January 16, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We saw a few more cattle trade yesterday at steady to $.50 higher when compared to Wednesday. The majors stepped into the market yesterday paying $83.50/$1.35 on cattle in Nebraska and Kansas. It looks as though we sold about 8,000 head of cattle in Kansas and 12,000 head of cattle in Nebraska. There were some cattle that sold in Colorado for $83.50 and further cleanup trade in western Iowa at $1.36-$1.37. Texas feedlot managers did not sell any cattle yesterday as the board looked like it had some support and there showlist numbers are manageable. We should see Texas feedlots let loose of cattle today at no worse than steady money, with a pretty good chance of $1 higher. Going home for the weekend slaughter cows are under pressure, however there still remains good support in the cash feeder cattle market. Most feeder cattle sales continue to report steady to higher transactions on lightweight cattle, however there was a softer undertone beginning to develop on the 7-8 weight cattle.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 125,000 head, which would be 1,000 head below last week and 5,000 head below the same day a year ago. The week-to-date kill now stands at 482,000 head, which would be 4,000 head above the same period last week with the industry looking for a 610,000 head production week. The boxed beef market was higher yesterday with the choice cutout closing $.85 higher to settle at $150.75 and the select cutout closing $.81 higher to settle at $143.62. Sales volume was good with 278 loads of beef sold (92.37 loads of choice fab cuts, 101.17 loads of select fab cuts, 30.31 loads of grinds, 54.41 loads of grinds). The choice/select spread settled at $7.13 a gain of $.04.

The beef market was higher again yesterday with the choice cutout closing back above $1.50 for the first time since the beginning of December. Yesterday saw continued price strength in the choice ribeye and PSMO market, as retailers and restaurant buyers secure product ahead of Valentines Day. There was also higher prices being paid on chuck rolls and certain round cuts. Ground beef and boneless markets were higher again yesterday as the retail community aggressively features hamburger product. Foodservice accounts also add to the strength in the ground beef complex. As I mentioned yesterday we could be getting close to seeing some of this near term beef demand being sufficed. Again, I am not saying we are in for a big break in beef prices; however we could start to see some of the recent gains begin to slow the acceleration. Look for the beef market to trend sideways into the first part of next week.

Futures Market Situation and Outlook:

February live cattle settled at $84.35 a gain of $1.00, April live cattle settled at $87.30 a gain of $.47, and the June live cattle settled at $85.70 steady on the day. In the feeder cattle pit, January feeder cattle settled at $95.00 a loss of $.70, March feeder cattle settled at $94.30 a loss of $.32, and the April feeder cattle settled at $95.55 a loss of $.67. The reported CME feeder cattle index for 1/14/09 was $96.24 a loss of $.25. Live cattle spreads: Feb/April settled at -$2.95 a gain of $.52, April/June settled at $1.60 a gain of $.47, and the June/August settled at -$.67 a loss of $.12. Feeder cattle spreads: Jan/March settled at $.70 a loss of $.37, March/April settled at -$1.25 a gain of $.35, and the April/May settled at -$1.75 a loss of $.55.

Yesterdays live cattle volume saw 31,573 contracts trade in the pit and 18,871 contracts trade on Globex. Live cattle open interest gained 4,071 contracts to come in this morning at 205,315. Yesterday’s feeder cattle volume saw 2,035 contracts trade in the pit and 1,047 contracts trade on Globex. Feeder cattle open interest gained 494 contracts to come in this morning at 21,236.

It was another choppy day in the cattle futures market yesterday as the knuckleheads who like to sell fat and feeder cattle futures because the Dow is lower were out in full force on the open, only to end up buying back those positions late in the day once the stock market started to rally. We have talked about how the fundamentals of the cash fed and feeder cattle market are supportive enough to promote higher cash and futures prices, and I think this train of thought is what prevailed by the close of trade yesterday. With that said, we will keep an eye on overhead resistance levels mentioned earlier in the week at $85 in Feb live cattle, $88.50 on April live cattle, and $95 in March feeder cattle to determine price direction for next week. Closing above these price points by the close today would keep the market positive into next week in my opinion. Holding below these resistance levels by the close today would keep risk of lower prices in the cards. Stock futures are pointing to a higher open, which should support a $.20-$.30 higher open to live and feeder cattle futures this morning. Keep in mind the futures market will be closed Monday in observance of Martin Luther King Day. Have a Good Weekend and 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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