January 27, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

Yesterdays cash fed cattle market went largely untested with no real packer bids to speak of and feedlots beginning the week offering cattle at $85-$86 live and $1.35-$1.37 dressed. Last weeks feedlot movement looks like this, Texas/OK/NM yards sold 43,796 head of fed cattle, Kansas yards sold 41,860 head of fed cattle, and Nebraska yards sold 75,446 head of fed cattle all for mostly $82 live and $1.32 dressed. Movement looked to be decent given the number of cattle for sale last week, which is leading to a modestly smaller offering of cattle in the south this week with larger numbers for sale in Nebraska. Fed cattle selling through the nations salebarns begin the week trading at lower money in sympathy with last weeks feedlot sales. Feeder cattle look softer to begin the week as well with Oklahoma City calling their market steady to $3 lower. I will look for this weeks fed cattle trade to be softer early and firming late.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 124,000 head, which would be 8,000 head below the same day a week ago and 3,000 head above the same day a year ago. The industry will look for a 640,000 head production week. The boxed beef market was lower yesterday with the choice cutout closing $.18 lower to settle at $148.13 and the select cutout closing $.32 lower to settle at $143.55. Sales volume was light with 210 loads of beef sold (105.66 loads of choice fab cuts, 56.16 loads of select fab cuts, 17.83 loads of trim, 30.45 loads of grinds). The choice/select spread settled at $4.58 a gain of $.14.

The beef market was under pressure again yesterday with discounts once again surfacing in the rib, round, and loin complexes. The ground beef market was mostly steady yesterday, however sources cited demand was beginning to back off a bit. Packers have pretty decent margins right now and will want to be killing extra cattle to take advantage of it. This is going to put extra product on the market for the balance of this week and into the first of next, which inevitably will weigh on cutout values. Continue to look for a lower beef trade.

Futures Market Situation and Outlook:

February live cattle settled at $82.35 a loss of $.32, April live cattle settled at $85.60 a loss of $.20, and the June live cattle settled at $83.82 a loss of $.35. In the feeder cattle pit, January feeder cattle settled at $93.75 a gain of $.10, March feeder cattle settled at $91.72 a loss of $1.02, and the April feeder cattle settled at $92.60 a loss of $.92. The reported CME feeder cattle index for 1/23/09 was $95.14 a loss of $.20. Live cattle spreads: Feb/April settled at -$3.25 a loss of $.12, April/June settled at $1.77 a gain of $.15, June/August settled at -$.60 a gain of $.10. Feeder cattle spreads: Jan/March settled at $2.02 a gain of $1.12, March/April settled at -$.87 a loss of $.10, April/May settled at -$1.90 a gain of $.22.

Yesterdays live cattle volume saw 23,134 contracts trade in the pit and 5,533 contracts trade on Globex. Live cattle open interest gained 1,793 contracts to come in this morning at 207,062. Yesterday’s feeder cattle volume saw 3,182 contracts trade in the pit and 601 contracts trade on Globex. Feeder cattle open interest declined 264 contracts to come in this morning at 20,991.

The futures market opened higher yesterday in reaction to the friendly cattle on feed report, however spec and hedge selling surfaced shortly after the open to cap the early rally attempt. The cattle on feed report indicated that the market has very supply friendly fundamentals going forward, however worries over near term demand are an overriding factor right now and this keeps rallies in the market at bay. We will continue to look for support in the market at contract lows of $80.60 in the Feb and $82.45 in the April. The market sure seems like it want to go and test those old lows and we will have to see if they hold or not. My opinion is that if they don’t hold we could get one more quick break before rallying into spring. Feeders should be able to hold the $89-$90 area on any further weakness. We will need to see Feb cattle start closing back above the $83 area in order to negate some of the recent bearishness. 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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