MORNING LIVESTOCK REPORT                       Tuesday May 6, 2008

LEAN HOGS

Good morning. Lean hog futures closed higher across the board on Monday led by the most active June contract. A higher cash hog market was also greeted with large hog receipts, despite the perception of tight hog supplies due to widespread field work. At the same time the slaughter was down from the recent pace at "just" 404,000. The pork cutout continues to perform strong, quoted up 1.02 at 76.21. The rising cutout was mostly due to higher priced loins with hams steady to firm and fresh bellies not tested. Total OI in lean hog futures was up 1,550 on yesterday's rally. Lower OI was noted in the May and June with rising OI in all other contracts. I'm expecting a "ton" of resistance over the next 100 points in the June lean hogs (7350 to 7450). Look for a steady to higher early trade followed by increased selling interest.

LIVE CATTLE

Live cattle futures set back hard on Monday led lower by the June and Aug in bear spread type of activity. The Oct live cattle continued to drift toward its session high into the closing bell. The Goldman roll begins on Wed and a massive roll out of June is expected. The fundamental table is set for a major rally in live cattle futures over the coming months, in my opinion. The beef packer, enjoying profitable margins has geared up the chain speed to an aggressive pace. Monday's kill was pegged at 129,000 compared to 109,000 last year. The choice beef cutout was up 1.00 at 155.46. I consider this a solid performance especially when many traders have expected just the opposite out of the beef over the past several days. Box movement was moderate at 151 boxes and 53 trim. OI in live cattle futures was up 3,124 on the lower performance. I'm expecting a higher cash steer market this week. Packers paid 92 cents for cattle the past two weeks. My opening call is steady to firm.

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