MORNING LIVESTOCK REPORT                    Wednesday November 19, 2008

LEAN HOGS

Lean hog futures finished slightly higher in the Dec and Feb on Tuesday which felt like a victory compared to the sharply lower live cattle performance. Aggressive slaughter, indicating decent demand for pork continues to allow the industry to "move through" the large hog numbers. In fact, numbers appear to be peaking with weekly slaughter running below last year in three out of the last four. The pork cutout was up .99 at 56.70 with evidence surfacing that cheap pork is attracting demand. The weekly belly out-of-town report showed a 1.536 million lb IN movement compared to an IN movement last year of 3.827 million. Belly stocks now stand only 8% above last year after running 45% to 50% above last year over the last several months. The USDA will issue a monthly cold storage report Friday at 2:00. Some of my spec traders are looking at the Feb hogs from the long side. My technicians tell me we need a close over 5660, last week's high in the Dec hogs to give the market the look of a bottom. I'm thinking it might happen. My opening call is up 25 to 30.

LIVE CATTLE

Live cattle and feeder cattle futures closed sharply lower with fresh contract lows scored in most contracts. What a mess as the trade factors in a worst case demand for beef products over the next several months. The board is trading at a sharp discount to last week's cash activity which was 93 cents/lb. Dec and Feb have already factored in a six cent decline in the cash with yesterday's settlement. There was no cash steer trade reported yesterday. The beef market was quoted higher with the choice beef cutout up .10 at 157.49. The slaughter was above expectations with the weekly kill actually running above last week's pace. The USDA will issue their monthly cattle-on-feed report Friday afternoon at 2:00. This sounds crazy, but the report, from a supply standpoint should be friendly. I'm expecting Oct placements to be down as much as 10% from last year. Total cattle-on-feed supplies, as of Nov 1 likely will be at a five year low. I have no spec position or spec recommendations at this time. My hedge customers are holding puts which have suddenly become valuable. For those hedgers who are long puts or long puts and short calls, I'm recommending to go in and sell some deep out-of-town money puts to establish a very attractive put spread. My opening call is mixed.

If you're a livestock producer and you need help developing and executing a hedging plan please give me a call or send an email at dennis.smith@archerfinancials.com  or 1.877.377.7905.

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