MORNING LIVESTOCK REPORT                   Thursday November 12, 2009

LEAN HOGS

Lean hog futures opened near steady on Wed, staged an 80 point rally early in the session for no apparent reason, and then proceeded to leak back toward unchanged into the closing bell. Open interest was up 373. Today marks the fifth and final day of the Goldman Roll. Cash hog prices are looking weak to lower today on the heels of yesterday's drop in the pork cutout value. Hogs on the electronic trade are lower, currently trading from 30 to 60 lower. I would not be surprised to witness a large break in futures today. The first line of major support should be evident near 5400 in the Dec hogs. The 40-day moving average comes in at 5310. It appears the product is topping, especially the hams. However, loins look "very weak" given the cutout a lower feel for the next few weeks.

LIVE CATTLE

Live cattle futures closed lower to sharply lower yesterday with settlements near session lows and very close to fresh contract lows in the Dec. The electronic trade is lower which fresh contract lows scored in the overnight trade. Live cattle futures volume was huge yesterday, one of the largest volume sessions on record at just over 94,000 contracts. Total open interest was up 1,080. Huge volume, definite direction, rising open interest and fresh contract lows today is all bearish. The negative technical situation appears to be equally matched up with negative fundamental developments. I've heard, but unconfirmed, that cattle have traded in the S. Plains for as low as 84 cents. Cattle traded in large numbers yesterday in NE at $132, fully $2.00 lower than last week. Beef packers have been processing cattle at a loss and now the wholesale beef market is beginning to slip away. The result could be a sharp drop in the cash market in order to recoup margins, which appears to be what the board is anticipating. The next level of support for the Dec live cattle should develop between 8200 and 8155. I'm expecting this level to be tested in the near term.

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