December 29, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We left last week with a cash fed cattle trade that developed mostly $1-$2 higher on a live weight basis and $3-$4 higher on a dressed basis. Earlier in the week Nebraska, Colorado, and Iowa feedlots sold cattle for $84-$85 live and $1.35 dressed and on Friday Kansas and Texas/OK/NM feedlots sold cattle for $85/$1.35 in Kansas and $86 in Texas. Weekly sales volumes look to be around 58,000 head in Nebraska, 24,000 head in Iowa, and 7,000 head in Colorado. On Friday the USDA was reporting that 47,000 head of fed cattle had sold on the southern plains, however I will report on final totals once everything is counted and reported to the USDA today. Last week’s feeder cattle and slaughter cow markets were higher on reduced volume in the nations auction markets. Also on Friday there was news of the Mexican government suspending some beef, pork, and poultry imports from 30 U.S. processing plants due to meat labeling issues. The ban affects only 3 U.S. beef plants (1 in Kansas, 1 in Utah, and 1 in Pennsylvania) and was said by the Mexican government late on Friday as being only temporary and likely to be resolved by this week. Looking into this week, I would expect to see fed cattle prices hold steady with a chance of higher money being paid again as packers will be buying for a full kill week next week. Packer margins are modestly in the red, however have been improving for the last couple of weeks as they continue to move end meats and loin items at higher money, which I expect to continue into the first couple of weeks of the New Year. There will be continued salebarn disruptions this week due to the holiday, which should be supportive to slaughter cow and feeder cattle markets.

Cash Beef Situation and Outlook:

Last weeks cattle slaughter was estimated at 450,000 head and included a Friday kill of 112,000 head and a Saturday kill of 48,000 head. The weekly production produced an estimated 352.8 mil lbs of beef. Year-to-date production now stands .3% below last year at 25.919 bil lbs with ytd cattle slaughter .5% below a year ago at 33.446 mil head. From Thursday to Wednesday of last week choice boxed beef gained $2.91 to settle at $144.46 and select boxed beef lost $.47 to settle at $134.60 on light movement of 784 loads of fabricated cuts sold.

The choice beef market saw moderate gains last week as reduced production levels kept packer inventories well clear and those needing to buy meat were faced with higher asking prices. End meats and loin cuts were in fairly good demand ahead of the Christmas holiday and this should continue to remain the case going into the first of January. There of course will be some concern over the Mexican situation, however as mentioned above the ban affects only 3 beef plants and talk is that it will be resolved by this week. I would continue to look for middle meats to trade a little lower and end meats to trade higher.

Futures Market Situation and Outlook:

For the week, December live cattle lost $.20 to settle at $85.90, February live cattle lost $.67 to settle at $86.10, and April live cattle lost $.35 to settle at $88.35. In the feeder cattle pit for the week, January feeder cattle lost $.68 to settle at $92.82, March feeder cattle lost $1.47 to settle at $91.75, and April feeder cattle lost $1.55 to settle at $92.70. The latest reported CME feeder cattle index for 12/25/08 was $90.31 a loss of $1.03 for the week and $.86 for the week. For the week in live cattle spreads: Dec/Feb gained $.47 to settle at -$.20, Feb/April lost $.33 to settle at -$2.75, and April/June gained $.30 to settle at $3.92. For the week in feeder cattle spreads: Jan/March gained $.80 to settle at $1.07, March/April gained $.07 to settle at -$.95, and April/May lost $.55 to settle at -$1.40.

Fridays live cattle volume saw 11,108 contracts trade in the pit and 3,674 contracts trade on Globex. Live cattle open interest gained 116 contracts to come in this morning at 210,423. Friday’s feeder cattle volume saw 1,496 contracts trade in the pit and 514 contracts trade on Globex. Feeder cattle open interest gained 67 contracts to come in this morning at 20,332.

Futures settled sharply lower on Friday on a light volume trade and worries over the Mexican meat import ban. As I pointed out above I think the Mexican situation is a temporary one and I think futures could be a little higher on the open today. We had a nice rally in the cattle futures the last couple of weeks and to see the market break back into support like it did on Friday should not be unexpected. As of right now, I think cattle futures still have the potential to move higher in the coming weeks on short covering and cash strength. Look for a $.20-$.30 higher 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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