for the holiday.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 121,000 head, which would be 5,000 head below last week and 5,000 head below the same day a year ago. The week-to-date kill now stands at 466,000 head, which would be 15,000 head below the same period a year ago. The boxed beef market was lower yesterday with the choice cutout closing $2.59 lower to settle at $141.55 and the select cutout closing $.23 lower to settle at $135.07. Sales volume was light with 248 loads of beef sold (85.03 loads of choice fab cuts, 72.67 loads of select fab cuts, 42.92 loads of trim, and 46.87 loads of grinds). The choice/select spread settled at $6.48 a loss of $2.36.

Several days of lower ribeye and rib roast pricing finally showed up in the USDA choice cutout last night. There were lower trading levels on rib cuts again yesterday along with price reductions noted on choice, select, and no-roll PSMO’s. The rest of the loin, chuck, and round complexes were fairly well supported yesterday, with special interest noted in choice boneless strips. Domestic and imported boneless beef values were higher yesterday as processors try to secure some supply ahead of the upcoming shortened holiday production weeks. I would look for a sideways beef market into early next week. Seasonal’s will be well at play with lower priced middle meats being offset by higher priced end meats.

Futures Market Situation and Outlook:

December live cattle settled at $84.70 a loss of $1.75, February live cattle settled at $85.70 a loss of $1.17, and the April live cattle settled at $88.37 a loss of $1.07. In the feeder cattle pit, January feeder cattle settled at $92.40 a loss of $1.05, March feeder cattle settled at $91.77 a loss of $1.20, and the April feeder cattle settled at $92.80 a loss of $1.05. The reported CME feeder cattle index for . Live cattle spreads: Dec/Feb settled at -$1.00 a loss of $.57, Feb/April settled at -$2.67 a loss of $.10, and April/June settled at $3.42 a loss of $.22. Feeder cattle spreads: Jan/March settled at $.62 a gain of $.15, March/April settled at -$1.02 a loss of $.15, and April/May settled at -$.50 a gain of $.50.

Yesterdays live cattle volume saw 19,091 contracts trade in the pit and 9,649 contracts trade on Globex. Live cattle open interest gained 808 contracts to come in this morning at 213,667. Yesterday’s feeder cattle volume saw 2,504 contracts trade in the pit and 1,375 contracts trade on Globex. Feeder cattle open interest gained 346 contracts to come in this morning at 20,931.

Live and feeder cattle settled lower in a technical correction and profit taking from the recent run up in prices. There was also some selling linked to concerns over the stock market, which closed 200 points lower yesterday. This morning the market will be positioning itself ahead of the cattle on feed report and will be eagerly awaiting cash information out of the southern plains. Estimates for the on feed report are, on feed 93.9%, placed 93.8%, and marketed 88.8%. If the report comes out this way it would certainly be supply friendly for the first and second quarter of next year. The marketing number was lower because of two less kill days this year compared to last year. Some of this bullishness has been priced in already, however the market is going to need to see signs of better demand before we can extend any kind of rally. Weather could play a role in the market next week as we are supposed to see more snow followed by sharply lower temps and winds in the northern plains feeding regions this weekend. Equity markets look like they should open steady this morning, with some of the outside commodity markets trading lower and the U.S. dollar trading sharply higher. I think we need to see Feb live cattle hold $85 today and front month feeders hold $90 in order to stave off further selling early next week. Look for a $20-$.40 lower open 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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