MORNING LIVESTOCK REPORT                       Thursday December 4, 2008

LEAN HOGS

Cash hog prices are called steady to weak for this morning which is not good enough to keep the premium structured board holding at current levels. The cash market was sloppy on Wed with the interior market mostly .50 lower. Lean hog futures sold off on Wed as the trade becomes concerned about sluggish exports moving into the first quarter. News has surfaced late yesterday that Russia has suspended imports of pork from six U.S. facilities, indicating products recently shipped did not meet Russian requirements. This more likely is the "Russian way" of slowing their imports of pork as crude oil revenues dry up. Slowing exports is going to be a problem for the pork industry in the face of global recession. Another lower close in the Feb hogs will likely trip up the moving averages and chase many of the trend following traders out of their long positions. The hog market is also vulnerable to index fund redemptions as/if crude oil prices continue to work lower (as is the cattle market). My spec and hedge customers are short hog futures and/or have established option window strategies and/or bear spreads. My opening call is steady to lower.

LIVE CATTLE

The cattle trade is bracing for a lower cash steer market this week. Just how low is uncertain, I'd guess we'll see trade in the 86 to 87 cent level in the S. Plains. This would be down from 89 to mostly 90 cents paid last week. Live cattle futures posted a new low settlement for the move yesterday which almost always indicates downside follow through. The beef has turned a mess with the choice beef cutout down 2.66 yesterday at 148.75. Box movement was moderate at 225 boxes and 115 trim. The beef was quoted lower at noon on Wed (down 1.88) but weakened further in the afternoon trade. Also, packers appear to be slowing chain speed with the kill for Wed reported at only 113,000, 10,000 below expectations. This is bearish in the short term. The stock market is lower early today and crude oil, once again, is trading lower and into new low territory. Look for a steady to lower open and look for downside follow through today. My next downside target is the 8100 to 8200 range basis the front month Dec futures. Dec options expire on Friday with FND on Monday.

If you need help in developing and executing a livestock hedging program please give me a call or send an email to dennis.smith@archerfinancials.com or 1.877-377-7905.

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