MORNING LIVESTOCK REPORT Friday August 22, 2008
LEAN HOGS
Good morning! Lean hog futures closed mixed on Thursday with the bearish fundamentals capping the rallies in the front two months while the rising grain markets inspired buying in the 2009 hogs. The near term pork situation is looking fairly negative. It's becoming clearly evident that wholesale pork has topped. The hog runs are increasing and average weights are showing daily evidence of rising. On the board, the strength in the bear spreads is a negative indication. The bullish traders are bullish due to the sharp discount which the Oct and Dec hold relative to the CME lean hog index (88.43). However, the board is running a sharp discount for a reason, cash is likely to break hard over the next 30 to 40 days. I have both my spec traders and hedge customers trading from the short side in the Oct and Dec futures. Look for a test of Thursday's lows early in today's action. In the face of lower cash for today and expectations for lower cash next week, look for a lower open today led downward by the Oct futures.
LIVE CATTLE
Live cattle futures spun higher on Thursday after trading slightly lower in the early action. We tried to buy the market yesterday but just missed getting our orders filled. Lower open interest resulting from Thursday's rally indicates much of the buying was inspired by short covering. Additional cash trading occurred yesterday at 99 cents, steady with the trade from Tuesday. The beef has turned a bit sloppy this week but overall I'd expect the beef to hold. We're moving into a period of sustained tighter supplies of fed cattle. Also, we're entering a period of improving demand for beef. The USDA will issue their cattle-on-feed report today at 2:00. I'm not expecting the report to be bearish. Look for a two-sided trade today but weakness early in the session likely will be greeted with large buy support. The strong close in the Aug inspired a rash of deliveries with 59 new deliveries posted. The oldest long jumped up to July 10th. My opening call is steady to lower across the board. Look for the Oct-Jun contracts to likely out- perform the Aug today.
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