MORNING LIVESTOCK REPORT Monday July 7, 2008

LEAN HOGS

Good morning! The talk last week was that packers would be bidding lower this week for live hogs. Then, late in the week the talk began to change toward the idea of maybe a steady to firm cash market for this week. July futures are 250 under the cash index. If the cash is not lower this week I'm looking for the summer hogs to rally. Pork packers are currently operating at profitable margins. There're looking to kill and process as many hogs as possible. Any downtick in the slaughter pace is a function of reduced hog supplies. Last week's kill is not available until 1:00 today. The pork cutout on Thursday was up .65 at 79.39. Limit down corn today will limit the buying interest in the Apr and June. My opening call is higher in July and Aug, mixed in Oct through Feb and slightly lower in the Apr and June. Today is FND for July bellies.

LIVE CATTLE

The cash steer market finished strong last week with tops reported as high as $1.021/2 for cattle in the south while hot beef in NE traded at $160. These cash prices were sharply higher than the previous week. The beef was higher every day last week with the choice beef cutout finishing strong at 171.58, up .41. The big resistance in the beef stands at 172.47, the high made in April of 2007. The impressive fundamental surrounding the beef complex is the fact that beef packer operating margins are very profitable. Sellers of the board on Thursday were likely speculating that wholesale beef will struggle at this price level and at this time of year. That's very likely. However, I contend that packers may not back off the cash market if supplies of cattle continue to tighten. Tightening supplies of finished cattle is exactly what the board is expecting moving into the fall season. The turn in corn prices should inject some real power into the feeder cattle market. My spec clients are trading the Aug and Oct live cattle from the long side. My opening call is mostly higher in live cattle and higher to sharply higher in feeders.

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

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