MORNING LIVESTOCK REPORT                       Wednesday August 20, 2008

LEAN HOGS

Good morning! Lean hog futures started out higher on Tuesday but the pit session failed to challenge the electronic highs and prices drifted lower into the close. Most settlements were near their session lows. The fundamental developments of which I've been discussing (expecting) all appear to be coming together at once. First, average hog weights appear to have bottomed. Second, the hog slaughter is showing rapid signs of expanding, indicating we're beginning to wade through the fall hog runs. Third, the trade is beginning to realize that exports will likely begin to slow into the fourth quarter. And fourth, the pork cutout is showing clear signs of a top. Tuesday's kill was very large at 434,000 and the pork cutout was down 1.88 at 92.12. I'm expecting a gap lower open followed by a lower to sharply lower close.

LIVE CATTLE

Live cattle futures stumbled lower on Tuesday as the chart pattern turns negative. On top of the negative technical picture, the cash market traded at 99 cents in TX, down one cent from last week's trade. There were no trades in KS or NE with asking prices still steady to higher compared to last week. The beef market held steady on average box movement. I'm expecting live cattle futures to work lower into the cattle-on-feed report which will be released Friday afternoon at 2:00. At this time I have no positions or desire to trade in the live cattle. My opening call here is steady to slightly lower.

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