February 9, 2009


Good Morning from the Chicago Board of Trade,

Cash Cattle Situation and Outlook:

We left last week with a fed cattle market that trades mostly $1-$2 higher in the Nebraska and Iowa at $1.31-$1.32, mostly $1.31 on moderate movement. Cattle trading turned active in Colorado, Kansas, and Texas late Friday afternoon at mostly $83 live and $1.31 dressed, which would be $1 higher on what looks to be moderate movement. I will report on actual sales volumes tomorrow morning once everything is counted and reported to the USDA. For the week, feeder cattle markets were mostly $1-$4 higher, with the biggest gains being found in cattle weighing less than 600 lbs. Slaughter cow markets were mostly $1-$3 higher. Looking into this week, the fed cattle market will be dictated by market psychology and early week trading activity in the stock market and beef market. Feeder cattle markets will be supported early in the week as buyers look to secure inventory ahead of perceived shrinking supplies of replacement cattle. Slaughter cows should be steady to higher, although increased slaughter of dairy cows will be noted.

Cash Beef Situation and Outlook:

Last weeks cattle slaughter was estimated at 622,000 head, which would be 9,000 head smaller than the previous week and included a Friday kill of 120,000 and a Saturday kill of 11,000. For the week, choice beef values declined $4.92 and select beef values declined $4.34 on moderate demand and increased movement. Friday saw further losses in the beef complex with the choice cutout closing $1.98 lower to settle at $136.87 and the select cutout closing $1.38 lower to settle at $133.96. Sales volume on Friday was good with 375 loads of beef sold (150.46 loads of choice fab cuts, 99.39 loads of select fab cuts, 37.41 loads of trim, 88.15 loads of grinds). The choice/select spread settled at $2.92 a loss of $.60.

The beef market was under pressure all last week on over production and slackened demand due to winter doldrums and economic concerns. The biggest losers on the week were chuck and loin cuts as export demand and consumer demand for high priced steak cuts remains dull. Ground beef values also came under pressure last week as demand post Super Bowl weekend declined. The only bright spot in the beef carcass was choice rib cuts were we saw moderate price strength by the end of the week. Looking into this week, I would expect to see packers cut kills in an attempt to support beef prices. This could lend some support to the beef complex late in the week or early next week, however until then I would expect to see beef trade on the defensive for the first part of the week.

Futures Market Situation and Outlook:

For the week, February live cattle gained $1.65 to settle at $83.65, April live cattle gained $1.60 to settle at $86.70, and June live cattle gained $1.62 to settle at $84.07. In the feeder cattle pit for the week, March feeder cattle gained $3.35 to settle at $94.35, April feeder cattle gained $3.20 to settle at $95.52, and the May feeder cattle gained $2.93 to settle at $97.25. The reported CME feeder cattle index for 2/5/09 was $93.93 a gain of $.44.

Fridays live cattle volume saw 20,963 contracts trade in the pit and 13,005 contracts trade on Globex. Live cattle open interest declined 7,779 contracts to come in this morning at 203,305. Friday’s feeder cattle volume saw 4,140 contracts trade in the pit and 1,640 contracts trade on Globex. Feeder cattle open interest gained 538 contracts to come in this morning at 21,705.

Live and feeder cattle ended the week with moderate gains, with most of the price strength coming early in the week in reaction to the friendly cattle inventory report. We pretty much traded sideways the rest of the week awaiting news on the cash trade, which as we can see came in higher. Looking into this week, I would imagine that we trade in tandem with the equity markets, which as of this writing, are trading modestly lower. Other factors affecting trade this week will be a pending announcement over a dairy herd buyout and first notice day for deliveries against the February live cattle. Support and resistance numbers I have for this week are as follows: Support Feb live, $81.35, April live, $84.47, March feeders, $90.92. Resistance Feb live, $85.25, April live, $88.37, March feeder cattle, $97.02. Look for a mixed 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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