MORNING LIVESTOCK REPORT                    Friday November 14, 2008

LEAN HOGS

Lean hog futures closed higher across the board on Thursday led by the Dec contract. Being led by the Dec is fairly impressive given that Dec futures are now trading over the latest CME lean hog index. The board is anticipating a nice turn upward in the cash hog market. Today's call, by the way, is mostly higher as packers actually seem to still be expanding the size of their Sat kill schedule. They would not be doing this if there wasn't demand coming to the pork market. Thursday marked the end of the Goldman roll. I also noticed that total lean hog open interest was higher from yesterday's higher close (up 3,846). I'd consider this, in the short term, as somewhat friendly. The pork cutout was quoted down 1.17 on Thursday at 56.96. However, the cutout is still higher for the week. It appears the weekly kill, despite an expanding Sat kill effort will come in below last year. If this is correct, the weekly slaughter will have come in below last year in three out of the last four weeks. It appears a trend is developing here, a trend that should last for months. Sep pork exports were reported at 116.4 MT, up 44% from last year. However, export shipments to Russia, China and Mexico were down from Aug indicating the export boom has run its course. The export boom this year prevented a disaster in hog prices this fall. My opening call is near steady but I'm expecting another rally in lean hog futures today.

LIVE CATTLE

Live cattle futures staged a "wild ride" on Thursday as futures traded sharply higher early and then broke hard in tandem with the intraday break in stock prices and the plunge in crude oil prices to a new low for the move. However, the stock market started a recovery off the lows just prior to the closing bell for cattle as did the crude oil. Cattle futures finished near unchanged and near the middle of the daily range. After the closing bell stocks rallied sharply as did crude oil. Thus, the opening call for live cattle today is up 50 to 80. The slaughter continues to come down and is running below both last week and last year. The beef cutout was up .12 at 157.33 on moderate box movement reported at 220 boxes and 72 trim. If the cash steer market trades at steady money today, 94 cents, in the S Plains I'd expect a rally on the discounted board. Sep beef exports, at 67.3 MT were up 64% from last year. Business to Mexico however, our biggest beef customer was down 18% from Aug. Given some reasonable stability from the outside markets and I expect a rally in live cattle futures today.

If you're a pork producer and you'd like to see my special report on hedging hogs please give me a call at 1.877.377.7905 or email me at dennis.smith@archerfinancials.com.

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