MORNING LIVESTOCK REPORT                     Thursday August 21, 2008

LEAN HOGS

Good morning! Lean hog futures gapped lower on Wed but then spent the reminder of the session recovering the initial losses. The board managed to turn higher in most months but the Oct and Dec closed mixed to lower while the back end finished higher. Strong buyers were noted in the Feb and Apr in tandem with rising corn prices. The action in the hog spreads and the fundamental landscape, however, strongly indicates that hog futures will head lower over the next 30 to 60 days. Cash hogs are expected to be lower into next week. The slaughter pace is expanding rapidly, average hog weights are rising and the pork cutout value has topped. I'm expecting a test of yesterday's lows in today's trading action. My opening call is lower in the Oct and Dec, mixed in the 09 contracts.

LIVE CATTLE

Live cattle futures worked lower on Wed but managed to recover off their lows by the closing bell. A few cattle traded in NE at lower money but it appears the feed lot is not interested in selling any more show list cattle inventory at lower money this week. There are still cattle available on this week's show list. The USDA will issue their cattle-on-feed report Friday afternoon. Traders are expecting higher placements during July (up 6% to up 7%). However, placements during July last year were very small, thus, we're not talking about a large number of cattle being placed. I'm not expecting the report to be bearish. In fact, it's my opinion the market put in a near term low yesterday and my customers are trading accordingly. Supplies of fed cattle are expected to tighten over the next 30 to 60 days. Despite profitable processing margins, this week's kill is running below both last week and last year. My opening call is mixed.

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