Lean hogs closed sharply higher across the board for the third consecutive session. Again, for the third day the market was absorbing large fund type buying thought to be a combination of index fund reallocation buying, trend following fund short covering and new trend following fund buying (establishing long positions). The speculative money has completely overwhelmed the hog pit and driven prices wildly higher in the absence of any spectacular fundamental news. The cash hog market has been soft to lower on Monday and Thursday while firm to higher on Tuesday and Wednesday. The slaughter remains large although some say that maybe, just maybe supplies are peaking. The pork carcass value has lost .93 over the four day period. Pork packer processing margins have narrowed this week reflecting a smaller Sat kill effort. Finally, open interest on the surge in prices yesterday was down 682 contracts with large declines posted in the Oct and Dec. The short traders in the Oct and Dec have been blown out of positions. I'm expecting keen selling interest in the Dec hogs on either side of 5400 today given the lack of bullish fundamental news developments this week. Look for a two sided trade today. Assuming we open higher I won't be surprised to see a lower close.

Live cattle futures closed mixed on Thursday with the expiring Oct lower while the rest of the board managed to close slightly higher. The Oct contract has been hampered by large deliveries this week. However, late yesterday there were no new deliveries posted. Also, of the 155 notices that were retendered all were demanded at the $1.00 discount. This seems to have taken some pressure off the expiring Oct contract. Oct futures appear to have held key weekly support as well which I've defined at 8150-8200. The beef was lower yesterday but movement of the boxed beef was good at 263 boxes and 98 trim. If the pressure is off the expiring Oct contract I suspect the whole cattle board can and likely will stage a short covering rally today. We'll see. My opening call is higher in the Oct and fully steady to firm in the deferred cattle contracts.

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