MORNING LIVESTOCK REPORT              Thursday May 15, 2008

LEAN HOGS

Good morning! Lean hog futures closed mixed on Wednesday with higher settlements in the summer contracts while the back end continued to come off its highs. For the second consecutive session, in the face of higher summer hogs total open interest in lean hog futures was down. OI from yesterday was down 432 cars. More importantly, the cash market is "changing its tone" with an outlook for steady to possibly lower cash for today and Friday. This represents a vast departure from the last four weeks in which the cash hog market has displayed an impressive seasonal advance. Incredibly, some traders seemed fully convinced the cash market "will never down tick" again. Pork production remains record large and it's likely that pork continues to pile up in warehouses. The USDA will issue a monthly cold storage report one week from today. I'm expecting a seasonal high in the summer hog futures "any minute now". We've already moved out of length in the Feb hogs and will look to re-establish length back there on weakness down the road. My spec and hedge clients are short the summer hogs. The Wed kill was substantial at 414,000. However, the packers are throttling back on their Sat kill plans. The Sat kill could come in as low as 10,000 head. The pork cutout was up .49 at 80.85. My opening call is mixed.

LIVE CATTLE

Live cattle futures traded lower in the early action on Wed but the June and Aug recovered and finished higher with their settlements near the session highs. Wed marked the "third day down" and sure enough the buyers stepped up and took additional ownership. My clients were buyers of the August on the lower trade yesterday. The fundamental and technical situation facing live cattle remains bullish. The USDA will shed further light on the supply situation Friday afternoon when they issue their monthly cattle-on-feed report. I'm expecting the report to show placements into the feed yard down about 10% while the rate of cattle marketed during the month is up about 5 to 6%. The bullish math should drive on-feed inventory to below last year and that likely will be the case for a lengthy period. Live cattle futures broke out to the upside last week on rising OI. Feeders have "busted out" this week, again, on rising OI. My producers remain un-hedged which has proven to be the correct strategy. My spec traders are long and have taken some profits and now are moving back into length. Cattle slaughter remains aggressive with 128,000 hitting the kill floor on Wed. The choice beef cutout was down .06 at 156.50 on boxed movement reported at 314 boxes and 110 trim. My opening call is steady to higher.

If you're not satisfied with your current brokerage relationship give me a call or send an email at 1.877.377.7905 or dennis.smith@archerfinancials.com .

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