MORNING LIVESTOCK REPORT                  Thursday November 5, 2009

LEAN HOGS

Lean hog futures closed slightly higher yesterday with the exception of the Feb which finished slightly lower. The action was relatively subdued despite a very strong cash market. Cash hog prices finished the day sharply higher in the west and steady to higher in the east. Packers continue to look for hogs and have been willing to bid strong to keep the animals moving. The pork cutout was quoted up .23 at 59.34. The value of the pork carcass has reached its highest level since late July. For the moment everything looks great in the pork fundamentals. However, a three of items caught my eye this morning. First, despite what appears to be stellar demand and profitable processing margins, it appears that packers are scaling back on the Sat kill plans. Why? Second, I'm now expecting average hog weights to begin increasing. And third, looking at the pit session Dec hog chart shows a topping pattern. In the face of a steady to higher cash hog call, look for a steady to higher early trade today in lean hog futures.

LIVE CATTLE

Live cattle futures rallied to resistance levels on Thursday but prices pulled back slightly into the closing bell. I define resistance in the Dec as the 8650 to 8700 level. The recent high of 8792 won't be challenged in my opinion. Eventually, I'm expecting the market to break down technically and test the contract lows (8430). The cattle market is in the middle of a major transition; moving from current tight supplies to more plentiful numbers and at the same time the market is likely experiencing peaking beef demand. Recent holiday bookings have been respectable but this round of purchasing is likely nearly complete. Futures have dropped well off recent highs and have begun trading on either side of their 40-day moving averages. The basis has strengthened during this process with Dec futures now trading under the cash. Look for a two sided trading affair today.

If you would like a free two-week trial to my evening livestock wire give me a call or send me an email to dennis.smith@archerfinancials.com  or 1.877.377.7905.

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