MORNING LIVESTOCK REPORT                   Tuesday November 10, 2009

LEAN HOGS

The hogs rallied late yesterday in what appeared to be support driven from the rally in corn prices. Any support from the grains may not be present today. The USDA report appears bearish toward soybeans and wheat and likely disappointing to the bullish corn trade. Back to the hogs; cash bids are looking fully steady for early today. It appears the cutout is "hanging on" before topping. We'll see. The pork cutout was quoted up .13 at 58.76. However, the sheet seems to be describing a weakening product situation which has not been reflected in the cutout calculation yet. Hams, bellies and loins were all quoted soft to lower on the sheet despite the higher cutout value. The USDA left their projections for pork production for this year and next unchanged. However, they lowered pork exports slightly for this year while leaving their export projection for next year unchanged from last month. Bottom line, I'm expecting a break in the hog futures market this week. What I'm not clear on is whether we'll experience simply a downside correction or a more meaningful move lower that will indeed challenge the current uptrend.

LIVE CATTLE

Live cattle futures closed near steady levels yesterday and the electronic trade early today remains near steady levels. Open interest continues to leak out of live cattle futures. Total open interest from yesterday was down 2,426. The USDA has increased their beef production estimates for this year by 70 million lbs and they've increased their projection for next year by 110 million lbs. However, the USDA has also increased export estimates for this year by 95 million lbs and at the same time reduced beef import estimates by 45 million lbs. This is no doubt a direct function of the lower dollar. Export projections for next year were increased by 80 million lbs with imports lower by a similar amount (80 million lbs). This information should be supportive to the back end of the live cattle futures market. The Dec contract will be influenced by the near term fundamentals. This includes the idea of peaking beef demand and supplies of fed cattle that appear to be about to increase. I'm expecting some pressure in today's trade.

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