December 30, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

Yesterday’s cash fed cattle market was untested with the exception of cattle that sold through auction markets. Packers were not bidding anything yesterday with feedlots beginning the week priced at $88-$89 live and $1.38-$1.40 dressed. A look at last week’s feedlot movement shows Texas/OK/NM feedlots selling 23,793 head of fed cattle (32,540 previous week) for mostly $86 live. Kansas feedlots sold 36,927 head of fed cattle (20,828) for $85 live and $1.35-$1.35 ½ dressed. Nebraska feedlots sold 64,671 head of fed cattle (57,476) for $84-$85 live and $1.35 dressed. Colorado feedlots sold 8,665 head of fed cattle (4,614) for mostly $85 live and $1.34-$1.35 dressed. Iowa/MN feedlots sold 25,462 head of fed cattle (19,265) for mostly $83-$84 live and $1.34-$1.35 dressed. As we can see movement in the north was pretty good and they did a good job in cleaning up a larger showlist offering last week, however southern movement was a little light. As such, southern feedlots carried some cattle over into this week and showlists in that part of the country look to be about 20,000 head larger in Texas and 10,000 head larger in Kansas. I still think the fed cattle market can be a little higher this week despite the larger showlists as packers will be buying for a full kill week next week and beef sales aren’t all that bad right now. I also think beef sales will pick up into the first couple of weeks of January, which will keep packers in the market for fed cattle to process. When all is said and done this week I will look for a cash fed cattle market that trades $86-$87 in the south and $84-$86 live and $1.35-$1.38 dressed in the north. Sale barn runs are very light this week with many auctions shut down until after the first of the year. Cattle that are selling through auction are bringing higher money with last week through with fed beef steers bringing $82-$85 and fed Holsteins bringing $72-$76. Slaughter cows bringing mostly steady to higher money at $38-$47 on the thin cows and $48-$57 on the fat cows. Feeder cattle runs are too light to establish a trend, however a higher undertone is evident on the cattle that are selling.

Cash Beef Situation and Outlook:

Yesterday’s cattle slaughter was estimated at 125,000 head, which would be 1,000 head above last week and 21,000 head above the same day a year ago. The industry will be looking for a 500,000 head production week. The boxed beef market was mixed yesterday with the choice cutout closing $.29 lower to settle at $144.17 and the select cutout closing $1.17 higher to settle at $135.77. Sales volume was good for a Monday with 307 loads of beef sold (99.24 loads of choice fab cuts, 67.99 loads of select fab cuts, 47.76 loads of trim, 91.70 loads of grinds). The choice/select spread settled at $8.40 a loss of $1.46.

The beef market saw continued gains in chuck and round cuts yesterday with demand described as decent. Continued weakness was evident in the rib complex along with further discounts surfacing in tenderloin butts and peeled tenders. Coarse ground markets were higher with very good movement as retail buyers came back to the market to secure some inventory. Boneless beef markets were higher, especially cow 90’s on a lack of production. I am still going to look for a mostly sideways beef market into next week with some buyer demand coming back to the market early next month.

Futures Market Situation and Outlook:

December live cattle settled at $85.97 a gain of $.07, February live cattle settled at $86.20 a gain of $.10, and April live cattle settled at $89.35 a gain of $.50. In the feeder cattle pit, January feeder cattle settled at $93.45 a gain of $.62, March feeder cattle settled at $92.85 a gain of $1.10, and the April feeder cattle settled at $93.87 a gain of $1.17. The reported CME feeder cattle index for 12/26/08 was $91.30 a gain of $.99. Live cattle spreads: Dec/Feb settled at -$.22 a loss of $.02, Feb/April settled at -$3.15 a loss of $.40, and April/June settled at $3.45 a loss of $.47. Feeder cattle spreads: Jan/March settled at $.60 a loss of $.47, March/April settled at -$1.02 a loss of $.07, and April/May settled at -$1.42 a loss of $.02.

Yesterdays live cattle volume saw 13,247 contracts trade in the pit and 6,981 trade on Globex. Live cattle open interest gained 614 contracts to come in this morning at 211,052. Yesterday’s feeder cattle volume saw 1,575 contracts trade in the pit and 707 contracts trade on Globex. Feeder cattle open interest declined 95 contracts to come in this morning at 20,196.

Cattle futures settled higher yesterday on ideas last Friday’s sell off was overdone. The main reason for Friday’s sell off was talk of Mexico delisting 30 U.S. beef plants from exporting meat to Mexico, however 20 of those plants were relisted yesterday and the situation seems to be temporary. Deliveries against the December live cattle contract saw 3 loads posted in Columbus, NE, with RJO delivering and Rosenthal receiving. For the month there have been 29 deliveries, 20 retenders, 20 demands, and 6 reclaims. The last date on Dec deliveries was 12/3/08. Keep in mind December live cattle will go off the board at noon tomorrow. Weather looks to be very moderate for the next several days; however another round of heavy snows followed by some of the coldest temperatures of the year is expected to hit plains states cattle feeding regions Jan 8-9. Option trading has been very quiet the last several sessions; with the main feature being volatility coming back down to 22%. Still feel cattle futures will have some support in the coming sessions as will cash cattle and cash beef values. For the balance of this week, Feb cattle will have support at $85 with resistance at $89-$90. April cattle will find support at $88 with resistance at last weeks high of $91. Feeder cattle will find support on the March contract at $92 with resistance being found at $94. Taking out above mentioned resistance levels should prompt further spec short covering into the mid $90’s basis fat cattle and upper $90’s basis feeder cattle. Look for a $.10-$.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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