MORNING LIVESTOCK REPORT                Friday September 3, 2010

LEAN HOGS

Good morning.  Cash hog prices are expected to show stability today and possibly firm up next week. What we noticed this week as the pork packer throttled the cash hog market; hog receipts totally dried up. Packer processing margins are the best they've been in eight years, they have no incentive to completely shut down the hog runs. The fact that packers are able to keep good margins around them is long term bearish as we get into the fall hog runs. However, in the short term, say the next couple of weeks, it appears that both cash and futures can work higher.

LIVE CATTLE

Live cattle futures posted a technically impressive and bullish performance on Thursday. The Dec, Feb and Apr contracts posted fresh contract highs and new high settlements. This typically indicates additional upside action. The path of least resistance is upward. What I mean by this is; funds come in and buy the market but at this (strong) basis there is very little commercial and hedge type selling resting above the market. This results in technical buy paper driving prices higher to sharply higher to get their orders filled. As previously stated many times, I'm bullish from both a technical standpoint and bullish from a long term fundamental standpoint. Open interest on yesterday's rally was up 4,200 contracts. Call me with questions.

If you're not satisfied with your current brokerage relationship, give me a call or send me an email. dennis.smith@archerfinancials.com  877.377.7905

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