February 3, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash fed cattle market was untested yesterday with no real packer bids evident and feedlots beginning the week pricing their cattle at $85 in the south and $1.35 plus dressed in the north. With last weeks decent feedlot movement (i.e. 37,000 head in TX, 36,000 head in KS, and 79,000 head in NE) showlists are coming in smaller in most trading areas. This along with recent strength on the board and the fact that Texas cattle feeders were able to hold their market steady last week should go a long way in stabilizing the cash market this week. While the beef was a little lower again yesterday I expect to see that market begin to find some support as well. I will call for a steady to $1-$2 higher fed cattle market for this week. Feeder cattle markets begin the week higher with Oklahoma City and Joplin, MO calling their markets $2 higher yesterday. With idea of higher fed cattle markets into the spring and dwindling feeder cattle supplies going forward, buyers stepped up procurement pricing yesterday and I would expect this to continue for most of the week. Slaughter cows continue to trade at higher money throughout much of the country.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 125,000 head, which would be 2,000 head below the same day a week ago and 6,000 head above the same day a year ago. The industry will be looking for a 625,000 head production week. The boxed beef market was lower yesterday with the choice cutout closing $.30 lower to settle at $141.53 and the select cutout closing $.73 lower to settle at $138.17. Sales volume was good with 374 loads of beef sold (148.32 loads of choice fab cuts, 76.32 loads of select fab cuts, 83.17 loads of trim, 66.19 loads of grinds). The choice/select spreads settled at $3.36 a gain of $.43.

The beef market was lower yesterday; however given the recent declines in many beef items over the last couple of weeks, the declines have begun to moderate. Most all items throughout the beef carcass were lower yesterday with the main emphasis being put on loin items and ground beef items. With that said though, sellers of beef are optimistic that steady to higher pricing will return to the beef complex by late this week or early next week. I will look for the beef market to begin to find some support in the $1.40 area basis the choice cutout.

Futures Market Situation and Outlook:

February live cattle settled at $83.90 a gain of $1.90, April live cattle settled at $86.82 a gain of $1.72, and June live cattle settled at $84.35 a gain of $1.90. In the feeder cattle pit, March feeder cattle settled at $94.00 a gain of $3.00, April feeder cattle settled at $95.32 a gain of $3.00, and May feeder cattle settled at $97.00 a gain of $2.67. The reported CME feeder cattle index for 1/30/09 was $93.35 a loss of $1.01. Live cattle spreads: Feb/April settled at -$2.92 a gain of $.17, April/June settled at $2.47 a loss of $.17, June/August settled at -$.95 a loss of $.30. Feeder cattle spreads: March/April settled at -$1.32 steady on the day, April/May settled at -$1.67 a gain of $.32, May/August settled at -$1.85 a loss of $.10.

Yesterdays live cattle volume saw 23,419 contracts trade in the pit and 17,019 contracts trade on Globex. Live cattle open interest declined 602 contracts to come in this morning at 207,786. Yesterday’s feeder cattle volume saw 2,586 contracts trade in the pit and 928 contracts trade on Globex. Feeder cattle open interest declined 761 contracts to come in this morning at 21,076.

Live and feeder cattle futures settled sharply higher to limit up yesterday on short covering and commercial buying in reaction to the bullishly construed cattle inventory report. Here again the market is certainly supply friendly going forward and once we get some of these near term demand issues worked out, I think we can see a sizeable rally in both live and feeder cattle futures. Weekly support in the market should now hold at $82 in the Feb live and $85 in the April live. The futures will find some resistance late this week at $85.50 in Feb and $88.25 in the April. March feeders should have good support now at $92.50 and the next major resistance level will be found at $96.50. I would probably look for a slightly lower open today on profit taking with some strength coming back to the market into late week, when we could see a more pronounced round of profit taking into the weekend. Look for a $.10-$.20 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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