The cattle market has been liquidating since July, as large speculators bailed. That took the bullish steam out of the market, but left commercials net long. And long in record numbers. In fact, commercials have pulled a market U-turn over the past three months, reversing a net short position of 26,000 contracts to now stand net long by better than 22,000 contracts.

There's still some work on the upside needed to confirm that a low's been put in, but relatively low placements of cattle on feed point to constrained supplies heading into 2009 against a background of robust demand.

CME Live Cattle (Dec. '08)

Working against these bullish fundamentals and technicals is the credit crunch which makes it more expensive for producers to borrow the capital needed to purchase feed and pay salaries. Bankers are pulling in their, um, horns, demanding more collateral and raising rates.

If the current thaw in the lending markets unclogs the capital blockage, ranchers should fare well as the market aims for a summer 2009 price objective of $1.30.

Investors who don't use futures can gain concentrated live cattle market exposure through three exchange-traded notes in the U.S.: the ELEMENTS MCLX Livestock ETN (AMEX: LSO), the iPath Dow Jones-AIG Livestock ETN (NYSE Arca: COW) and the E-TRACS Bloomberg CMCI Livestock ETN (NYSE Arca: UBC). Each of the notes track the performance of live cattle and lean hog futures, but the ELEMENTS note, at 70%, provides the biggest dollop of cattle exposure.