December 5, 2008


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We saw an active fed cattle trade develop in all trading areas at steady money with Wednesday’s declines. Kansas feedlots sold around 18,000 head of fed cattle for $86-$87 live and $1.37 ½ dressed, Texas feedlot sold around 26,000 head of fed cattle for mostly $87 live with some $86 being paid late. In the north, Nebraska feedlots sold approximately 13,000 head of fed cattle for $85-$85.50 live and $1.36-$1.38 dressed, with most of the market taking place at $1.36 late in the day. Colorado feedlots sold a couple thousand head of fed cattle for $1.38 dressed, and Iowa feedlots sold close to 10,000 head of fed cattle for $1.35-$1.37. That should clean things up for the week with any more cleanup trade likely taking place towards the lower end of yesterday’s price range. Going home for the weekend feeder cattle markets were starting to soften up due to the drop in cash fed cattle and cattle futures. We should probably expect to see further losses in the cash market early next week.

Cash Beef Situation and Outlook:

Yesterday’s cattle slaughter was estimated at 124,000 head, which would be 124,000 head above last week and 6,000 head below the same day a year ago. The week-to-date kill now stands at 483,000 head, which would be 99,000 head above the same period a week ago with the industry looking for a 625,000 head production week. The boxed beef market was lower yesterday with the choice cutout closing $2.97 lower to settle at $145.78 and the select cutout closing $1.26 lower to settle at $137.14. Sales volume was moderate with 352 loads of beef sold (128.79 loads of choice fab cuts, 109.63 loads of select fab cuts, 60.27 loads of trim, 52.95 loads of grinds). The choice/select spread settled at $8.64 a loss of $1.71.

The beef market was lower yesterday, however sales volumes were starting to pick up on the lower market. Chuck, round, and loin items led the market lower yesterday as retail demand for said items was still lackluster. With that said though, there was some interest beginning to surface in certain chuck items from the export market, which could help to stabilize some of the beef declines by next week. Most boneless beef markets were under pressure yesterday and I would look for further weakness in the beef market into the middle of next week.

Futures Market Situation and Outlook:

December live cattle settled at $83.07 a loss of $.75, February live cattle settled at $83.07 a loss of $1.00, and the April live cattle settled at $85.12 a loss of $.92. In the feeder cattle pit, January feeder cattle settled at $88.10 a loss of $.25, March feeder cattle settled at $86.90 a loss of $1.15, and the April feeder cattle settled at $88.35 a loss of $.90. The reported CME feeder cattle index for 12/3/08 was $91.87 a loss of $.42.

Yesterday’s live cattle volume saw 22,632 contracts trade in the pit and 11,925 contracts trade on Globex. Live cattle open interest gained 2,729 contracts to come in this morning at 217,377. Yesterday’s feeder cattle volume saw 4,615 contracts trade in the pit and 2,203 contracts trade on Globex. Feeder cattle open interest declined 181 contracts to come in this morning at 20,361.

Live and feeder cattle futures settled lower once again on continued spec and commercial selling. We made a new round of contract lows in most live and feeder cattle futures yesterday, which doesn’t bode well technically. The market did manage to rebound slightly off its lows going into the close, but with stock futures pointing to another lower open to the Dow Jones this morning, I would say that cattle futures will be on the defensive as well. Closing December live cattle futures below $83, February live cattle below $83.50, and January feeder cattle below $88 by the end of the day would keep the door open to lower prices going into next week. I don’t see much strength in the cash market for next week either, so this will add to sell side pressure. Look for 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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