February 12, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash fed cattle trade was at a standstill yesterday with packer bids of $80-$81 live and $1.30 dressed going unmatched against feedlot offering prices of $86 live and $1.36-$1.37 dressed. We could begin to see a few cattle trade as early as today, however I would expect to see the bulk of business to wait until Friday. Packer margins have been suffering the last week or so and as such they are beginning to take hours out of weekly production schedules. The beef is still acting sluggish, although we have had good movement the last several sessions, showlists are mostly larger this week, and I wasn’t very impressed with how the board closed yesterday, so I don’t know high we can get fat cattle sold this week. They are likely going to try to press the futures lower today and tomorrow, which could break sellers resolve. Fed cattle selling in Sioux Falls, SD yesterday were trading lower with the beef fats bringing $78-$80 and the Holstein fats bringing $67-$72. Slaughter cows were lower yesterday as well with the bulk of the cutter and boning utility cows bringing $40-$46, and the breakers bringing $48-$52. Feeder cattle continue to trade mostly higher on all classes, however I did notice a few pockets of weakness on cattle weighing over 800 lbs. El Reno, OK had their weekly feeder sale yesterday with about 5,000 head of cattle on offer and a market they called mostly steady to $1 higher. In El Reno yesterday the 5 weight steer calves were bringing $104-$115, 6 weight steers were bringing $96-$107, 7 weight steers were bringing $94-$97, and the weight steers were bringing $87-$95.

Cash Beef Situation and Outlook:

Yesterday’s cattle kill was estimated at 120,000 head, which would be 2,000 head below last week and 2,000 head below the same day a year ago. The week-to-date kill now stands at 372,000 head, which would be 1,000 head above the same period a week ago with the industry looking for a 610,000 head production week. The boxed beef market was mixed yesterday with the choice cutout closing $.73 lower to settle at $136.42 and the select cutout closing $.37 higher to settle at $135.20. Sales volume was good with 416 loads of beef sold (203.09 loads of choice fab cuts, 82.88 loads of select fab cuts, 42.05 loads of trim, 87.57 loads of grinds). The choice/select spread settled at $1.22 a loss of $1.10.

The beef market was a little sluggish again yesterday, as demand for most cuts of beef remains flat. Packers needed to discount clods, outside/gooseneck rounds, and PSMO’s. However, the lower price levels on these items did attract some extra business as we saw trading volumes pick up. Ground beef values were mostly steady yesterday and boneless beef items, both domestic and imported were trading lower. The exception was fed cattle 50’s where talk of packers cutting kills late this week and next supported that market. Continue to look for a steady to lower beef trade into early next week. Beef exports for the week of January 30-Februrary 5, 2009 are as follows:
Beef: Net sales of 9,300 MT were primarily for Mexico (2,300 MT), Vietnam (2,300 MT), Japan (1,900 MT), Canada (1,600 MT), the Netherlands (800 MT), and Hong Kong (600 MT). Decreases were reported for South Korea (900 MT). Exports of 7,900 MT were mainly to Mexico (3,100 MT), Canada (1,200 MT), South Korea (1,100 MT), Vietnam (800 MT), and Japan (700 MT).
Futures Market Situation and Outlook:

February live cattle settled at $84.52 a loss of $.25, April live cattle settled at $87.60 a loss of $.45, June live cattle settled at $85.17 a loss of $.22. In the feeder cattle pit, March feeder cattle settled at $95.40 a loss of $.30, April feeder cattle settled at $96.40 a loss of $.70, and May feeder cattle settled at $97.90 a loss of $.57. The reported CME feeder cattle index for 2/10/09 was $94.83 a gain of $.17. Live cattle spreads: Feb/April settled at -$3.07 a gain of $.20, April/June settled at $2.42 a loss of $.22, June/August settled at -$.80 steady on the day. Feeder cattle spreads: March/April settled at -$1.00 a gain of $.40, April/May settled at -$1.50 a loss of $.12, May/August settled at -$1.85 a gain of $.15.

Yesterdays live cattle volume saw 13,529 contracts trade in the pit and 8,650 contracts trade on Globex. Live cattle open interest declined 539 contracts to come in this morning at 201,466. Yesterday’s feeder cattle volume saw 4,879 contracts trade in the pit and 1,538 contracts trade on Globex. Feeder cattle open interest declined 735 contracts to come in this morning at 21,448.

The futures market settled under pressure yesterday on renewed spec selling and profit taking from the recent run up in prices. As I mentioned above, I wasn’t very impressed with yesterdays close in the cattle as we couldn’t get through overhead resistance and faded late. The market was probably getting a little over priced compared to where cash fed cattle are going to trade this week and with renewed selling in the equity markets the path of least resistance would seem to be lower. We can probably expect to see further selling in the cattle complex this morning as equity and outside commodity markets are all lower this morning. The market appears as though it could move back into near term weekly support at $82.50 in Feb live, $85.50 in April live and $92.50-$93 in March feeders. There remain no deliveries against the February live cattle contract. In a statement released by the Cooperatives Working Together program, members have voted to commit to funding a dairy herd retirement program over the course of two years that will eventually take 200,000-300,000 dairy cows out of production. Look for a $.20-$.40 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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