January 23, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash fed cattle market turned active yesterday in southern plains feedlots at prices generally $2 lower than the week before. Texas/OK/NM feedlots sold 18,500 head of fed cattle for $82 live and Kansas feedlots sold 28,200 head of fed cattle for $82 live. There was also trade that took place in the north with prices mostly steady with Wednesday as we see Nebraska feedlots selling 26,300 head of fed cattle for $1.32 dressed, Colorado selling 1,500 head of fed cattle for $82 live, and Iowa/MN feedlots selling 7,700 head of fed cattle for $1.32 dressed. The northern trade of fed cattle should be about wrapped up for the week and any cleanup trade that occurs today should take place at steady money with yesterday. The south could probably use to sell a few more cattle and here too, any trade that does develop should take place at steady money with the bulk of yesterday’s trade. A few plants in the north are said to be booked up with cattle into the end of next week and first half of the following week. Southern packers remain rather close to the knife in terms of inventory and this might take some leverage away from them in next weeks price negotiations. I am going to look for a steady to higher fed cattle trade for next week. Going home for the weekend, slaughter cow markets remain firm and given the level of demand for ground beef, lack of near term beef imports, and tightening of cow numbers in the west I will call for a steady to firm cow market early next week. Feeder cattle markets remain a under pressure going into the weekend as lower fed cattle markets, both futures and cash, keeps buyers looking to procure inventory at lower money. Feeder cattle runs should start to tighten up a bit towards the end of the month, which I think with an increase in fed cattle prices should support feeder cattle values in the lower $90’s basis the CME index.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 126,000 head, which would be 1,000 head above the same day last week and 1,000 head above the same day a year ago. The week-to-date kill now stands at 490,000 head, which would be 8,000 head above the same period a week ago, with the industry looking for a 620,000 head production week. The boxed beef market was lower with the choice cutout closing $2.10 lower to settle at $149.65 and the select cutout closing $.98 lower to settle at $143.54. Sales volume was good with 301 loads of beef sold (127.22 loads of choice fab cuts, 110.19 loads of select fab cuts, 22.58 loads of trim, 41.22 loads of grinds). The choice/select spread settled at $6.12 a loss of $1.12.

The beef market was lower again yesterday with price discounts showing up in most all primal areas of the beef carcass as packer margins are attractive and they ramp up production to take advantage of the situation. This has put a larger mix of beef cuts on the market that buyers are only willing to absorb now that they have comfortable inventory positions. Ground beef remains firm from most points of sale and higher prices in that complex along with higher prices in the boneless grinding beef complex should prevail into next week. I will continue to look for choice cutout values to drift into the $1.45 area and select cutout values to drift into the $1.40 area by the first of February. Export sales for the week of January 9-15, 2009 are as follows:
Beef: Net sales of 7,500 MT were primarily for Mexico (2,000 MT), Japan (1,800 MT), South Korea (1,300 MT), and Canada (1,100 MT). Exports of 8,400 MT were mainly to Mexico (3,100 MT), South Korea (1,800 MT), Vietnam (1,400 MT), Canada (800 MT), and Japan (700 MT).
Futures Market Situation and Outlook:

February live cattle settled at $82.27 a loss of $.07, April live cattle settled at $85.40 a gain of $.20, and the June live cattle settled at $84.17 a gain of $.07. In the feeder cattle pit, January feeder cattle settled at $93.47 a gain of $.60, March feeder cattle settled at $92.30 a gain of $.95, and the April feeder cattle settled at $93.40 a gain of $.60. The reported CME feeder cattle index for 1/21/09 was $95.52 a loss of $.11. Live cattle spreads: Feb/April settled at -$3.12 a loss of $.27, April/June settled at $1.22 a gain of $.12, and June/August settled at -$.77 a loss of $.05. Feeder cattle spreads: Jan/March settled at $1.17 a loss of $.35, March/April settled at -$1.10 a gain of $.35, April/May settled at -$2.05 a loss of $.15.

Yesterdays live cattle volume saw 21,962 contracts trade in the pit and 10,406 contracts trade on Globex. Live cattle open interest gained 131 contracts to come in this morning at 205,233. Yesterday’s feeder cattle volume saw 2,443 contracts trade in the pit and 762 contracts trade on Globex. Feeder cattle open interest declined 200 contracts to come in this morning at 21,068.

Live and feeder cattle futures settled higher yesterday on hedge lifting, short covering, and a late rally in the Dow. We did nothing more yesterday than trade with the lower stock market early, tested Wednesday’s lows and rallied into the close. It looks like the exact same thing is going to happen again this morning with overnight Dow futures down 200, S&P futures down 22, and overnight Globex cattle futures down $.50. Keep in mind we will have a cattle on feed report out tonight after the close, which is expected to show on feed Jan 1, 2009 93.9%, placed during December 100.1%, and marketed during December 99.3%. The report should show that fed cattle numbers get very manageable in the next 4 weeks, which should be supportive to the front end of the board. Feedlot placement activity will continue to grow in the coming months as placements the last several months have been running below year ago levels. These cattle are outside feedlots right now waiting to be placed at heavier weights, which is going to start to build fed cattle supplies for the late summer/early fall marketing timeframes. The market should find some support on a lower trade today until we get the on feed report behind us. Look for a $.25-$.50 lower open to live and feeder cattle futures this morning, and if today is like any other day this week, you can buy fats and feeders $1 lower and look to sell them out higher on the day by the close. 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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