MORNING LIVESTOCK REPORT                  Friday October 2, 2009

LEAN HOGS

Lean hog futures started out higher yesterday but closed lower. The Dec contract, as expected, tested the lows from the previous session (4855) but managed to recover slightly above this level into the closing bell. The futures were lower but the cash market was higher with the interior quotes as much as up 2.00. Evidently export ham business continues to develop and is keeping this market from breaking down severely. Yesterday's cutout was up 2.05 on a sharp upward adjustment in ham values. Looking at the product over the four day period, however, shows the value of the pork carcass is down .42 for the week. Eventually, I'm expecting the aggressive production rate to overwhelm demand and drive prices lower. Look for a flat to lower open by the time the opening bell rings. I'd consider the outside market influences a bit negative today.

LIVE CATTLE

Live cattle futures broke hard on Thursday with severe technical damage sustained. On the heels of the Wed outside day higher close the market performed an outside day lower close yesterday. The cash market broke loose at lower money in all of the direct trade areas. Just when supplies are reaching their tightest levels the market is breaking down. I'm working aggressively with my hedge clients to secure some protection against a further slide in prices, which looks inevitable. The beef cutout continues to drop with heavy weight cattle a real problem. The unemployment report showing larger job losses in Sep than expected is not going to help today. Look for a flat to lower open.

If you need help in developing and executing a cattle or hog hedging program please send me an email at dennis.smith@archerfinancials.com or 1.877.377.7905.

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