February 5, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

The cash feedlot trade was quiet yesterday as bids of $80/$1.29-$1.30 remain dollars apart from asking prices of $84-$85/$1.35. I wouldn’t expect to see much business transpire before Friday as packers have inventory around them into next week and of course they are losing margin daily as the beef market continues to erode, which will keep them less aggressive in this weeks price negotiations. We will have to see what happens, the board right now is implying a steady to higher fed trade for this week, however with the way it acted yesterday it feels like we may go and test downside support today or Friday. Fat cattle in Sioux Falls, SD yesterday were bringing mostly steady money on the beef cattle and $1-$2 higher on the Holsteins. The majority of the beef fats in Sioux Falls yesterday were bringing $79-$82 with the Holsteins bringing $70-$74. Slaughter cows continue to bring higher money across the country with cutters and boners bringing $40-$50 and the breakers bringing $49-$52. Feeder cattle auctions continue to turn higher transactions pretty much everywhere you look in the country. El Reno, OK had 7,000 head on offer yesterday with that market being called $1-$3 higher. In El Reno yesterday, the 7 weight steers brought mostly $92-$97 and the 8 weights brought mostly $88-$95.

Cash Beef Situation and Outlook:

Yesterdays kill was estimated at 122,000 head, which would be even with a week ago and 4,000 head above the same day a year ago. The week-to-date kill now stands at 371,000 head, which would be 3,000 head below the same period a week ago with the industry looking for a 625,000 head production week. The beef market was lower yesterday with the choice cutout closing $.91 lower to settle at $140.21 and the select cutout closing $.47 lower to settle at $136.90. Sales volume was good with 420 loads of beef sold (162.75 loads of choice fab cuts, 144.87 loads of select fab cuts, 42.41 loads of trim, 70.14 loads of grinds). The choice/select spread settled at $3.30 a loss of $.44.

The beef market was lower yesterday on continued buyer resistance to current price levels. Peeled tenders and ground beef supplies are said to be outpacing current demand and as such these were the items that received the deepest discounts yesterday. With that said though, yesterday’s lower market did entice some to take on extra inventory of chuck rolls and top butt’s as evident by yesterdays increased load count of choice beef items. The beef market still feels heavy and we can expect to see lower prices into the first of next week. Beef exports for the week of January 23-29, 2009 are as follows:
Beef: Net sales of 6,700 MT were primarily for Mexico (4,300 MT), Canada (1,000 MT), South Korea (600 MT), the Netherlands (300 MT), and Taiwan (200 MT). Exports of 8,000 MT were mainly to Mexico (3,000 MT), Canada (1,200 MT), South Korea (1,100 MT), Vietnam (900 MT), and Japan (800 MT).
Futures Market Situation and Outlook:

February live cattle settled at $83.17 a loss of $.35, April live cattle settled at $85.95 a loss of $.17, and the June live cattle settled at $83.67 a loss of $.07. In the feeder cattle pit, March feeder cattle settled at $93.42 steady on the day, April feeder cattle settled at $94.32 a loss of $.27, and the May feeder cattle settled at $96.42 a loss of $.02. The reported CME feeder cattle index for 2/3/09 was $93.32 a gain of $.12. Live cattle spreads: Feb/April settled at -$2.77 a loss of $.17, April/June settled at $2.27 a loss of $.10, and June/August settled at -$.95 a loss of $.07. Feeder cattle spreads: March/April settled at -$.90 a gain of $.27, April/May settled at -$2.10 a loss of $.25, May/August settled at -$2.27 a loss of $.25.

Yesterdays live cattle volume saw 12,500 contracts trade in the pit and 7,563 contracts trade on Globex. Live cattle open interest gained 598 contracts to come in this morning at 207,843. Yesterday’s feeder cattle volume saw 1,811 contracts trade in the pit and 689 contracts trade on Globex. Feeder cattle open interest declined 202 contracts to come in this morning at 20,765.

The futures market was very quiet yesterday as participants await fresh inputs regarding this weeks cash fed cattle trade. Monday’s rally in the market was a bullish reaction to the cattle inventory report and pricing in a steady to higher fed cattle trade for this week. Now, as we get towards the end of the week, the market has to justify whether or not the fed cattle market will be higher, and as such has started to drift lower. It looks like we will be lower on the open this morning, and the market feels heavy coming out of yesterday, so I wouldn’t doubt we trade lower and test some support under the market at $82 in Feb and $85 in April. March feeders should have a little support at $92 for today, and whether these support areas can hold, will be key in determining cash stability this week. 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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