MORNING LIVESTOCK REPORT                    Tuesday May 13, 2008

LEAN HOGS

Good morning. Lean hog futures closed mixed to mostly lower on Monday despite another round of cash strength. The impressive seasonal rally has been just that; impressive. It's all on the back of demand but typically we've reached a point in time when domestic demand tends to peak, usually creating a seasonal top in futures. The export data for March was good but there's some cracks in the armor. Total pork exports for March, at 361 million lbs, were up 37% from March of last year. First quarter exports were up 40%. It doesn't get any better than this. However, I question whether such a torrid pace can continue. Also, pork exports in March to China were actually down 58% from February. My customers are moving out of length in the Feb hogs and moving into the short side of the June. The board is getting "loaded up" with speculative longs with open interest record large yesterday at 255,429, up 2,600. Cueing off the strong cash performance and another round of higher cutout from yesterday, my opening call is 50 higher.

LIVE CATTLE

Live cattle futures spent the entire session lower on Monday only to stage a decent recovery and finish just slightly lower with most settlements near unchanged. The correction which was "back and fill" in nature is long term healthy for the market. The solid beef fundamentals remain firmly intact. For example, last week's aggressive slaughter pace was revised upward by 6,000 head. Yesterday's kill came in large at 128,000 compared to 126,000 last year. Finally, the beef was quoted up .55 at noon on Monday but the closing beef report showed the choice cutout up .80 at 156.84. Box movement was good at 178 boxes and 68 trim. The USDA is scheduled to issue their  cattle-on-feed report Friday afternoon. Also, we're scheduled to begin shipping beef to S. Korea this week. The bullish combination of declining supply and increasing demand should drive cattle futures higher over the long term. Feeder cattle futures closed very strong on Monday, providing further confirmation of a long term bullish attitude in the live cattle market. My customers remain pretty much un-hedged and my spec traders are long, mostly in the Oct live cattle. My opening call is steady to higher.

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

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