January 7, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

Yesterdays feedlot trade of fed cattle was non-existent as packers were not tendering any bids and feedlots pricing a mostly larger fed cattle offering at $89-$90 live and $1.40 plus dressed. Cattle feeders resolve to get higher money for their cattle this weeks has been solidified by higher settlements on the futures board and a beef trade that so far this week is no worse than steady. Packers contend that there is more cattle to chose from this week and that the beef continues to be a challenge to move at profitable levels and as such are not willing to bid on anything early in the week. It would still appear as though the cash fed cattle market could be higher again this week as beef movement isn’t all that bad and there looks to be some business being conducted out forward, which I think will keep packers in the market wanting inventory. There has been some talk of production cutbacks towards the end of the week as packers try to improve on profitability, which may be a price limiting factor in the northern sections of feeding country where showlists are larger this week. For now and unless we get a crash on the board, I will still call for a mostly steady to $.50-$1 higher market that takes place at $87-$88 live in the southern feeding states and $1.38-$1.40 dressed in the northern feeding states. While canvassing yesterday’s auction market trade of cattle we see fed cattle and slaughter cows trading through the nations salebarns are bringing mostly steady to instances of $1-$2 higher money, with most feeder cattle sales solidly $2-$4 higher. First of the year demand for feeder cattle to get placed into the spring and early summer fed cattle marketing timeframe remains very good and I would expect to see higher prices on feeder cattle (i.e. 600 lbs-800 lbs) for the next couple of weeks.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 126,000 head, which would be 2,000 head below last week and 3,000 head below the same day a year ago. The week-to-date kill now stands at 245,000 head, which would be 8,000 head below the same pace last week, as the Monday slaughter was revised down to 119,000 head. The industry will look for a 620,000 head production week. The boxed beef market was mixed yesterday with the choice cutout closing $.17 lower to settle at $144.80 and the select cutout closing $.61 higher to settle at $136.25. Sales volume was good with 313 loads of beef sold (121.04 loads of choice fab cuts, 103.83 loads of select fab cuts, 41.78 loads of trim, 45.90 loads of grinds). The choice/select spread settled at $8.55 a loss of $.78.

The beef market continues to exhibit some strength in end meat pricing, however it is said that perhaps some of this near term buying could be starting to dry up. Yesterday saw decent gains in choice and select chuck rolls, clods, inside/outside rounds and gooseneck rounds for quick ship. Ground beef markets were also higher yesterday on continued retail demand. Packers cite continued challenges in moving ribs and peeled tenders and there was some discounting needed in select strips and top butts yesterday as well. Domestic boneless beef items were a little lower yesterday as more product was offered to the market. Imported boneless bull and cow beef was a tick higher yesterday. It sounds like some of the near term domestic demand for retail beef could be getting satisfied, which could flatten out cutout values for the rest of the week.

Futures Market Situation and Outlook:

February live cattle settled at $88.55 a gain of $1.00, April live cattle settled at $91.32 a gain of $.92, and the June live cattle settled at $88.20 a gain of $.27. In the feeder cattle pit, January feeder cattle settled at $96.12 a loss of $.87, March feeder cattle settled at $95.97 a loss of $.75, and the April feeder cattle settled at $97.00 a loss of $.45. The reported CME feeder cattle index for 1/5/09 was $95.45 a gain of $.93. Live cattle spreads: Feb/April settled at -$2.77 a gain of $.07, April/June settled at $3.12 a gain of $.65, and June/August settled at -$.40 a loss of $.50. Feeder cattle spreads: Jan/March settled at $.15 a loss of $.12, March/April settled at -$1.02 a loss of $.30, and April/May settled at -$1.27 a gain of $.27.

Yesterdays live cattle volume saw 24,482 contracts trade in the pit and 19,607 contracts trade on Globex. Live cattle open interest gained 1,551 contracts to come in this morning at 216,984. Yesterday’s feeder cattle volume saw 3,728 contracts trade in the pit and 1,158 contracts trade on Globex. Feeder cattle open interest declined 486 contracts to come in this morning at 20,328.

The live cattle futures market settled with solid gains yesterday, however feeder futures faltered towards the end of the session with long profit taking and ideas the market got far enough ahead of the cash market for the time being as reasons for the sell off. Fat cattle futures performed well yesterday and closed above the resistance levels I was talking about at $88 in the Feb and $91 in the April; however the sell off in the feeder cattle is a little concerning to me as the feeders have been leading us higher on this rally. Perhaps if the beef were to get a little sloppy towards the end of the week and packers come through with cutting kills and manage to hold the cash market steady we may see live and feeder cattle futures back up a bit. Also of concern for the near term futures market is the upcoming “Goldman Roll”, and what could be some index fund rebalancing of livestock holdings, which could create some sell pressure. Overall I still think live and feeder cattle futures can and will move higher (i.e. mid-$90’s on the fats and lower $100’s on the feeders), but given the recent rally and overbought market conditions coupled with some of this upcoming fund business, we may see a minor set back in the market. It would be a break I would want to buy if it were to transpire. Look for a $.10-$.20 lower 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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