MORNING LIVESTOCK REPORT                          Tuesday August 26, 2008

LEAN HOGS

Good morning! Lean hog futures felt a bit over sold on Monday and after working lower in the early trade, taking out support defined at the 40-day moving average and trading to their lowest levels for the month, prices recovered. However, I'd rate the recovery as very anemic. The pork fundamentals continue to erode under the weight of expanding production and possibly peaking demand. A sharply higher U.S. dollar today will certainly fuel the idea that pork exports may have peaked. Cash hog prices were sharply lower yesterday and they're expected to remain under pressure today and likely for the remainder of the week. The hog slaughter was large at 431,000 and the pork cutout value was sharply lower, quoted down 1.14 at 87.72. I'm expecting a lower open today and I'm not expecting the market to recover.

LIVE CATTLE

Live cattle futures closed slightly higher on Monday in a light volume session reported at only 13,602. Open interest was down 506. "Never sell a quiet market short" is the old saying which applies in this case, in my opinion. Supplies of fed cattle continue to tighten and the cattle-on-feed report did nothing to change that bullish fundamental supply situation. Demand for U.S. beef in the current economic environment is debatable; however, beef demand always improves into the fall season. Also, our renewed beef export business to booming with S. Korea coming on strong. Yesterday's kill was aggressive at 127,000 and last week's kill was revised upward by 6,000. The choice beef cutout was up .84 at 161.62. Finally, the choice beef gained on the select beef with the choice/select spread moving out to $7.20. I'm expecting a rally in live cattle futures into the middle part of Sep.

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