MORNING LIVESTOCK REPORT                   Monday August 25, 2008

LEAN HOGS

Good morning! Lean hog futures finished Friday on a low note led downward by the lead Oct contract. I'm expecting additional pressure in the cash hog market early this week. Last week's hog slaughter came in very large at 2.231 million, up 7% from last year. Anticipate another large kill this week ahead of next week's shorten slaughter due to the Labor Day holiday. The wholesale pork has topped. Friday's cutout was down 1.45 at 88.86. Downward pressure was noted in most of the retail pork cuts with bellies not established and hams mostly steady. The monthly cold storage report did not contain any information to turn hog prices strong this week. Higher grain prices right off the bat today will contribute to active bear spread activity; buying the 2009 contracts and selling the Oct and Dec futures. My opening call is flat to lower in the Oct and Dec, steady to higher in the Feb through Jun lean hog futures.

LIVE CATTLE

The cattle-on-feed report contained friendly to bullish information for the live cattle market today. The placements of cattle into the feed yards was not nearly as active as many traders feared. Placements were up 2% instead of up 6% as expected by most traders. Also, the placement rate last year was historically small, thus, this year's placements represent a small number. The report does nothing to change the fact that supplies of fed cattle are going to get tight this fall. Last week's kill was small, reported at just 667,000, down 3.5% from last year and down 2% from the prior week. The choice cutout was down Friday, quoted at 160.78, down .74. Finally, there were only 3 new deliveries posted against the expiring Aug live cattle futures. All 59 deliveries from Thursday were stopped, indicating strong demand for the live cattle. I'm expecting a higher cash market when it breaks loose this week and look for a higher open in live cattle futures. My opening call is up 40 to 60 in the Aug, Oct, and Dec. Steady to slightly higher in the Feb through Jun.

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

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