MORNING LIVESTOCK REPORT                   Wednesday July 1, 2009

LEAN HOGS

Good morning. Score a minor victory for hog producers yesterday with the substantial increase in corn acreage and limit down corn futures. However, another sharp drop in pork cutout values has stifled, for now, the upside recovery in the cash and futures. The lower pork cutout (down 1.72) was solely due to a decline in the value of the pork loin. I'll check my data base today; I can't remember when pork loin prices were this cheap. If pork prices at six year lows can't stimulate some demand then, I'm afraid; the hog market is slated for some real problems. I'm holding some bull spreads. My opening call is down 50 to 100. 

LIVE CATTLE

After closing 300 points higher on Monday the Aug live cattle experienced large swings in prices on Tuesday but closed only 15 points lower yesterday. The Aug is now the lead contract. The very weak basis is rare for the summer market with Aug futures trading at 8550 with the latest cash market at 8200. Typically the Aug live cattle futures trades under the cash market as traders expect the cash market to work lower into the summer lows. The board is making a statement that this year will be different. In other words, futures traders appear to be anticipating that the summer cash low is already in place. Given the fact that fed supplies are sitting at 10-year lows and given the outlook that supplies will likely tighten further moving into the fall season, I have no gripe with the current basis and structure of the board. In other words, I'm bullish. My opening call is steady to up 25.

If you're considering opening an account to trade livestock and/or grains give me a call at 1.877.377.7905 or send an email to dennis.smith@archerfinancials.com.

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