December 23, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash fed cattle market was quiet yesterday as participants spent the day putting showlists together. Numbers for sale this week look lower in Nebraska and Kansas and mostly steady in Texas. The Nebraska showlist is said to be down close to 20,000 head as cattle are kept off the market to recover from last week’s winter weather. A look at last week’s feedlot movement shows 32,540 head of fed cattle sold in Texas/OK/NM (36,521 previous week) for mostly $85. Kansas feedlots sold 20,828 (21,269) head of fed cattle for mostly $83-$84 live and $1.32 dressed. Nebraska feedlots sold 57,476 (46,768) head of fed cattle for $81.50-$82.50 live and $1.30-$1.33 dressed. Iowa/MN feedlots sold 19,265 (19,831) head of fed cattle for $81.50-$82.50 live and $1.31 dressed. Colorado feedlots sold 4,614 (3,360) head of fed cattle for $82 live and $1.32 dressed. Cash fed cattle markets should be supported this week on reduced numbers for sale and a little better tone to the beef market, despite the fact we will have a short kill week. Futures markets seem to have some support under them as well, which will be another supportive factor. Cattle selling in the sale barns to start the week are bringing steady to $1 higher on the fat cattle, $2-$3 higher on the slaughter cows, and mostly $2-$3 on the feeder cattle. Oklahoma City is shut down for the next couple of weeks due to the holiday as will many other sales, which will be supportive to the feeder cattle market. I think packers will have some beef orders to fill when we get back from the holidays, which is going to keep some support under the market. Look for a feedlot trade to develop by Wednesday at $85-$86 live in Texas and Kansas and $83-$84/$1.34-$1.36 in the north.

Cash Beef Situation and Outlook:

Yesterday’s cattle slaughter was estimated at 124,000 head, which would be 9,000 head above last week and 100,000 head above the same day a year ago with the industry looking for a 495,000 head production week. The beef market was higher yesterday with the choice cutout closing $2.38 higher to settle at $144.27 and the select cutout closing $.25 higher to settle at $135.68. Sales volume was light with 197 loads of beef sold (53.97 loads of choice fab cuts, 65.49 loads of select fab cuts, 26.69 loads of trim, 51.21 loads of grinds). The choice/select spread settled at $8.59 a gain of $2.13.

The beef market was higher yesterday on strength in chuck and loin cuts. Two-piece chucks, chuck rolls, bone-in and boneless strips were all trading at higher price levels yesterday as buyers cover some needs ahead of the holiday. Production cutbacks were said to be a supportive factor to the market. Coarse ground and boneless beef markets were also higher yesterday adding to gains in cutout values. Look for a mostly sideways beef market for the balance of this week and next, with some strength emerging past the holidays.

Futures Market Situation and Outlook:

December live cattle settled at $85.97 a loss of $.12, February live cattle settled at $86.25 a loss of $.52, and the April live cattle settled at $88.82 a loss of $.37. In the feeder cattle pit, January feeder cattle settled at $93.37 a loss of $.12, March feeder cattle settled at $92.92 a loss of $.30, and the April feeder cattle settled at $94.07 a loss of $.17. The reported CME feeder cattle index for 12/19/08 was $91.31 a gain of $.14. Live cattle spreads: Dec/Feb settled at -$.27 a gain of $.40, Feb/April settled at -$2.57 a loss of $.15, and April/June settled at $3.80 a gain of $.17. Feeder cattle spreads: Jan/March settled at $.45 a gain of $.17, March/April settled at -$1.15 a loss of $.12, and April/May settled at -$.72 a gain of $.12.

Yesterdays live cattle volume saw 11,010 contracts trade in the pit and 5,202 trade on Globex. Live cattle open interest declined 326 contracts to come in this morning at 213,399. Yesterday’s feeder cattle volume saw 1,861 contracts trade in the pit and 1,007 trade on Globex. Feeder cattle open interest declined 195 contracts to come in this morning at 20,169.

Live and feeder cattle futures settled lower yesterday in a corrective type setback from last weeks strong gains. Yesterday saw very light volume on the break as many participants have already left for the holidays. The futures will be slow and choppy for the balance of the week. However, I believe we will have some support under the futures market as there will be support in the cash markets the next several weeks. I wouldn’t be too concerned with hedging many cattle until we get back from the holidays as I feel the market will appreciate in value in coming weeks. I will continue to view the market as a buy on flat price breaks of $1-$2. I will also be looking to put April/August bull spreads on at pull backs under $3.50 and put June/August bull spreads on at pull backs where June goes discount to August. Look for a $.10-$.20 higher open to live and feeder cattle futures this morning. Also, this will be my last letter for the week as I will be traveling back home for Christmas tomorrow, so I would like to take this chance to wish everyone who reads this a Very Merry Christmas!!! and as always Trade Well!!! I’ll be back on Monday.

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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