MORNING LIVESTOCK REPORT                    Thursday July 15, 2010

LEAN HOGS

Good morning.  The Aug lean hog contract staged a massive outside day higher close yesterday. The market is pulling back early today as the fundamentals have not yet turned positive. Yesterday's cutout was down .97 with the cash hog market sloppy to lower yesterday and called flat to lower again today. However, I firmly believe the pork fundamentals will soon change rather dramatically. After being long and stopped out of length on Monday, I started moving my customers back into length yesterday. I like the Aug hogs today on any trade below 8100. Futures volume was huge yesterday at over 65,000 cars with total open interest rising by 7,380. Repeating, it's my opinion the Aug hogs forged a low yesterday.

LIVE CATTLE

Live cattle futures closed sharply higher yesterday with the buying action driven by strong cash steer prices paid by the beef packers. The cash tops yesterday reached as high as 94.5 with TX moving their list at 94 cents/lb. The action first started in KS when a 93 cent bid started moving cattle. Prices in the North were strong as well. Tight supplies of finished cattle is the fundamental driver forcing the cash steer market higher. Beef packers are still processing cattle at profitable margins. Until margins slip into the red, it appears highly likely you'll continue to see fully steady to higher cash prices paid, until more cattle become available. I'll use a higher trade to begin exiting all long positions in the Aug live cattle, while keeping our length established in the feeder market. We started executing hedging strategies in the Oct live cattle options yesterday and will continue working additional hedges today. With the outside markets supportive today, look for upside follow through from yesterday's performance. Open interest, by the way, was up over 4,800 cars on yesterday's impressive rally.

If you need help in developing and implementing a solid hedging strategy for your cattle give me a call or send me an email to dennis.smith@archerfinancials.com or 1.877.690.7303.

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.