February 10, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash fed cattle market was quiet yesterday with showlist distribution the main feature of the day. A look at last weeks feedlot transactions shows Texas/OK/NM yards selling 35,525 head of fed cattle for $83, Kansas yards sold 37,656 head of fed cattle for $83/$1.31, Nebraska feedlots sold 60,135 head of fed cattle for $80-$82/$1.31, Colorado feedlots sold 8,213 head of fed cattle for $83/$1.31, and Iowa/MN feedlots sold 21,267 head of fed cattle for $80-$82/$1.29-$1.30. Showlist numbers coming into this week look smaller in the northern feeding states and larger in the south. Packers were not bidding on any cattle yesterday with most feedlots pricing cattle at $86/$1.36-$1.37. Fed cattle selling through the sale barns in the Midwest were a little lower yesterday with the fed beef steers bringing $77-$82.50 and the fed Holsteins brining $68-$75. Slaughter cows begin the week with a mixed tone, higher at some sales and lower at others, but the bulk of the cutter and boning utility cows across the country continue to bring $35-$45. Feeder cattle markets have some follow through strength from last week as we see Oklahoma City calling their market steady to $1 higher on an estimated run of 10,500 head. In OKC yesterday the 5 weight steers were bringing $103-$116, the 6 weights were bringing $96-$107, the 7 weights were bringing $92-$98, and the 8 weights were bringing $89-$97. The jury is still out on this weeks feedlot trade of fed cattle, however the board was implying that it will be steady to $1 higher. Keep in mind thought that the week is still young and futures can still fall apart by the end of the week, especially if the beef continues to move lower. Feeder cattle markets should continue to find support for most of the week and slaughter cows might move into a more steady market, especially if we see boneless markets stall out and we continue to see more milk cows come to kill.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 125,000 head, which would be even with a week ago and 6,000 head above the same day a year ago. The industry will be looking for a 610,000 head production week. The boxed beef market was mixed yesterday with the choice cutout closing $.11 lower to settle at $136.76 and the select cutout closing $.33 higher to settle at $134.29. Sales volume was good for a Monday with 358 loads of beef sold (153.26 loads of choice fab cuts, 73.11 loads of select fab cuts, 56.17 loads of trim, 75.21 loads of grinds). The choice/select spread settled at $2.46 a loss of $.44.

The beef market turned mixed yesterday on increased sales volumes. Coarse ground beef prices and sharply lower peeled tenderloin prices were the culprits in lending to a lower choice cutout yesterday. Choice and select chuck rolls were also trading at reduced price levels yesterday adding pressure to cutout values. The only cuts trading at higher money were inside rounds and top butts. Interesting to note that choice PSMO’s printed a 10 year low yesterday with USDA’s wtd ave price of $589.66. Choice short loins were very near a 10 year low at $357.77. As mentioned though, the lower price levels attracted increased trading levels yesterday with each item trading right at 500,000 lbs, which are some of the highest load counts we have seen on these items since the first quarter of 2008. There were increased trading levels in chuck rolls and short ribs as well yesterday, with each of these cuts showing over 500,000 lbs of product trading. Some of this could be export booking’s. Look for the beef market to remain under pressure until late week, when we could begin to see some stabilization in prices.

Futures Market Situation and Outlook:

February live cattle settled at $84.70 a gain of $1.05, April live cattle settled at $87.75 a gain of $1.05, and June live cattle settled at $84.92 a gain of $.85. In the feeder cattle pit, March feeder cattle settled at $95.55 a gain of $1.20, April feeder cattle settled at $97.35 a gain of $1.82, and the May feeder cattle settled at $98.52 a gain of $1.27. The reported CME feeder cattle index for 2/6/09 was $94.13 a gain of $.20. Live cattle spreads: Feb/April settled at -$3.05 steady on the day, April/June settled at $2.82 a gain of $.20, June/August settled at -$.80 a gain of $.20. Feeder cattle spreads: March/April settled at -$1.80 a loss of $.62, April/May settled at -$1.17 a gain of $.55, and May/August settled at -$1.97 a gain of $.17.

Yesterdays live cattle volume saw 22,147 contracts trade in the pit and 11,319 contracts trade on Globex. Live cattle open interest gained 57 to come in this morning at 204,005. Yesterday’s feeder cattle volume saw 4,395 contracts trade in the pit and 1,245 contracts trade on Globex. Feeder cattle open interest gained 198 contracts to come in this morning at 21,899.

Live and feeder cattle futures were higher yesterday on short covering and hedge lifting from last weeks late cash trade and some technical buying. There were no deliveries against the February live cattle contract last night. Yesterday was also the second day of the “Goldman Roll” of March feeder cattle long’s into April, with that spread losing $.62 on approximately 500-600 cars rolled. The USDA released new supply/demand data this morning. They lowered 2009 beef production 430 mil lbs, lowered 2009 pork production 55 mil lbs, and lowered 2009 poultry production 148 mil lbs. On the import/export side, USDA left beef imports alone and lowered exports by 40 mil, they lowered pork imports 40 mil and lowered exports 100 mil, and they left poultry imports unchanged and lowered exports 100 mil. The lowered revisions to the recent cattle inventory report were the main reasons for the lowered 09 beef production. We start out this morning right up against some weekly resistance numbers that I have at $85.25 in Feb live and $88.37 in April live. March feeders will have weekly resistance at $97.02. The above mentioned resistance levels will be a battleground today and closing above them would indicate a higher market into the end of the week. Holding below these resistance levels would indicate a move back to $82.50 in Feb live, $85.50 in April live, and $92.50 in March feeders. 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


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