MORNING LIVESTOCK REPORT               Wednesday March 10, 2010

LEAN HOGS

Hog futures closed lower across the board on Tuesday with the summer hogs attracting the largest selling pressure. Open interest was up by 1,690 contracts on the lower performance. The early electronic market is narrowly mixed today. Cash hogs are called flat. It appears the cutout will weaken further during the course of the trading week. The USDA pork supply/demand table did not show any significant changes today. Projected production for 2010 was lowered by 90 million lbs. Looking forward, I'm expecting a further downward correction against the impressive uptrend in lean hog futures.

LIVE CATTLE

Live cattle traded in a narrow range on Tuesday in what felt like a light volume trading affair. However, the actual volume traded was reported at over 61,000 contracts with total open interest down by 1,775. That's two high volume sessions with open interest net lower for the two-day period. The beef was slightly higher yesterday with no cash activity to report. The USDA supply/demand table left beef production unchanged for 2010 but they did lower projected beef imports by 75 million lbs while leaving exports unchanged (from 30 days ago). I'm expecting a downward correction in live cattle futures which would be quite normal from a seasonal standpoint. The trend-following-funds are holding a record large net long position. They started building this position near the lows in December. If you think these markets, the ones that are loaded with fund length can't correction in a massive way, take a look at the sugar market. For today, for both my spec and hedge traders, I'm recommending the purchase of April live cattle puts and/or March feeder puts. Call me for specific recommendations.

If you would like a free 30-day trial to my evening livestock wire which includes a discussion of the grain market, give me a call or send me an email to dennis.smith@archerfinancials.com or 1.877.690.7303.

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