MORNING LIVESTOCK REPORT                   Friday May 9, 2008

LEAN HOGS

Lean hog futures continued their upside move on Thursday opening higher and closing higher with many contract posting a settlement near their session highs. We were stopped out of short June hog positions on the open Thursday, still taking a profit (short from 7650) but very disappointing as I thought we had sold the market two weeks ago and caught the seasonal top. Outstanding demand for U.S. pork continues to be the number one fundamental driving force fueling the upside advance. As a fundamental analyst, however, I have to question whether demand and continue to drive prices higher in what would be contra-seasonal strength from this point forward. I seriously doubt it, thus, I'll still be looking and watching for a signal, either fundamentally or technically to re-establish short positions. My spec traders are still long Feb hogs which is working nicely. I've recommended that my hedge customers, who are short in the summer hogs but not the fall and winter, to maintain their partial hedges. The weekly kill should come in about 8% above last year and record large. The pork cutout last night was up .39 at 78.71. The volume of trade on yesterday's rally was active at nearly 50,000 cars and total lean hog OI was up 753. Repeating, I'll be watching the market and looking to re-establish short positions in the June, July and Aug. My opening call is up 20 to 30.

LIVE CATTLE

Wow! The action on Thursday is what I've been anticipating for several months and waiting for, literally sitting on my hands. My customers have been long in the Oct live cattle, long some June and Aug live cattle, long large numbers of Aug call options and pretty much un-hedged, waiting for the break out to the upside. We finally saw it yesterday. In surprise fashion live cattle futures opened higher and soared through resistance levels like a hot knife through butter. There seemed to be little fundamental news to fuel the gains with no active cash market and wholesale beef near steady. Technically the action was bullish with active volume of futures trading on rising open interest. Despite the liquidation of over 10,000 contracts in the June, total live cattle OI was up 826 cars. There were reports of some cash cattle trading as high as 94 cents in the south but I have little confirmation of good volume of trade at this time. If you've been reading my comments with any regularity you've heard and read my fundamental reasons for being long term bullish live cattle futures. We lightened up on some length at 105 basis the Oct but only partially. I expect upside follow through today. My opening call is steady to higher.

Full service brokerage pays dividends. Email dennis.smith@archerfinancials.com  for more details.

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