MORNING LIVESTOCK REPORT                   Wednesday November 4, 2009

LEAN HOGS

Lean hog futures closed mixed on Tuesday with no definite trend. The market remains locked in a solid uptrend. Cash hog prices yesterday turned soft but there was certainly no disaster in the cash market. The cash outlook today is looking fully steady to higher. The electronic hogs are trading slightly higher in the early action, led by the most active Dec contract. Dec hogs are trading about 350 points over the latest CME lean hog index. The pit session Dec hog chart is looking like a possible top. I'm encouraging my spec traders and hedgers to purchase out-of-the money Dec puts. I'm expecting a top in the hams resulting in a sharp drop in the pork carcass value. I'm also expecting average hog weights to begin increasing again, further adding to total production. Pork production was record large in Aug and Sep with the Oct final production figure likely coming in just below a record. Pork demand has been up to the task thus far. However, it's not normal for markets to move straight up without any major corrections. Look for a steady to firm early trade.

LIVE CATTLE

Live cattle futures closed lower across the board yesterday despite widespread expectations that cash prices would be strong again this week. Bids near 87 cents are being countered with asking prices at 89 and 90 cents. The cash market traded in volume last week at 88 cents with about 5,800 head moving on Monday of this week in TX also at 88 cents. However, one must remember that we're trading cattle for delivery in December. The "futures market" is anticipating that cash steer prices will be in retreat by late December. A combination of increasing supplies of finished cattle, continued heavy weights and peaking beef demand are responsible for the changing attitude and basis. Look for strong resistance on rallies approaching 8630 to 8650 in the Dec cattle. A close below 8520 would be a negative signal and target the Dec contract to a test and likely penetration of the contact low of 8340. My opening call is flat to lower.

If you're interested in opening an account to trade the livestock and/or grains give me a call or send me an email to dennis.smith@archerfiancials.com or 1.877.377.7905.

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.