MORNING LIVESTOCK REPORT               Friday November 20, 2009

LEAN HOGS

Lean hog futures closed lower yesterday but the market finished off session lows with no technical damage sustained. Cash hog prices were quoted lower yesterday but actually finished near steady money for the second consecutive day. Today's cash market is called mostly steady. Overall, the cash market continues to behave stronger than what I've expected. The pork cutout has been lower this week but certainly not a disaster. Lean hog futures remain in their uptrend. The Dec is trading about 200 over the hog index. Production remains large but demand thus far has been up to the task. I question the board premiums, however. I have no spec positions in hog futures at this time. I'm holding the Dec 52 puts (paid 50 points) for several of my spec traders. The USDA will issue their monthly cold storage report today at 2:00. It likely will confirm a record large amount of pork in frozen storage. Look for a two-sided trade today. The Dec and Feb have been propped up by index fund buying this week.

LIVE CATTLE

The Dec and Feb closed higher yesterday, likely attracting short covering type of buyers. The open interest in cattle futures was down over 3,300 cars, at least partially confirming my idea of short covering. The cash trade is likely finished for the week with lower money paid in all of the direct trade areas. The beef, following the very active box movement on Wed, was quoted lower on Thursday. It appears that Wed's surge in volume was last minute holiday business. The choice beef was down 1.14 at 139.61. Offers of wholesale beef were described as moderate to heavy. Unlike the hog market, cattle futures appear to be locked in a downtrend. I'm expecting the downtrend to resume today ahead of the cattle-on-feed report. The USDA will issue their cattle-on-feed report today at 2:00. The trade is expecting a negative report showing placements above last year and the movement of cattle out of the feed yard to the slaughter house below last year, leaving total on-feed inventory above year ago levels. My clients, both spec and hedge, are short Dec futures.

If you're interested in opening an account to trade livestock and/or grains send me an email to dennis.smith@archerfinancials.com.

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