February 2, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We left last week with a fed cattle market that finally traded in the Texas panhandle at $82 on approximately 20,000 head. For the week feeder cattle values were steady to $3 lower with the biggest declines noticed in cattle weighing over 700 lbs. Slaughter cows were mostly $1-$3 higher on reduced numbers coming to market in the west, although dairy cow slaughter is seen increasing in major dairy producing states. Looking into this week I would expect to see cash fed cattle and feeder cattle values begin to stabilize and I would expect to find further support in the slaughter cow market. We had a bullishly construed cattle inventory report on Friday afternoon. Some highlights of the report revealed all cattle and calves as of January 1, 2009 at 94.491 mil head or 98.4% of a year ago (99.3%), all cows and heifer 41.005 mil head or 98.4% of a year ago (99%), 2008 calf crop at 36.113 mil head or 98.2% of a year ago (99.3%) and cattle on feed 13.851 mil head was 93.4% of a year ago. Pre-report estimates for the report are in parenthesis and the report shows that cattle supplies going forward are going to get tight and once we see near term demand get straightened out we can expect to see a sizeable rally in the cattle market.

Cash Beef Situation and Outlook:

The beef market was lower last week and we can expect to see more of the same again for the first half of this week. I expect to see some support come into the beef market as the choice cutout approaches the $1.40 area, give or take a couple of dollars. We did see trade volumes pick up a bit on the lower market, which leads me to believe that buyers are beginning to find value in certain items as the market works lower. This would especially be true in middle meat items. Look for a softer start to the beef market this week, with some support being found late in the week.

Futures Market Situation and Outlook:

Live cattle futures lost $.67/$.70 respectively in Feb and April with June and August losing $1.70 apiece last week. Feeder cattle futures lost $1.20-$1.70 across the board last week as well with technical selling and worries over near term cash and beef demand being the catalyst for the lower markets. This week, I think we can begin to stabilize the cash markets and we should get at least some what of a friendly reaction to the cattle inventory report. The Dow and the other outside commodity markets are all lower this morning, so we probably won’t open as high as we would like to see in the cattle futures this morning and I’m sure we will find people willing to sell a higher open despite what the inventory report said on Friday. As mentioned above, we will get the near term demand fundamentals of the market straightened out in another couple of weeks, at which time I think we can see a sizeable rally in cattle futures, so I would caution about getting too bearish at current price levels. Look for a $.25-$.50 higher open to live and feeder cattle futures this morning, with more strength and less sell pressure being found in the deferred contracts as opposed to the front months. 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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