January 2, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash cattle markets were largely untested on Wednesday, however there were a few thousand head of cattle that did trade in eastern Nebraska and western Iowa for $1.35 dressed, steady with last week. Packers continue to bid $83 on cattle and I think they are going to have to move bids closer to last week in order to get any cattle bought. I am still going to call for a steady to $1 higher trade for this week at $86-$87 in the south and $1.35-$1.38 dressed in the north. Beef movement isn’t all that bad and I think they will have beef orders to fill into the first couple of weeks of this month. Overnight futures are trading sharply higher this morning, which would also indicate a higher fed trade for this week. Going home for the weekend cattle selling in the salebarns (i.e. fats, feeders, and cows) are all brining $1-$3 higher money and we can look for more of the same early next week.

Cash Beef Situation and Outlook:

Wednesday’s cattle kill was 95,000 head, which would be 53,000 head above last week and 31,000 head below the same day a year ago. The week-to-date kill now stands at 348,000 head, which would be 58,000 head above the same period a week ago with the industry looking for a 500,000 head production week. The boxed beef market was mixed on Wednesday with the choice cutout closing $.23 lower to settle at 143.19 and the select cutout closing $.13 higher to settle at $135.53. Sales volume was good with 330 loads of beef sold (125.80 loads of choice fab cuts, 97.63 loads of select fab cuts, 30.73 loads of trim, 75.50 loads of grinds). The choice/select spread settled at $7.66 a loss of $.36.

The beef market continues to carry a mixed tone with packers needing to offer sharp discounts on rib cuts and peeled tenderloins; however there remains decent demand and higher pricing throughout the end meats and ground beef markets. Wednesday saw sharply lower pricing in ribeyes and PSMO’s, which is likely to show up in the USDA cutout early next week with lower settlements. Aside from that there is good movement of cheaper chuck and round cuts and I would expect that to continue into the first couple weeks of January, which will help to support cutout values on breaks. Look for a lower tone to the beef market into early next week.

Futures Market Situation and Outlook:

February live cattle settled at $86.05 a gain of $.15, April live cattle settled at $89.10 a loss of $.30, and the June live cattle settled at $86.20 a gain of $.22. In the feeder cattle pit, January feeder cattle settled at $94.05 a gain of $.07, March feeder cattle settled at $93.67 a loss of $.15, and the April feeder cattle settled at $94.45 a loss of $.30. The reported CME feeder cattle index for 12/30/08 was $91.96 a gain of $1.51. Live cattle spreads: Feb/April settled at -$3.05 a gain of $.45, April/June settled at $2.90 a loss of $.52, and June/August settled at $.47 a gain of $.47. Feeder cattle spreads: Jan/March settled at $.37 a gain of $.22, March/April settled at -$.77 a gain of $.15, and April/May settled at -$1.15 a loss of $.10.

Wednesday’s live cattle volume saw 13,584 contracts trade in the pit and 7,862 contracts trade on Globex. Live cattle open interest gained 1,952 contracts to come in this morning at 213,285. Wednesdays’ feeder cattle volume saw 1,543 contracts trade in the pit and 483 contracts trade on Globex. Feeder cattle open interest gained 27 contracts to come in this morning at 20,398.

Live and feeder cattle futures were lower most of the session on Wednesday, however a round of late fund buying brought most live and feeder cattle contracts into positive by the close. December went off the board without much fanfare at $84.47. This morning Globex futures, which started trading at 5:00 am, are sharply higher and I think we should trade that way most of the day. I think we are going to see some new fund buying come into all commodity markets now that we are into a new year and with a fairly sizeable spec short position in cattle futures I think we will see some of those shorts forced out of the market. Resistance on Feb cattle will be found at $88.50 and in the April live cattle at $91.00. Resistance on March feeder cattle will be found at $94.50-$94.70 and a close above that level would likely move that market into the upper $90’s. I don’t know if we can get live cattle to close above resistance levels today, but it likely could happen early next week, which would open the door to the $93-$96 level in Feb and April. Look for a $.25-$.50 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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