MORNING LIVESTOCK REPORT Monday June 9, 2008

LEAN HOGS

Good morning! Crude oil prices are down about $1.30 and stocks are expected to start out higher today. Corn futures are expected to start out the week higher, likely moving into all-time highs as continued heavy rains over the weekend provide a less than ideal planting/growing season. The summer lean hog futures spun lower to sharply lower late Friday as traders fear additional weakness in cash hog prices this week. I'm using "this round of weakness" to cover short positions for both my spec customers and hedge type business. Look for strength in the back end as hog producers are faced with the situation of rising feed costs. This feed "situation" likely will keep sow slaughter active and liquidation of breeding stock in the U.S. underway. Open interest was down hard in the June and July hogs on Friday's drop. Total OI was down 3,123. Look for a soft to lower cash market today and my opening call is steady to lower in the summer hogs while the winter contracts open higher.

LIVE CATTLE

June and Aug live cattle futures worked lower under the weight of active bear spread activity spurred mostly by higher grain prices on Friday. While the grain market will remain strong today, look for June and Aug live cattle to show some back bone today as the beef fundamental landscape remains bullish. Cash steer prices backed up last week in a very rare Tuesday trade. Seasonal cash steer weakness is actually par for the course during June. The result of last week's lower cash was a vast improvement in beef packer processing margins. The wholesale beef gained $1.98 last week. Cattle slaughter for the week was reported at 692,000, down 2% from last year. It appears highly likely that beef production has peaked for the summer season. Baring an economic melt down resulting from escalating crude oil prices, I remain bullish to very bullish toward live cattle futures. I'm holding length in the Oct and I'll look to buy the market in the 10670 to 10700 level this week. My opening call is mixed.

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