February 4, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash feedlot trade went untested again yesterday with just a few token bids of $80 in the south going unmatched against feedlot offering prices of $85 live and $1.35 plus dressed. We likely won’t see any meaningful trade develop before late Thursday or Friday as packers are said to have some inventory around them. Beef values continue to erode, which is starting to weigh on margins, however a lower showlist offering this week and prospects for fed cattle numbers to get tighter by the end of the month should give cattle feeders a little bargaining power. A Feb futures board trading at $83.50 should also help provide a little support to the cash fed cattle market as well. I will still call for a steady to $1/$2 higher fed cattle trade for this week. The cash feeder cattle market continues to build on gains from Monday with most sales across the circuit like Huron, SD and La Junta, CO calling their markets mostly $1-$2 higher on both lightweight cattle weighing under 700 lbs and yearling types weighing over 700 lbs. There were some exceptions as we saw a big run of cattle in Phillip, SD yesterday with that market being called mostly $1-$3 lower. Overall though there seems to be better demand in the procurement of feeder cattle since last week and I would expect to see the market trend higher into next week. As we hit the midweek point slaughter cows are trading mostly $1-$3 higher pretty much everywhere in the country.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 124,000 head, which would be 1,000 head below last week and 3,000 head below the same day a year ago. The week-to-date kill now stands at 249,000 head, which would be 3,000 head below the same period last week with the industry looking for a 625,000 head production week. The boxed beef market was lower yesterday with the choice cutout closing $.41 lower to settle at $141.12 and the select cutout closing $.80 lower to settle at $137.37. Sales volume was light with 222 loads of beef sold (91.30 loads of choice fab cuts, 77.22 loads of select fab cuts, 7.67 loads of trim, 46.02 loads of grinds). The choice/select spread settled at $3.76 a gain of $.39.

The beef market was lower again yesterday with discounts showing up in most primal areas of the beef carcass. Ground beef markets have now taken a significant downturn in the market and this adds to overall lower cutout values. Fed cattle 50% trim was also sharply lower yesterday on softening demand from the grinding sector. Many on the buy side continue to monitor consumer pulls at the retail level, or lack there of, and as such continue to procure beef on an as need basis. Look for a continued lower trend to the beef market into late this week.

Futures Market Situation and Outlook:

February live cattle settled at $83.52 a loss of $.37, April live cattle settled at $86.12 a loss of $.70, and June live cattle settled at $83.75 a loss of $.60. In the feeder cattle pit, March feeder cattle settled at $93.42 a loss of $.57, April feeder cattle settled at $94.60 a loss of $.72, and May feeder cattle settled at $96.45 a loss of $.55. The reported CME feeder cattle index for 2/2/09 was $93.20 a loss of $.15. Live cattle spreads: Feb/April settled at -$2.60 a gain of $.32, April/June settled at $2.37 a loss of $.10, June/August settled at -$.87 a gain of $.07. Feeder cattle spreads: March/April settled at -$1.17 a gain of $.15, April/May settled at -$1.85 a loss of $.17, May/August settled at -$2.02 a loss of $.17.

Yesterdays live cattle volume saw 17,225 contracts trade in the pit and 12,179 contracts trade on Globex. Live cattle open interest declined 486 contracts to come in this morning at 207,224. Yesterday’s feeder cattle volume saw 2,504 contracts trade in the pit and 663 contracts trade on Globex. Feeder cattle open interest declined 89 contracts to come in this morning at 20,976.

Live and feeder cattle futures settled lower on the day yesterday as profit taking from Monday’s rally and ideas the market was a little overpriced kept futures under pressure all day. Until we can see a better demand tone out of the beef market rallies in the futures market are likely to be capped for the balance of this week. With that said though, I don’t know how much we will break either, as I expect to see higher trend to the cash cattle markets develop in the coming weeks. I would expect futures to remain choppy for the balance of the week as we pretty much already have a higher cash fed cattle trade priced in for this week. Support for the balance of the week will continue to be found at $82 in Feb, $85 in April, and $92 in March feeders. We would need to see the market start closing back above $85 in Feb, $88 in April, and $95 in March feeders to negate some of the recent bearishness. Look for a $.10-$.20 higher open to live and feeder cattle futures. 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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