MORNING LIVESTOCK REPORT Friday June 27, 2008

LEAN HOGS

Good morning! Lean hog futures were smashed again on Thursday with aggressive sellers working on the summer months, driving these contracts well under the current cash indices. The traders are bearish for two fundamental reasons. First, new concern that the upcoming hog & pig report will confirm continued large hog slaughter for the remainder of the summer and second, that new highs in corn prices will force a sudden and massive liquidation of sows, flooding the market with pork. I contend the liquidation of breeding stock will continue as it has over the past several months; consistent and fairly orderly. I also believe the hog & pig will confirm large production continuing for the remainder of the summer, but I contend this should not be a surprise to the futures market. I'm not trading from the short side in the summer hogs and continue to hold length in the Feb lean hogs. Hog slaughter was reported at 421,000 and the pork cutout was down .40 at 79.71. Look at what's happening to the beef, cash steer prices and beef cutout values are soaring. From a demand perspective, I think it's rather dangerous to be bearish and aggressively selling the summer hog contracts ahead of the report that likely will confirm that widespread contraction of U.S. breeding stock is underway. My opening call is steady to higher.

LIVE CATTLE

Live cattle futures drifted off their session highs on Thursday in what appeared to be selling tied to economic concerns deriving from sharply higher crude oil prices and sharply lower stocks. However, late yesterday the cash market broke loose with beef packers, processing at very profitable margins paying sharply higher money to get their arms around cattle. The NE hot beef market traded up to $155, up $4.00 to $5.00 from last week. Trade was confirmed in the S. Plains as high at 99 cents/lb up 4 cents from last week. Beef business with S. Korea is expected to begin next week. The wholesale beef market has been higher every day this week. Yesterday's closing beef report showed the choice beef cutout up 1.13 at 164.83. I've moved out of speculative length in the live cattle and have started executing conservative hedging strategies. My opening call is sharply higher, likely up 100 to 150.

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