February 13, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash fed cattle market was mostly untested again yesterday except for a handful of cattle that changed hands in eastern Nebraska and western Iowa at steady money with last week. USDA reported 3,795 head of fed cattle sold in Nebraska at $1.30-$1.31 dressed in their afternoon report yesterday afternoon. The rest of cattle feeding country was quiet with packer bids of $80/$1.30 remaining unmatched against feedlot asking prices of $86/$1.36-$1.37. I would assume we will see trade turn active by this afternoon in all feeding areas, and the way it would appear right now it shouldn’t be any worse than steady with last week given a February board priced at $84.35. Packer margins took it on the chin again this week and it would seem like they would want to try and buy cattle cheaper this week but I don’t imagine feeders are going to want to sell many cattle at lower money with the futures holding above $84. There still haven’t been any deliveries against Feb and depending on how well the packing community can tow the line this week in terms of spending, perhaps we start seeing some deliveries next week. Going home for the weekend, slaughter cows remain under pressure as do fat cattle selling in the auction markets. Feeder cattle are strong with demand rated as aggressive by several of the major feeding companies. I would look for more of the same next week.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 122,000 head, which would be 2,000 head above last week and 3,000 head below the same day a year ago. The week-to-date kill now stands at 494,000 head, which is running 3,000 head above last weeks pace with the industry looking for a 610,000 head production week. The boxed beef market was mixed yesterday with the choice cutout closing $.30 lower to settle at $136.12 and the select cutout closing $.05 higher to settle at $135.25. Sales volume was light with 227 loads of beef sold (103.86 loads of choice fab cuts, 56.82 loads of select fab cuts, 24.75 loads of trim, 41.28 loads of grinds). The choice/select spread settled at $.87 a loss of $.35.

The beef market was mostly steady yesterday on light trading volume. Buyer demand was rated as slow yesterday and as such there weren’t many features to speak of. There was some light discounting noted on many items throughout the beef carcass as a result. Ground beef markets were also under some pressure yesterday, however there were a few instances of higher money being paid on trimming’s, especially the fed cattle 50’s, where talk of production cuts into next week had grinders looking to secure product. I will continue to call for a sideways to lower beef market into next week.

Futures Market Situation and Outlook:

February live cattle settled at $84.35 a loss of $.17, April live cattle settled at $87.50 a loss of $.10, and the June live cattle settled at $85.22 a gain of $.05. In the feeder cattle pit, March feeder cattle settled at $95.15 a loss of $.25, April feeder cattle settled at $96.15 a loss of $.25, and the May feeder cattle settled at $97.80 a loss of $.10. The reported CME feeder cattle index for 2/11/09 was $95.01 a gain of $.18. Live cattle spreads: Feb/April settled at -$3.15 a loss of $.07, April/June settled at $2.27 a loss of $.15, and June/August settled at -$.92 a loss of $.12.

Yesterdays live cattle volume saw 18,132 contracts trade in the pit and 10,412 contracts trade on Globex. Live cattle open interest gained 398 contracts to come in this morning at 201,864. Yesterday’s feeder cattle volume saw 5,061 contracts trade in the pit and 1,344 contracts trade on Globex. Feeder cattle open interest gained 329 contracts to come in this morning at 21,777.

Cattle futures were under pressure most of the session yesterday on continued concerns over the economy and the lower stock futures. Futures tested some support levels under the market early yesterday and held, which prompted a short covering rally going into the close. I probably wouldn’t expect to see much action today in the futures until more is known about this week’s cash trade of fed cattle. We will probably continue to follow the stock market. I think it will be important for Feb live cattle to hold $84 and April cattle to hold $87 by the close today in order to stave off further selling into next week. March feeders will need to hold above $94 today in order to keep from seeing a couple dollar break next week. Back month feeders continue to look positive closing above $100. There remain no deliveries against the Feb live cattle contract. Keep in mind we will be closed Monday in observance of Presidents Day, we will be on normal trading hours today though. Look for a $.10-$.20 higher open to live and feeder cattle futures today. 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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