MORNING LIVESTOCK REPORT                       Tuesday November 3, 2009

LEAN HOGS

Hogs closed higher to sharply higher on Monday with the Dec and Feb leading all advances, finishing 100 higher. Nearly all contracts finished into new recent highs as the market remains technically very strong. Also strong yesterday was the cash hog market which finished the day sharply higher out west. The early cash call for today is fully steady. The hog slaughter was reported at 428,000 and the cutout was up .51 at 58.68. News circulated yesterday after the pit session closed that a commercial hog herd in Indiana was confirmed positive with the H1N1 virus. The hogs have fully recovered from the flu. Also, the news appeared to have little, if any impact on the electronic futures trading. My concern moving forward is that ham prices are due to top out any day. Hams were quoted sharply higher yesterday in a very light test (total of 4 loads). The recent strength in the pork carcass has been solely due to strength in the ham market. The bellies and loins have not been contributing to the appreciation of the pork carcass. If hams top the cutout is likely to tumble. Thanksgiving is only three weeks from Thursday. Holiday business should be completed by the end of this week. Look for a two-sided trade today.

LIVE CATTLE

Live cattle futures managed to close higher yesterday on the heels of what appeared to be a "fluke" expiration of the Oct contract on Friday. News at midsession yesterday that a packer paid 88 cents for some cattle in TX lent support to the board. However, it appears the packer has asked for extra time to pick up the cattle. Traders should be concerned by the lower than expected kill yesterday, reported at just 119,000. Also, while the cutout was quoted higher, up .80, the volume of box movement was less than impressive. It's my opinion that beef demand is not going to be good enough to sustain current prices in the wholesale beef. Technically, look for solid resistance in the Dec cattle in the 8650 to 8680 range. The 40-day moving average comes in at 8580. A close below this level is negative and a close below last Friday's low (8520) is real negative. I'm trading from the short side for my hedge customers.

If you're not satisfied with your current brokerage relationship give me a call or send me an email to dennis.smith@archerfinancials.com or 1.877.377.7905.

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