January 30, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We saw continued feedlot movement of fed cattle in Nebraska, Kansas, Colorado, and Iowa yesterday with each state selling about 4,000-5,000 head apiece at mostly $80 live and $1.28-$1.30 dressed. Texas feedlots have yet to sell any cattle and with the way the board is acting it looks like it should be an $81 market down there by this afternoon. So far this week movement looks pretty good in all trading areas with Kansas selling 34,000 head, Nebraska selling 70,000 head, Colorado selling 15,000 head, and Iowa/MN selling 24,000 head. This will help in keeping front end numbers of fed cattle manageable in the coming weeks. Going home for the weekend feeder cattle markets remain under pressure by $1-$3. I would expect to see both the cash fed cattle and feeder cattle markets begin to stabilize at current price levels going into next week. Slaughter cow markets remain $1-$3 higher going into the end of the week on good packer demand and I will look for more of the same early next week.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 123,000 head, which would be 3,000 head below last week and 3,000 head above the same day a year ago. The week-to-date kill now stands at 497,000 head, which would be 7,000 head above the same period last week with the industry looking for a 640,000 head production week. The boxed beef market was lower yesterday with the choice cutout closing $2.46 lower to settle at $143.77 and the select cutout closing $1.20 lower to settle at $139.68. Sales volume was good with 340 loads of beef sold (205.17 loads of choice fab cuts, 80.44 loads of select fab cuts, 20.29 loads of trim, 34.09 loads of grinds). The choice/select spread settled at $4.09 a loss of $1.26.

The beef market was lower yesterday as packers offer product at sharply lower price levels to entice buyers back into the market. The strategy worked with many on the buy side willing to take on extra inventory of rib and loin items at the lower market values. Boneless beef items were about the only thing that was trading at higher money yesterday as there remains good demand for processing beef from the grinding sector and cow numbers are said to be getting tighter. I am going to look for beef values to begin finding support as the choice cutout approaches the $1.40 area by late next week.

Futures Market Situation and Outlook:

February live cattle settled at $81.10 a loss of $.07, April live cattle settled at $84.32 a loss of $.10, and the June live cattle settled at $82.02 a loss of $.27. In the feeder cattle pit, March feeder cattle settled at $90.62 a gain of $.05, April feeder cattle settled at $91.65 a loss of $.15, and the May feeder cattle settled at $93.55 a gain of $.10. The reported CME feeder cattle index for 1/28/09 was $94.70 a loss of $.17. Live cattle spreads: Feb/April settled at -$3.22 a gain of $.02, April/June settled at $2.30 a gain of $.17, and June/August settled at -$.60 a loss of $.27. Feeder cattle spreads: March/April settled at -$1.02 a gain of $.20, April/May settled at -$1.90 a loss of $.20, and May/August settled at -$1.60 a gain of $.50.

Yesterdays live cattle volume saw 26,011 contracts trade in the pit and 9,996 contracts trade on Globex. Live cattle open interest declined 23 contracts to come in this morning at 206,973. Yesterday’s feeder cattle volume saw 2,714 contracts trade in the pit and 1,322 trade on Globex. Feeder cattle open interest gained 322 contracts to come in this morning at 22,182.

Futures managed to come back and settle mixed to slightly lower yesterday after trading sharply lower early in the session and making new contract lows in February live cattle. January feeder cattle went off the board yesterday at $94.27 without much excitement. March feeders take over as lead contract month with a $4 discount to the CME index. We have this weeks cash fed and feeder cattle markets prices about right now the market will be positioning ahead of the semi-annual cattle inventory report set to be released at 2:00 pm. Estimates for the report are all cattle and calves on Jan 1 99.3%, annual calf crop 99.3%, total cows 99%, beef cows 98.8%, and dairy cows 100.1%. Once again the report will show that the supply side of the market remains friendly going forward and once we get the near term demand situation straightened out we can expect to see a sizeable rally in cattle futures and cash cattle values. If we are not at a bottom, we are getting very close, so if looking for long term trading strategies I think you want to be looking at the long side of the market. Look for a $.20-$.40 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


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.