January 28, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We saw a light fed cattle trade develop in eastern Nebraska and western Iowa late yesterday afternoon at $1-$2 lower money. Approximately 5,000-10,000 head of cattle changed hands at mostly $81 live and $1.30-$1.31 dressed yesterday afternoon in the north on fears the market was going to get worse before it gets better. Most other feedlots in the north and in the south were resisting the lower packer bids opting to see if the board can rebound any by the end of the week before negotiating prices on this week’s showlists. If we can get a rally in the futures by Friday, which could happen given oversold conditions and strength in the stock market, perhaps the rest of cattle feeding country can hold the market steady with last week. Feeder cattle markets remain under pressure with most auction markets across the country calling their markets $1-$3 lower. This will likely be the case for the next week or two until we begin to see feeder cattle numbers coming to market subside a little and we stabilize the fed cattle market. There remains a pretty good call for slaughter cows with most salebarns reporting $1-2 higher.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 125,000 head, which would be even with last week and 5,000 head below the same day a year ago. The week-to-date kill now stands at 252,000 head, which would be 11,000 head above the same period with the industry looking for a 640,000 head production week. The boxed beef market was lower yesterday with the choice cutout closing $.72 lower to settle at $147.41 and the select cutout closing $1.01 lower to settle at $142.54. Sales volume was light with 228 loads of beef sold (97.96 loads of choice fab cuts, 77.35 loads of select fab cuts, 18.46 loads of trim, 34.55 loads of grinds). The choice/select spread settled at $4.87 a gain of $.29.

The beef market was lower again yesterday as slaughter levels running 11,000 head above last week at this time are being met with steady to weaker buyer demand. Most items throughout the major primal areas of the beef carcass were either trading at steady to lower price levels yesterday, with the exception of a few select middle meat items. Ground beef still had a steady call as did lean boneless beef during yesterdays trading session. With the increased fed cattle production the first part of this week, 50% fed cattle trim was starting to come under pressure yesterday. I will continue to look for boxed beef markets to drift lower into next week.

Futures Market Situation and Outlook:

February live cattle settled at $81.27 a loss of $1.07, April live cattle settled at $84.40 a loss of $1.20, and June live cattle settled at $82.30 a loss of $1.52. In the feeder cattle pit, January feeder cattle settled at $94.10 a gain of $.35, March feeder cattle settled at $90.27 a loss of $1.45, and the April feeder cattle settled at $91.52 a loss of $1.07. The reported CME feeder cattle index for 1/26/09 was $94.95 a loss of $.19. Live cattle spreads: Feb/April settled at -$3.12 a gain of $.12, April/June settled at $2.10 a gain of $.32, and June/August settled at -$.75 a loss of $.15. Feeder cattle spreads: Jan/March settled at $3.82 a gain of $1.80, March/April settled at -$1.25 a loss of $.37, and April/May settled at -$1.67 a gain of $.22.

Yesterdays live cattle volume saw 22,188 contracts trade in the pit and 10,494 contracts trade on Globex. Live cattle open interest declined 321 contracts to come in this morning at 206,740. Yesterday’s feeder cattle volume saw 2,957 contracts trade in the pit and 1,119 trade on Globex. Feeder cattle open interest gained 382 contracts to come in this morning at 21,379.

Cattle futures were under pressure for most of the session yesterday as ideas of lower cash cattle and beef values along with formidable spec selling kept the market under wraps all day. It certainly appears as though the futures market wants to go and test old contract lows and perhaps make new lows in Feb and April live despite the recent strength we are seeing in the equity markets. We have now priced in a lower fed cattle trade for this week along with lower cash feeder markets, which could mean that we could see a reprieve in selling for today and tomorrow. Stock futures are pointing to a higher open in the Dow this morning, which I think will translate into a higher open and perhaps a small rally in cattle futures this morning. If you are selling cash fed cattle down here you need to be looking for a spot to buy them back on paper. 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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