MORNING LIVESTOCK REPORT                Thursday October 29, 2009

LEAN HOGS

The Dec and Feb closed 50 higher yesterday with the deferred contracts about half as strong. Most contracts posted new high closes for the current move which is technically friendly. Yesterday's cash was lower but the late report showed the actual cash prices paid were much closer to steady money. The pork carcass was quoted up 1.34 at 57.54, riding the back of ham market appreciation. How much further the ham market can drive the cutout upward is questionable in my opinion. Ham bookings for Thanksgiving could be completed any day. I have no upside targets and resistance levels are even hard to determine. Average hog weights remains heavy and packers appear to be scaling back on their Sat kill effort. For now the path of least resistance is upward. The Chinese announced overnight that they are dropping their ban on U.S. pork imports due to the H1N1 virus. While this is good news, I'm not expecting the Chinese to return to our pork market in the near term. Fundamentally, to say I don't trust the market (to go higher) is an understatement. Look for a higher early trade.

LIVE CATTLE

Live cattle futures closed lower across the board but prices recovered well off their session lows prior to the closing bell. Strong cash news circulated during the session and brought buyers to the board. Packers paid higher money for cattle in KS (87 cents, up 1) and up to 88 cents in TX, fully 2 cents higher than 86 paid last week. The recovery on the board was rather subdued given the impressive cash news. The board is in the process of moving under the cash market. Basically, Dec futures are expecting a top in the cash market (likely near the current cash price) and further expecting cash weakness to develop by mid December. Beef packers are asking higher money for the wholesale beef but successfully moving beef at higher money appears to be a struggle. Box movement was slow yesterday at only 190 boxes and 70 trim. That's very poor movement for a Wednesday which is typically the largest box movement total of the week (244 boxes and 91 trim last Wed). My clients continue to establish hedges with partial hedges established as far as June. Look for a higher early trade but "look out" if prices turn lower on the day.

If you need help in developing and executing cattle hedging strategies give me a call or send me an email to dennis.smith@archerfinancials.com or 1.877.377.7905.

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