January 29, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We saw further trading in the cash feedlot market yesterday with prices drifting another $1-$2 lower from Tuesday’s trade. Kansas feedlots started trading cattle yesterday at $80-$80.50 on about 8,000 head. Nebraska feedlots saw further trade at $80-$80.50 live and $1.29-$1.30 dressed on about 25,000 head, with Iowa and Colorado each selling about 5,000 head of cattle at $80 live and $1.29-$1.30 dressed. Texas feedlots did not sell any cattle yesterday opting to hold out for higher money. This will likely turn out to be a futile attempt and I would look for a steady to $1 lower market in that part of the country by the end of the week. Feeder cattle sales remain under pressure going into the weekend as weakness in the fed cattle market and a few more receipts around keep pressure on that market. Slaughter cows are higher coming into the end of the week and I would continue to look for support in that market.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 122,000 head, which would be 1,000 head below the same day a week ago and 1,000 head below the same day a year ago. The week-to-date kill now stands at 374,000 head, which would be 10,000 head above the same period a week ago with the industry looking for a 640,000 head production week. The boxed beef market was lower with the choice cutout closing $1.18 lower to settle at $146.23 and the select cutout closing $1.66 lower to settle at $140.88. Sales volume was good with 349 loads of beef sold (145.98 loads of choice fab cuts, 97.13 loads of select fab cuts, 20.84 loads of trim, 84.85 loads of grinds). The choice/select spread settled at $5.35 a gain of $.48.

The beef market was lower again yesterday with discounts now surfacing throughout the entire beef carcass. Weekly production running 10,000 head above last week and steady at best demand for beef are reasons for the lower market. Lower money was also beginning to show up in the ground beef market. The beef market will likely continue to drift into the lower $1.40’s basis the choice cutout into the first couple of weeks of February. Exports for the week of January 16-22, 2009 are as follows:

Beef: Net sales of 7,800 MT were primarily for Mexico (4,800 MT), South Korea (1,200 MT), Canada (1,000 MT), and Taiwan (400 MT). Exports of 8,000 MT were mainly to Mexico (3,100 MT), South Korea (1,300 MT), Canada (1,200 MT), Vietnam (900 MT), and Japan (700 MT).

Futures Market Situation and Outlook:

February live cattle settled at $81.17 a loss of $.10, April live cattle settled at $84.42 a gain of $.02, and the June live cattle settled at $82.30 steady on the day. In the feeder cattle pit, January feeder cattle settled at $94.20 a gain of $.10, March feeder cattle settled at $90.57 a gain of $.30, and the April feeder cattle settled at $91.80 a gain of $.27. The reported CME feeder cattle index for 1/27/09 was $94.87 a loss of $.08. Live cattle spreads: Feb/April settled at -$3.25 a loss of $.12, April/June settled at $2.12 a gain of $.02, and June/August settled at -$.32 a gain of $.42. Feeder cattle spreads: Jan/March settled at $3.62 a loss of $.20, March/April settled at -$1.22 a gain of $.02, and April/May settled at -$1.70 a loss of $.02.

Yesterdays live cattle volume saw 19,300 contracts trade in the pit and 11,245 contracts trade on Globex. Live cattle open interest gained 328 contracts to come in this morning at 207,060. Yesterday’s feeder cattle volume saw 2,329 contracts trade in the pit and 953 contracts trade on Globex. Feeder cattle open interest gained 473 contracts to come in this morning at 21,860.

Live and feeder cattle futures settled mixed yesterday with some moderate strength being found in feeder cattle by the close. Lower cash markets and idea cash cattle might be lower again next week were reasons live cattle couldn’t rally much yesterday. Spec selling and some new hedge selling were also showing up in the market yesterday. February live cattle futures are making new contract lows on the overnight Globex trade, which along with lower stock futures will certainly keep some pressure on the market today as well. We have a lower cash market priced in for this week so now the market will await the cash fed cattle trade in Texas and begin positioning for the semi-annual cattle inventory report set to be released tomorrow afternoon after the close. Estimates for the report are all cattle and calves 99.3%, annual calf crop 99.3%, total cows/heifers 99%, beef cows 98.8%, and dairy cows 100.1%. The report again will show the supply friendliness of the market going forward into 2010/2011. Look for a lower trade in the cattle futures today and new contract lows in February live. 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


Reproduction or rebroadcast of any portion of this information is strictly prohibited without the written permission of the Linn Group, Inc. the information reflected herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. Opinions expressed are subject to change without notice. This material and any view expressed herein are provided for informational purposes only and should not be construed in any way as an inducement to buy or sell commodity futures or options contracts. The Linn Group and its officers, directors, employees and affiliates may take positions for their own accounts in contracts referred to herein. Trading futures involves risk of loss. Past performance is not indicative of future results.