Margin Watch: December

January 4, 2010 by Chip Whalen

Hog

Margins remained relatively flat through the second half of the month, although slight deterioration was noted as corn rallied while hog and soybean meal prices held steady. The much-anticipated USDA Hogs and Pigs report contained few surprises, but if anything was considered slightly bearish given the Sep-Nov pig crop and pigs per litter during this period. While an industry-wide contraction is still evident, the efficiency of the smaller breeding herd is allowing for a large supply of hogs to remain in the pipeline. Meanwhile, the USDA’s upcoming January crop report will reveal more clues on the size of last year’s corn and soybean crops as well as the strength of demand… Get the Complete Report »

Dairy

Dairy margins deteriorated in nearby Q1 as well as Q2 over the past two weeks as milk futures dropped sharply. Block cheddar prices lost 11.75 cents during the last week of 2009 to close out the year at $1.45 – the lowest price since October 21. Meanwhile, corn prices firmed as export demand has been good recently while concerns remain over how much of the crop was possibly lost before harvesting shut down for the year across the northern Midwest… Get the Complete Report »

Beef

Beef cattle production margins held relatively steady through year-end as rallies in both cattle and corn were largely offsetting. Cattle prices have firmed recently as cold weather and reduced slaughter schedules due to the holidays is creating questions on beef supply heading into January. The latest slaughter report for the week ended December 19 showed carcass weights down 1% from the same week a year ago, while retail demand during December appears to be better than expected. While food service demand is still suspect, there remains optimism that the economy is recovering which may help support restaurant traffic. Corn prices have firmed with ongoing concerns of how much of a loss may be noted in this year’s crop ahead of the USDA’s report January 12th. Export demand has been good… Get the Complete Report »

Corn

Margins improved since the middle of December as basis firmed slightly while futures also rallied to finish out the year. While questions remain over domestic livestock and ethanol demand, recent export business has been better despite a strengthening dollar. There also remains uncertainty over how much of the crop was lost when harvest shut down recently across the northern Midwest following significant snowstorms in the region… Get the Complete Report »

Soybeans

Margins were down slightly since the middle of December, but held relatively steady over the past two weeks as futures recovered most of their mid-month swoon. Despite expectations that most of their demand interest has been filled for U.S. soybeans, there has been no significant drop in exports to China which has helped to support the market. Crop conditions continue to look favorable in South America, and this should eventually pressure the market although the crops are not yet made in Argentina and Brazil. There was no change in basis noted since mid-December… Get the Complete Report »

Wheat

Margins improved since the middle of December, owing principally to a strengthening in basis as futures prices held relatively steady. Although export demand has been lackluster at best, producers may be reluctant to let go of their old-crop supply as many were unable to plant next year’s winter wheat crop this fall. The USDA will release their first acreage report for the winter wheat crop on January 12, and it is estimated that between two to four million intended acres went unplanted across the Midwest due to adverse weather conditions. The lack of country movement may be helping to support domestic basis levels. Also unclear is whether… Get the Complete Report »

About the Author

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