MORNING LIVESTOCK REPORT                           Monday August 18, 2008

LEAN HOGS

Good morning. Lean hog futures closed lower across the board on Friday with general weakness noted in all contracts. The trade is anticipating several developments including increasing hog weights, expanding slaughter and production over the next 30 to 60 days and the real possibility that export business will slow in the face of a strengthening dollar. That pretty well sums up the fundamental situation facing the hogs in the next few weeks. In the very short term, the pork trade remains historically high priced with the pork cutout Friday up .52 at 94.41, record high. However, the major pork primal cuts were very lightly tested with heavy weight hams steady while bellies and loins were not tested. I'm expecting the product to top this week. Look for a steady to lower cash hog tone to begin the week. My opening call is steady to weak.

LIVE CATTLE

Live cattle futures broke hard on Friday with the trade nervous about the strong dollar and disappointed with the flat performance in the cash steer trade. While the volume of trade is not confirmed, it appears that large numbers of cattle traded in the S. Plains at steady money with the previous week ($1.00/lb). This proved to be flat out disappointing to the trade (including myself) which had been expecting a higher cash market all week. The live cattle futures market also experienced a massive strengthening of the basis as the premium structured futures market loses it premium to the cash. Indeed, the seasonal tendencies indicate that normally the cash, cutout and futures market tends to bottom at this time of year. This appears to be "on track" for the cash and cutout, but not accurate for the futures market which built up a massive premium over the summer months. I was stopped out of length in the Oct live cattle on Friday's lower performance. I'm now proceeding very cautiously toward the live cattle. Given the idea that Friday's drop was overdone, I'm going with a higher open today.

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