December 2, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

A look at last weeks feedlot sales volumes and prices shows Texas/OK/NM feedlots selling 42,535 head of fed cattle (37,055 the week before) for $90 live, Kansas feedlots sold 44,080 head of fed cattle (31,593) for $90 live, Nebraska feedlots sold 62,038 head of fed cattle (49,079) for $89 live and $1.42-$1.43 dressed, Colorado feedlots sold 4,398 head of fed cattle (7,045) for $89-$90 live and $1.43-$1.44 dressed, and Iowa/MN feedlots sold 25,020 head of fed cattle (26,394) for $88 live and $1.40 dressed. When compared to the previous week, feedlot movement didn’t look all that bad, however we find ourselves coming into this week with a sharply larger showlist offering linked mainly to a hefty increase in contract and formula cattle for the first of December. As such packers weren’t tendering many bids yesterday, especially with the board going their way. Feedlot offering prices begin the week at $92-$93 in the south and $1.45-$1.46 dressed in the north. Prospects for a steady to higher cash fed cattle market coming out of last week were dashed today with the crashing futures board and larger showlist offering. Unless we can see a dramatic turnaround in board values, I would say steady to $1 lower would be the best call on this week’s cash market for right now.

In auction market news, fed cattle selling in the upper Midwest salebarns were actually bringing higher money on the beef fats at $82-$87 and $71-$75 on the Holstein steers. Most of these gains can likely be attributed to catching up with the gains witnessed in the cash feedlot trade last week. Slaughter cows were under a little pressure yesterday with the cutter and boner cows bringing $32-$42 and the fat cows bringing $43-$48. Feeder cattle markets were trading at lower money yesterday with Oklahoma City, OK calling their market steady to $2 lower on an estimated run of 7,400 head. Yesterday in OKC, 400 lbs steers were bringing $100-$117, 500 lbs steers were bringing $90-$110 (depending on quality and weaned or unweaned), 600 lbs steers were bringing $85-$102, 700 lbs steers were bringing $85-$95, and the 800 lbs steers were bringing $85-$91.

Cash Beef Situation and Outlook:

Yesterdays cattle kill was estimated at 120,000 head, which would be 9,000 head below last week and 10,000 head below the same day a year ago. The industry will be looking for a 625,000 head production week. The boxed beef market was higher yesterday with the choice cutout closing $.18 higher to settle at $151.79 and the select cutout closing $.27 higher to settle at $141.03. Sales volume was light with 143 loads of beef sold (55.18 loads of choice fab cuts, 49.42 loads of select fab cuts, 19.74 loads of trim, 18.46 loads of grinds). The choice/select spread settled at $10.76 a loss of $.09.

The beef market was slow to develop yesterday as most participants came back from the long holiday weekend going over inventory positions and determining their next move in the marketplace. Reportedly packers were offering certain middle meat items at lower money in particular items from the loin in an attempt to try and spur retail interest, as movement of beef over the weekend was rather lackluster. Boneless beef markets were slightly lower yesterday as reportedly product is available at the packinghouse level. The beef market looks like it will be under a little pressure early this week, and possibly firming up late in the week. Australia released their monthly beef export numbers yesterday with an 81% decrease in exports to Russia during the month of November. Japanese exports were off 12% on the month and down 26% from the same period last year. Exports to the U.S. were up 5% on the month and up 32% compared to the same month a year ago. As mentioned in previous writing’s, the cheaper U.S. dollar and collapsing world economies is going to attract Australian beef to the U.S.

Futures Market Situation and Outlook:

December live cattle settled at $85.45 a loss of $1.92, February live cattle settled at $85.72 a loss of $1.92, and the April live cattle settled at $87.55 a loss of $2.17. In the feeder cattle pit, January feeder cattle settled at $89.62 a loss of $2.07, March feeder cattle settled at $89.85 a loss of $2.37, and the April feeder cattle settled at $90.47 a loss of $2.27. The reported CME feeder cattle index for 11/28/08 was $93.58 a gain of $.21.

Yesterdays live cattle volume saw 18,171 contracts trade in the pit and 8,769 contracts trade on Globex. Live cattle open interest declined 603 contracts to come in this morning at 213,363. Yesterday’s feeder cattle volume saw 1,605 contracts trade in the pit and 758 contracts trade on Globex. Feeder cattle open interest gained 364 contracts to come in this morning at 20,269.

The latest commitment of traders report showed speculative fund traders net short 12,331 contracts of live cattle futures a gain of 1,527 shorts from last week, commercial traders were short 65,174 a decline of 1,643 shorts from last week, index fund traders were net long 100,942 a decline of 1,632 longs from the previous week, and the small speculative traders were net short 23,436 a decline of 1,518 shorts from the previous week. In the feeder cattle, spec funds were net short 3,960 an increase of 1,163 shorts from the previous week, commercials were net long 2,093 a gain of 988, index funds were net long 6,608 a gain of 336, and the small spec was net short 4,741 a gain of 160.

Live and feeder cattle futures settled sharply lower yesterday in sympathy with a 7% loss in the equity market. We managed to wipe out all of last weeks gains in one fell swoop yesterday. Live and feeder cattle futures will need to see a dramatic turnaround either today or tomorrow in order to stave off another test of recent contract lows, and likely round of new contract lows. Support for the rest of this week in Dec live cattle will be found at $83 and in the February live cattle at $83.80. We will need to see both Dec and Feb live get back above $87 and $88 respectively to negate yesterday’s bearishness. In the feeder cattle, January will have some support at $87.80 and will need to get back above $92 in order to keep any rally attempts alive. Taking out any of the above mentioned support areas open the door to the upper $70’s basis the fat cattle and lower $80’s basis the feeders. Stock futures are indicating a higher open to the equity markets this morning, which should help promote a $.10-$.20 higher open to live and feeder cattle futures. 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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