December 3, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

Cash fed cattle markets were at a standstill yesterday as packer bids were rather non-existent and feedlots offering cattle at $92/$1.45. The USDA did report a few pens of cattle sold in Texas for $88 live, however volume was too light to establish a trend. I would assume that a late week trade will develop at what now appears is going to be lower money. Larger contract and formula supplies of fed cattle for the first of December and faltering beef and futures market are likely to be the main culprits for the lower trade by the end of the week. There is also some talk of packers cutting back on production hours towards the end of this week, which will also keep some pressure on this week’s cash trade. Look for an $88 live and $1.40 dressed trade to develop by Friday. In other cash news, fed cattle selling through the Midwest auction markets were bringing mostly steady money at $83-$86 with the Holsteins steers bringing $75-$77. Slaughter cows were a little firmer in spots with the bulk of the cutter and boner cows bringing $34-$43, with some white cows up to $45. Feeder cattle sales are mixed, however a firmer tone is being noted at many sales. The majority of the 500 lbs-600 lbs steer calves that sold in the plains states salebarns yesterday were bringing $90-$105, with the true yearling cattle, which are hard to find, bringing from the mid-$80’s to lower $90’s.

Cash Beef Situation and Outlook:

Yesterday’s cattle slaughter was estimated at 126,000 head, which would be 2,000 head below last week and 5,000 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 lower yesterday with the choice cutout closing $.38 lower to settle at $151.41 and the select cutout closing $.37 lower to settle at $140.66. Sales volume was light yesterday with 204 loads of beef sold (70.71 loads of choice fab cuts, 68.25 loads of select fab cuts, 14.88 loads of trim, 50.04 loads of grinds). The choice/select spread settled at $10.75 a loss of $.01.

The beef market was lower yesterday as both domestic demand and export demand has failed to meet expectations this week. Sharp discounts were beginning to surface in the chuck, round, and loin primals yesterday, with short ribs, inside rounds, top butts, and PSMO’s receiving the biggest brunt of the lower money. Poor weekend beef clearance has most buyers sitting on the sidelines or buying on an as-need basis. Export business is reportedly non-existent this week as is evident by sharply lower chuck roll and short rib markets along with the drop credit being at its lowest levels in over 5 years. Boneless beef markets were mixed yesterday with the fed cattle 50’s garnering some support from talk of production cutbacks later this week and boneless cow 90’s under pressure from an increase of cow numbers in the west. We probably now need to look for the beef market to stay under pressure for the balance of the week.

Futures Market Situation and Outlook:

December live cattle settled at $84.35 a loss of $1.10, February live cattle settled at $84.95 a loss of $.77, and the April live cattle settled at $86.52 a loss of $1.02. In the feeder cattle pit, January feeder cattle settled at $89.00 a loss of $.62, March feeder cattle settled at $89.10 a loss of $.75, and the April feeder cattle settled at $89.97 a loss of $.50. The reported CME feeder cattle index for 11/29/08 was $94.35 a gain of $.77.

Yesterdays live cattle volume saw 20,445 contracts trade in the pit and 9,261 contracts trade on Globex. Live cattle open interest declined 119 contracts to come in this morning at 213,323. Yesterday’s feeder cattle volume saw 1,583 contracts trade in the pit and 1,043 contracts trade on Globex. Feeder cattle open interest gained 23 contracts to come in this morning at 20,290.

Live and feeder cattle futures settled lower yesterday despite decent gains in the stock markets on concerns over forward and near term beef demand and pricing. New contract lows seem close at hand with December live cattle likely to test support at $83 and February live cattle at $83.80. January feeder cattle will likely be testing its contract lows of $87.80 either by today or tomorrow as well. A Close below any of the above mentioned support areas would open the door for lower futures prices due to technical selling. We do have a lower cash cattle and beef market priced in for this week, so to see some short covering once we get this weeks cash trade behind us might help to mitigate some of the losses by the end of the week. Dow and S&P futures are lower this morning, which will likely prompt a $.25-$.50 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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