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Dennis Smith
Archer Financial Services
Focus: Livestock

Phone: 877-377-7905
E-Mail: dennis.smith@archerfinancials.com


MORNING LIVESTOCK REPORT
April 25, 2008

LEAN HOGS
Good morning! Lean hog futures opened lower and closed lower yesterday with the market unable to penetrate the Wed session highs (recent highs). The selling emerged despite continued “solid” fundamental news including strong cash and higher cutout. The fact that total OI was higher on the lower performance indicates that commercial and hedge type traders are “willing sellers” at this time and price. OI was up just over 1,000 cars, and record large at 248,000. While the weekly slaughter is going to come in below last week (indicating fewer numbers on a seasonal basis) the kill will still be substantially above last year. Keep in mind the hog & pig indicated we’ll see numbers consistently running from up 7% to up 8%. The key question is; can demand remain good enough, hot enough, to keep the market in an uptrend given a consistently large supply of butchers? Ladle on top of that the idea that corn will remain expensive and sow slaughter will thus remain in liquidation mode and add to the overall pork tonnage. Sow slaughter last week was up 19% from last year. My answer to the above question is…unlikely. My hedgers are selling the board (summer contracts) while my spec trade is looking to sell further strength in the June hogs while holding length in the Feb. My opening call is higher boosted by the higher pork cutout value.

LIVE CATTLE
The expiring April live cattle closed higher on Thursday, probing into new recent highs. The remainder of the board pulled back, seemingly taking a breather after posting fresh recent highs in the June early in the session and fresh contract highs in the Aug and Oct. The higher close in the April was “cash-driven” with packers moving on a Thursday morning to secure inventory and paying higher money to get it done. Beef packers paid 92 cents for cattle, up 2 cents from last week in the S. Plains and they paid 150 on the hot beef in NE, up 3.00 from last week. The choice beef cutout was higher by .11, closing at 155.27. Movement was moderate at 225 boxes and 171 trim. The fact that packers moved on a Thursday morning and paid higher money in the process is a direct testimony to vastly improved processing margins. This is in sharp contrast to securing inventory at the last minute on Friday afternoons and reluctantly paying whatever price necessary to pry the cattle loose from the feedlot. That’s been the strategy for months in the face of very poor margins. I’m bullish and my producers have remained un-hedged all winter. My spec traders are long the board, mostly in the Aug and Oct. My opening call is steady to higher.

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.






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