January 9, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

Yesterdays cash fed cattle market turned fairly active with live sales running $2-$3 lower and dressed sales running mostly $4 lower when compared to the previous week. Cattle sold in Texas for mostly $84-$85 on about 4,000 head, Kansas feedlots sold approximately 12,000 head for $84 live, Nebraska sold approximately 20,000 head for $1.34-$1.35, Colorado feedlots sold 1,200 head for $83-$83.50 live, and Iowa feedlots sold 3,000 head of fed cattle for $1.32-$1.36 dressed. Numbers of cattle sold look to be moderate and there will certainly be some cleanup trade today, likely steady with yesterdays market depending on what the board does. Believe the drop in this weeks cash fed cattle market was a direct result of the lower futures board, and we should begin to see some of that selling in the futures subside in the next day or two as we are getting some of the open interest that has been talked about out of the market. We have brought the cash market back into $83-$84 support and would expect the market to hold together here give or take a dollar and trade sideways to higher from here. Going home for the weekend, slaughter cows carry a mixed tone, some higher and some lower depending on what part of the country you are in. Feeder cattle sales remain strong, with many sales yesterday like Pratt, KS reporting $2-$4 higher across the board on all classes of feeders with very good buyer demand. This is especially true on 7-8 weight cattle that will finish by late spring and I would expect this trend to continue into next week.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 126,000 head, which would be 126,000 head above a week ago and 3,000 head below the same day a year ago. The week-to-date kill now stands at 478,000 head, which would be 1,000 head below the same period a week ago with the industry looking for a 620,000 head production week. The boxed beef market was $.26 higher on the choice cutout to settle at $143.75 and $.52 higher to settle at $136.76 on the select cutout. Sales volume was good with 420 loads of beef sold (127.12 loads of choice fab cuts, 169.50 loads of select fab cuts, 40.93 loads of trim, 82.14 loads of grinds). The choice/select spread settled at $6.99 a loss of $.26.

The beef market was mostly steady to higher yesterday, with the exception of choice/select rib roasts. The rest of the complex was holding its own with price strength showing up once again in two-piece chucks, chuck rolls, knuckles, and outside rounds. There was another round of higher price transactions in the ground beef market on good movement. Boneless beef markets were higher as well, again most of that strength showing up in the fed cattle 50’s. Packers did a good job of clearing backlogged inventory this week and head into the weekend with manageable inventory levels. For this reason I will continue to look for a mostly steady to higher beef market into the first part of next week.

Futures Market Situation and Outlook:

February live cattle settled at $83.15 a loss of $2.62, April live cattle settled at $86.95 a loss of $1.97, and the June live cattle settled at $85.37 a loss of $1.07. In the feeder cattle pit, January feeder cattle settled at $93.50 a loss of $1.00, March feeder cattle settled at $92.25 a loss of $1.02, and the April feeder cattle settled at $93.50 a loss of $.77. The reported CME feeder cattle index for 1/7/09 was $96.43 a gain of $.31. Live cattle spreads: Feb/April settled at -$3.80 a loss of $.65, April/June settled at $1.57 a loss of $.90, and June/August settled at -$.72 a loss of $.22. Feeder cattle spreads: Jan/March settled at $1.25 a gain of $.02, March/April settled at -$1.25 a loss of $.25, April/May settled at -$1.42 a gain of $.40.

Yesterdays live cattle volume saw 43,662 contracts trade in the pit and 20,831 contracts trade on Globex. Live cattle open interest declined 7,474 contracts to come in this morning at 210,095. Yesterday’s feeder cattle volume saw 3,257 contracts trade in the pit and 1,187 contracts trade on Globex. Feeder cattle open interest gained 524 contracts to come in this morning at 20,632.

Live and feeder cattle futures suffered another round of heavy selling yesterday linked to the beginning of the “Goldman Roll” and index fund liquidation. We have been hearing the last couple of days about how the index fund community needs to rebalance their meat position, and yesterday we saw Feb open interest go down 8,351 contracts with total live cattle open interest going down 7,474. Some of this was rolled, however it would appear that there was some sizeable outright liquidation. Since last Friday Feb live cattle open interest has gone down approximately 17,000 cars. Again, some of this was rolled into deferred month fats; however there has been a portion that was simply outright liquidated. This would lead me to believe that we could be getting close to seeing some of this selling subside. We could see another day or two of live cattle liquidation; however I think we are getting close to wrapping that up and would want to be a buyer on any further weakness. Feeders on the other hand don’t have to break that much more from where they are at, due to the index guys not having to liquidate feeders and we have very good cash strength in the country. For this reason I would look to be a buyer of feeder cattle today, and if they come in and whack the fat cattle at the end of the day again you can buy them cheaper. If not, and the market rallies, you at least have the feeders on to help offset paying up for the fat cattle. Look for a $.10-$.20 higher open to live and feeder cattle this morning. Have a Good Weekend and 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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