January 15, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We saw a light test of the northern dressed trade in feedlot cattle yesterday, with one of the smaller Omaha packers paying $1.36-$1.38 dressed on about five thousand head of cattle in eastern Nebraska and western Iowa. The $1.38 was said to be paid on a package of high grading cattle early in the morning and those bids were pulled back to $1.36 late where the majority of the trade took place. There was also about a thousand head of hedged cattle that reportedly sold in Kansas at $83. The rest of feeding country was quiet with feedlots resisting bids from the major packers of $82 live and $1.30-$1.32 dressed looking to get $1.36-$1.38/$86-$87. The beef market continues to trade at higher money with the choice cutout closing back near $1.50 for the first time since the first of December. However, there is a larger offering of fed cattle for the packer to chose from this week and there are a few packing companies that are a little short bought and as such are cutting production hours to manage margins from the supply side. There was a pretty choppy trade in the futures yesterday, however front month contracts did manage to come back from steep losses early in the session. Still feel that even with all the gyrations in the market that this weeks fed cattle trade should be no worse than steady, and if we were to see some strength in the futures today that there would be a very good possibility of $.50-$1 higher for feedlot cattle by the end of the week. Keep in mind that it was a mostly $84 live trade in the south last week and $1.34-$1.36 dressed in the north.

The salebarn trade of cattle saw mostly lower prices on the fed cattle yesterday. Sioux Falls, SD was calling their weekly fed cattle auction $1-$2 lower yesterday with the choice beef steers bringing $81-$83 and the choice Holsteins bringing $70-$72. Slaughter cows in Sioux Falls were being called $2-$3 lower with the bulk of the cutters and boners bringing $39-$45. Feeder cattle markets are mixed as we head into the end of the week, with some sales reporting higher results and some lower. Torrington, WY had an estimated run of 3,700 head yesterday with that market being called $3 higher on the cattle weighing under 700 lbs and $2 lower on cattle weighing over 700 lbs. The majority of the cattle weighing 6-8 were bringing $95-$100. There remains pretty good demand for feeder cattle to get placed into late spring/early summer fed cattle marketing timeframes and with the recent run of feeder cattle coming to market expected to taper off in the coming weeks, I would expect to see some support in the cash feeder cattle market.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 112,000 head, which would be 5,000 head above last week and 10,000 head below the same day a year ago. The week-to-date kill now stands at 357,000 head, which would be 5,000 head above the same period a week ago with the industry looking for a 610,000 head production week. The boxed beef market was higher with the choice cutout closing $.64 higher to settle at $149.90 and the select cutout closing $.88 higher to settle at $142.81. Sales volume was good with 376 loads of beef sold (145.99 loads of choice fab cuts, 123.31 loads of select fab cuts, 18.36 loads of trim, 88.02 loads of grinds). The choice/select spread settled at $7.10 a loss of $.24.

The beef market was higher again yesterday on continued buyer demand for quick ship of middle meat product ahead of Valentines Day. Yesterday saw a solid performance in choice bone-in and boneless ribeyes with values gaining $.10-$.20 along with $.05-$.10 gains in bone-in and boneless strips. There was the usual buying in chuck and rounds cuts yesterday with clods and boneless rounds attracting the attention of some buyers yesterday. Steady to higher was the call for chuck rolls and short ribs yesterday. The ground beef market settled down yesterday with steady prices being paid on most coarse ground items. Boneless beef markets were mixed, with lower prices being paid on domestic cow 90’s and imported cow and bull grinding material. The fed cattle 50% trim was higher again yesterday with wtd ave prices now at $.80 a gain of $.15 since the first of the year. We could likely see the beef market cool down a bit as some of this near term buying gets wrapped up. Since last Thursday choice cutout values have gained $6.15 and select cutout values have gained $6.05 on pretty good volume. I don’t know if we will see a big break in the beef market, however to see the market stall out at current values shouldn’t be unexpected. Much will depend on how well packers manage production levels. The USDA and USMEF released November export data for beef and pork yesterday, with beef exports for the month of November running 14% above 2007 at 45,633 MT. Year-to-date Jan-Nov 2008 beef exports were 37% above the same period in 2007 at 582,270 MT. November pork exports were 4% above a year ago at 119,911 MT, with the ytd Jan-Nov total running 54% above the same period in 2007 at 1,463,566 MT. Beef exports for the week of January 2-8. 2009 are as follows:
Beef: Net sales of 7,900 MT were mainly for Mexico (2,500 MT), Vietnam (1,800 MT), Canada (1,700 MT), and South Korea (1,000 MT). Exports of 7,400 MT were mainly to Mexico (2,700 MT), South Korea (1,200 MT), and Vietnam (1,200 MT).
Futures Market Situation and Outlook:

February live cattle settled at $83.35 a loss of $.72, April live cattle settled at $86.82 a loss of $.75, and the June live cattle settled at $85.70 a loss of $.30. In the feeder cattle pit, January feeder cattle settled at $95.70 a loss of $.65, March feeder cattle settled at $94.62 a loss of $.27, and the April feeder cattle settled at $96.22 a loss of $.22. The reported CME feeder cattle index for 1/13/09 was $96.49 a loss of $.10. Live cattle spreads: Feb/April settled at -$3.47 a gain of $.02, April/June settled at $1.12 a loss of $.45, June/August settled at -$.55 a loss of $.07. Feeder cattle spreads: Jan/March settled at $1.07 a loss of $.37, March/April settled at -$1.60 a loss of $.05, April/May settled at -$1.20 a gain of $.17.

Yesterdays live cattle volume saw 46,387 contracts trade in the pit and 24,009 contracts trade on Globex. Live cattle open interest gained 145 contracts to come in this morning at 201,284. Yesterday’s feeder cattle volume saw 2,190 contracts trade in the pit and 727 contracts trade on Globex. Feeder cattle open interest gained 11 contracts to come in this morning at 20,712.

Live and feeder cattle futures had a wild ride yesterday with the market opening lower and trading sharply lower early on profit taking from Tuesday’s rally and weakness in equity and outside commodity markets. Once early selling dried up and word of steady to higher cash fed cattle prices being paid in Nebraska and Iowa hit Chicago, the market staged an impressive rally into the noon hour, only to have some of those gains trimmed going into the close due to the last day of the official “Goldman Roll”. Had it not been for the late roll of Feb longs into deferred month futures, we likely would have closed Feb higher on the day. June forward live cattle and March forward feeder cattle managed to hold onto most of their late session rally going into the close. It looks like the Goldman’s rolled about 8,000 cars late in the day, with Feb open interest going down 8,740 and April OI going up 6,267 and June OI going up 1,948. This morning could see a reprieve of selling pressure in cattle futures as most of the index fund rebalancing should be completed and the official roll period of the Goldman Sachs Commodity Index is over. We managed to hold some of the weekly support I was looking at yesterday basis $81 in Feb and $85 in April live as well as $92 in March feeders. We still have plenty of overhead resistance to deal with though, as $85 in Feb live and $88.50 in April live will be tough barriers to get through by Friday. March feeders ran right into stiff resistance at $95 on the midday rally yesterday, and this, along with the above mentioned live cattle resistance prices, will need to be taken out on a closing basis in order to negate some of the recent bearishness. There should continue to be some optimism towards the cash fed cattle trade this week and I think we are finding willing spec short covering on recent breaks in the market, which should continue to provide a level of support under live and feeder cattle futures for the balance of the week. Overnight stock futures are pointing to a steady to slightly lower open. Look for a $.10-$.20 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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