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Hog
margins improved further through the last half of January due to continued strength in hog prices as feed costs held relatively steady over the past 2 weeks. Hog profitability remains off the charts, literally, with Q2 margins in particular posting new all-time highs for our data series. Both Q2 and Q3 are essentially at the 100th percentile of the previous 10 years while Q4 likewise remains very strong from a historical perspective at the 94th percentile. A recent feature has been sharp depreciation in emerging market currencies relative to the U.S. dollar. There is concern that the stronger dollar will begin to impact import/export flows, with negative implications for U.S. meat exports while Argentina and Brazil become more competitive exporters of grain and oilseeds relative to the U.S. Deferred hog futures prices moved to … Get the Complete Report »

Dairy
Dairy margins continued to strengthen in the last half of January, led by an ongoing surge in nearby milk prices. Q1 represents a new all-time high for profitability in that period, while Q2 margins have not been this strong since 2004. Deferred margins in the second half of 2014 are comparatively not as strong, but remain above or near the 90th percentile of the past 10 years. The strength in milk futures continues to be paced by record high cheese prices, with spot block cheddar at the CME and results from the latest Global Dairy Trade auction for cheddar each posting all-time highs at $2.295/lb. and $2.33/lb, respectively. One potential headwind moving forward though is that U.S. prices have now caught up to world values for cheese powder and butter, and our exports may start looking … Get the Complete Report »

Beef
Beef margins were mixed since the middle of January, improving in nearby marketing periods where input costs are increasingly fixed while deferred periods reflected deterioration from rising feeder cattle prices and steady to higher corn costs. Finishing margins remain negative from the June marketing period forward, with feedlots needing to be very selective about particular margin opportunities on various classes of animals. Cattle prices moved to new highs in the second half of January before retreating over the past week. The latest USDA Cold Storage report showed total beef inventories on December 31 at 438.1 million pounds, down 2.8% from November and 5.9% lower than a year ago. The sharp reduction of beef supplies in cold storage definitely helps to explain a lot of the recent strength in prices. Meanwhile, the monthly Cattle on Feed report reflected on feed supplies at … Get the Complete Report »

Corn
Nearby corn margins were slightly higher since the middle of January while deferred corn margins were marginally lower. New information during the period has been limited as cash movement has been slow. Export sales have remained strong with exporters having committed 86% of the USDA sales forecast with seven months remaining in the crop year. Ethanol production has also kept pace with the current USDA estimate. Private forecasters have begun estimating potential seedings for the coming crop year and are expecting roughly 2 million acres less to be seeded this year due to already-depressed new crop prices. On the global front, South American weather remains … Get the Complete Report »

Soybean
Soybean margins have deteriorated slightly over the last two weeks of January as both price and basis values have fallen. NOPA recently released its member crush figures for December reporting a record crush for the month at 165.3 million bushels. Soybean meal demand remains stout both domestically as well as through the export market which has continued to support the crush pace. Exporters have currently committed 70% of the USDA forecast for sale with eight months remaining in the crop year. There has been talk in the cash market of potential Chinese cancellations of previously purchased soybeans which has proven to cap recent price recovery efforts. Further, recent sales have been made with optional origin attached which gives the buyer the right to choose where to source the product. On the surface these developments would be … Get the Complete Report »

Wheat
Wheat margins have continued to fall and have put in new lows for the year. Harsh winter weather has done little to boost prices as fears of winter kill have eased for now. Damages will only be measurable after the crop exits dormancy this spring. While U.S. wheat stocks are expected to be tighter than last year, demand prospects face headwinds. Wheat prices relative to corn still remain unattractive for the most part to switch into livestock rations. Further, exporters are facing competition from nearly every country around the globe. Record exports continue to be reported out of the Black Sea region as sales are currently up 24% from last year. The region has even more to sell the world as supplies remain ample. A record crop from India is also expected which will add pricing pressure to the region. All told, U.S. wheat remains … Get the Complete Report »

Hog
margins continued to strengthen starting off the New Year, with all of 2014 now well above the 90th percentile of the past 10 years. In fact, Q2 has recently made a new 20-year high and when you look at all four quarters together as an average, the projected margin is the strongest it has been since 2004. This is an extremely rare opportunity currently facing hog producers to lock in excellent returns for the entire year. The margin strength continues to be driven by concerns over reduced pig flow and pork supply through the first half of the year due to PEDv, while feed costs are largely expected to remain in check. While these two factors should continue to influence near-term margin direction, producers should not get complacent as potential headwinds loom. It was recently announced that a vaccine … Get the Complete Report »

Dairy
margins started off 2014 where they ended 2013 by strengthening further through the first half of January. Soaring milk prices are responsible for all of the margin improvement since the end of last year as feed costs have been steady to higher in the past couple weeks. Nearby milk values in particular have strengthened significantly, with the February Class III contract up $2.50/cwt. in just the past two weeks. The market has largely responded to the spot cheddar market where blocks and barrels have rallied 20 and 30 cents, respectively, since the beginning of the year to the strongest level for January since 2008. Meanwhile, export data for dairy products continues to … Get the Complete Report »

Beef
margins improved considerably since the beginning of the year, particularly against the nearby February and April fat marketing periods. The margin improvement was due mostly to surging live cattle prices as feed costs held relatively steady over the past two weeks. Deferred margins improved as well but remain negative from the June marketing period forward, as live cattle prices rose more than feeder values since the end of December. While supply issues certainly continue to support the cattle complex, beef demand also appears to be quite strong and seems to be a supporting factor as well. Based upon weekly data, December steer and heifer slaughter was down 2% from 2012; however, using USDA’s daily estimates, last week’s total of 451,000 head would actually be … Get the Complete Report »

Corn
Nearby corn margins improved over the first half of January while deferred 2014 margins were relatively flat. Corn quarterly stocks reported by NASS came in at 10.426 billion bushels, well below the pre-report estimate as well as outside the low end of pre-report estimates. The much lower stocks on hand figure suggests better feeding in livestock rations during the first quarter. NASS finalized the 2013 production figures, lowering production by 64 million bushels to 13.925 billion bushels which remains record-large. National yields were reduced 1.6 bushels per acre while harvested area was increased 500,000 acres. The additional harvested area likely represented … Get the Complete Report »

Soybean
Nearby soybean margins improved over the first two weeks of January while deferred 2014 margins lost ground. Soybean quarterly stocks reported by NASS came in at 2.148 billion bushels, below the pre-report estimate but within the range of estimates. NASS finalized the 2013 production figures, raising production 31 million bushels to 3.289 million bushels, the third largest crop on record. The increased supply resulted from increased yields and higher harvested area. National yields were increased 0.3 bushels per acre while harvested area was increased 200,000 acres. The USDA updated its ending stocks estimate for the 2013/14 crop year, leaving ending stocks unchanged from the December forecast at 150 million bushels. The increased supplies revealed in the Annual Production report are expected to be consumed through exports and crush. Exports were … Get the Complete Report »

Wheat
Wheat margins have continued to fall to start the New Year as supply concerns have been easing. Wheat quarterly stocks as reported by NASS came in at 1.463 billion bushels, above the pre-report estimate but within the range of estimates. The larger stocks on hand are being attributed to lower feed and residual usage over the first half of the crop year from June-November. The Winter Wheat Seedings report showed fewer winter wheat acres year-over-year at 41.892 million acres planted, roughly 1.7 million acres less than expected. The largest deviation from estimate came in Soft Red Winter wheat acreage as NASS reported 8.4 million acres planted compared to pre-report estimates of 9.7 million acres. The USDA updated its ending stock forecast for the 2013/14 crop year, raising the … Get the Complete Report »

Hog
margins were flat to higher over the second half of December to finish off the year, with feed prices and hogs mixed across the various marketing periods in 2014. Overall from a bigger picture perspective, hog production margins remain extremely favorable heading into the New Year, resting at or well above the 90th percentile of the previous 10 years. USDA released their quarterly Hog and Pig report last week which revealed a breeding herd of 5.757 million head as of December 1st, down 1.3% from a year ago when on average analysts were expecting a 1% increase from 2012. In addition, the growth in pigs per litter declined sharply during the Sep-Nov quarter with USDA reporting 10.16 pigs saved per litter during the period – virtually unchanged from a year ago and the lowest growth rate in litter size since 2003. Both figures seem to validate the impact from PEDv on productivity and the premium that has been built into the forward futures curve. On the feed side of the equation, the corn market has … Get the Complete Report »

Dairy
margins continued to improve over the second half of December to finish off the year on a strong note. Margins remain well above the 90th percentile of the previous 10 years through the first half of 2014, and above the 80th percentile in the second half of the year providing dairy producers great opportunities to protect profitability at historically strong levels. With feed costs relatively unchanged over the past two weeks, margins have improved primarily due to higher milk prices. Milk continues to draw support from strength in the export market as indicated by the recent USDA Cold Storage report. Butter stocks in particular had the highest monthly drawdown in 20 years, with November butter stocks of 121.4 million pounds … Get the Complete Report »

Beef
margins improved over the second half of December to finish off 2013 with higher cattle prices balanced against steady feed costs. According to YEAH! Local SEO company, the margins will remain favorable against the nearby winter and spring marketing periods, but continue to be negative from summer 2014 marketing periods forward. Cattle prices have been supported by the recent USDA Cattle on Feed report that reflected much lower placements than had been expected by analysts. Total December 1st Cattle on Feed was reported at 10.725 million head which was down 5.5% from last year and 0.9% lower than analysts had expected. More surprising however were November placements of only 1.882 million head which were down 3.1% from last year and 4% lower than market expectations. It would appear as though … Get the Complete Report »

Corn
Both nearby corn margins as well as deferred 2014 margins were flat through the last half of December as recent recovery efforts have failed. News during the period has been limited leaving the marketplace to focus on weekly demand from exports and ethanol as well as South American weather. Domestic demand continues to advance nicely for ethanol despite a potential reduction in EIA mandated levels. Currently, corn used to produce ethanol is up approximately 9.7% over last year, better than the USDA forecast for a 6.5% usage increase year-over-year. However, recent Chinese cancellations of DDG shipments from the U.S. has the marketplace on edge as ethanol margins are currently positive through March and are flat thereafter. Increased domestic supplies of DDGs would eventually pressure ethanol production margins provided the livestock industry does not replace … Get the Complete Report »

Soybean
Although still positive, soybean margins have declined significantly over the last half of December as the prospect of decreased demand has arisen. Presently, U.S. exporters have committed 1.467 billion bushels or 99.5% of the USDA forecast for sale and have shipped out 55% of the USDA forecast, well ahead of the average pace for this time in the crop year. At first glance, the figures are quite friendly and would bode well for potential adjustments upward to future USDA demand projections. The marketplace, however, is contending with the fact that much of the forward sales have been issued as ‘Optional Origin’. In other words, the foreign buyer has the option to source the supplies from different locations, not just from the U.S. This is nothing new in the export world, but has ramifications for domestic farmers as current prices are justified due to … Get the Complete Report »

Wheat
margins have continued the slow erosion that began in the middle of October and finished 2013 at the lowest level for the year. Domestically, the winter wheat crop in dormancy has no threatening weather in current forecasts. The winter crop entered dormancy in much better condition than the last few years, but the critical period is early spring where moisture is crucial. Export sales have been limited and are expected to remain slow throughout January. Export sales have been slowing since October when China and Brazil were on a buying frenzy which has since cooled off as competition on the global market is stiff as many countries are set to produce record crops. On the global front, Russia recently updated its forecasted production to be 52.1 million metric tons, roughly 500,000 metric tons above the current USDA forecast. The government went on to say final … Get the Complete Report »

Hog
Hog finishing margins were mixed since the end of November, weakening in nearby Q1 while holding relatively steady in both Q2 and Q3. Now that we are in the month of December, we dropped tracking the current Q4 and started monitoring the fourth quarter of 2014 which is just off the 90th percentile of the previous 10 years. The other 3 quarters of next year remain well above the 95th percentile and continue to offer outstanding opportunities for hog producers to protect margins and secure profitability in 2014. Most of the weakness in nearby margins over the past couple weeks has resulted from a setback in the hog market. Despite the impact from … Get the Complete Report »

Dairy
Dairy margins strengthened significantly since the end of November due to a sharp rally in milk prices over the past couple weeks. Now that we are in the month of December, we stopped tracking the current Q4 period and added the fourth quarter of 2014 which is just over the 80th percentile of the previous 10 years. Both Class III and Class IV milk futures have surged recently in response to strong prices for both cheese and non-fat dry milk powder. Spot NDM prices on the CME are trading at their highest level since October 2007 while CME block cheddar prices on the spot market have been flirting over $1.90/lb. which is unusual for December and represents price strength that similarly has not been witnessed since 2007. It appears that dairy product markets remain … Get the Complete Report »

Beef
Beef margins deteriorated since the end of November, as live cattle prices declined while feeder cattle prices increased and corn held relatively steady. Although nearby placements continue to reflect positive margin opportunities through the marketing period against April live cattle, deferred margins remain negative beyond that. Nearby fat cattle prices have been under pressure due to an increase in slaughter weights which has led to higher beef production. The average dressed cattle weight for the week ending December 14 was 807 pounds, up 0.9% from last year as weights continue trending higher despite the removal of Zilmax earlier this fall. Part of the reason for the increased weights also stems from the fact that there are fewer cows in the slaughter mix as more heifers have been retained for increased dairy production. Competition for feeders meanwhile has helped to … Get the Complete Report »

Corn
Corn margins have been flat since the beginning of December as prices have given up early-month appreciation. The USDA updated its projection for ending stocks to be 95 million bushels lower than November’s expectation at 1.792 billion bushels. The reduction came as a result of increased demand from exports as well as corn for ethanol. Lower supplies due to increased demand tend to be positive for prices; however, the market continues to contend with large ending stocks domestically as well as prospects for larger global production. The USDA also updated its forecast for global stocks, reducing the … Get the Complete Report »

Soybean
Soybean margins have risen only slightly since the beginning of December. The USDA recently updated its expectation for domestic ending stocks to be 20 million bushels lower than November’s estimate to 150 million bushels. Increases in demand particularly for exports and domestic crush were the reason for the increase. Currently, exporters have sold nearly 97% of the USDA’s updated forecast with 8 full months remaining in the crop year. Global demand for soybean meal continues unabated as well forcing the crush rate higher. On the global balance sheet, the USDA made few changes, but did increase its forecast for Argentine production 1 million metric tons to 54.5 MMT due to … Get the Complete Report »

Wheat
Wheat margins have lost ground since the beginning of December as global supplies have exceeded expectations. The USDA recently updated its expectation for domestic ending stocks and increased the estimate 10 million bushels to 575 million bushels. The increase resulted from larger expected imports from Canada. While the current ending stock estimate remains below last year’s figures, the marketplace sees competition for exports and usage for feed as headwinds. Wheat is currently priced out of most Midwest livestock rations but does still pencil in other regions. On the global front, the USDA … Get the Complete Report »

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