MORNING LIVESTOCK REPORT                Monday November 2, 2009

LEAN HOGS

December lean hogs closed lower on Friday with the rest of the board higher. It appeared that traders were unwinding bull spreads, likely taking some profits in Friday's action. The cash market today is looking fully steady which was expected Friday. The weekly hog slaughter came in at 2.294 million hogs, down 3.5% from the same week last year. Friday's pork cutout was down .51 at 58.17. The cutout, however, gained $2.95 last week. The seasonal tendencies appear to be totally backwards in the hog market. Normally you're looking at Dec futures near seasonal lows at this time of year. Today, it appears they could be near a seasonal top. Moving forward, the ham market is due to top out any day. This should pressure the pork cutout from $3.00 to $5.00 when it occurs. It's very unlikely that bellies and loins will "take up the slack" when the hams top out. The index fund reallocation is complete. Look for a mixed tone early in the action today.

LIVE CATTLE

The Oct live cattle contract expired limit down on Friday. Traders could have bought the contract, at a substantial discount to the cash, and delivered the cattle but no one did. Either they weren't prepared to deliver cattle or they knew the cash market would not be near recent prices. The rest of the board closed lower with a substantial build in open interest noted. Total live cattle open interest was up 3,565 on Friday. Some clean up trade was noted in KS on Friday at 87.5, fully steady. There was no trade in TX or NE. Weekly direct trade totals were good last week as packers paid higher money to secure inventory. The beef was quoted slightly lower for the second consecutive session. What is most alarming was the slow box movement reported last week. Look for resistance in the Dec live cattle first at 8620 and then at 8650. I'll be using a move into this range (8620-8650) to sell futures for spec traders and add to hedge positions through various option strategies. I'm expecting a steady at best to more likely a slightly lower cash steer market this week and a lower cutout value during the course of the trading week.

If you're not satisfied with your current brokerage relationship give me a call or send me an email to dennis.smith@archerfinancials.com or 1.877.377.7905.

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