MORNING LIVESTOCK REPORT                     Wednesday October 8, 2008

LEAN HOGS

The U.S. Federal Reserve, Bank of England, European Central Bank and the Bank of China all lowered interest rates by a half percent early today. This global reduction in rates turned the stock market from sharply lower to steady/higher around 6:30AM Chicago time.

Cash hog prices were mostly higher yesterday after being called mostly lower. Also, the cash was called lower for today but appears to be coming in steady to higher. The performance of cash hog prices over the last two weeks has been impressive. The board remains discount in the first three contracts. There's other positive news to report today in the pork market as well. First, average hog weights remain 2.2 lbs below last year. It's my opinion that producers have been moving hogs ahead of schedule since mid-summer. Second, the belly out-of-town report showed an OUT movement of 1.3 million lbs compared to an IN movement last year of 646,000 lbs. This report shows good demand for bellies given the fact that last week's kill was unchanged from last year. Third, packers continue to work through the large hog numbers with the cutout holding fairly well. Yesterday's kill was 435,000 and the pork cutout was down .57 at 72.33. Look for a steady to higher market today.

LIVE CATTLE

Live cattle futures closed higher across the board on Tuesday but the board finished well off the session highs. The market appears extremely oversold and likely ready to hold, maybe bounce. I'm not advocating long positions in the futures but I am moving my clients into bull call spreads that have profit potential with limited, defined risk. Stability in the stock market, should it develop over the next week will go a long way toward establishing a bottom in many commodities, especially the meats. There was no cash steer trade yesterday. The kill came in at 127,000 compared to 128,000 last year. Last week's kill was down 6% from last year. This week will likely be down as well. The beef was down 1.10 at 155.06. Movement was moderate at 207 boxes and 66 trim. I'm looking for a mixed performance in the live cattle today.

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