Margin Watch Notes: November

December 3, 2009 by Chip Whalen


Margins improved since the middle of November as hog futures increased while corn was relatively flat, although soymeal futures advanced sharply. Hog prices continue to firm – particularly in nearby periods – due to indications of stronger demand reflected in higher cutout values. Ham prices have been especially strong on a combination of robust exports to Mexico given the weakness in the U.S. dollar relative to the peso as well as seasonal holiday demand in the U.S… Get the Complete Report »


Margins were flat through the end of November, although nearby Q4 deteriorated slightly since the middle of the month. This occurred as milk futures were basically unchanged while soybean meal futures rose sharply. Demand continues to be robust for soymeal both domestically as well as in the export market. Recent talk that more soymeal may be substituted in livestock feed rations due to increased vomitoxin levels in this year’s corn harvest may have fueled part of the rally, although the vomitoxin issue now appears to be subsiding and is confined to a localized area of the Eastern Corn Belt… Get the Complete Report »


Margins were relatively flat since the middle of the month, but maintained a general trend of deterioration from the beginning of November. Cattle prices have come under pressure, with nearby December futures moving to new life-of-contract lows on concerns over beef demand. Consumers remain cautious, and premium beef roast cuts may not be featured as prominently as hams and turkeys for holiday dinners this season. The latest USDA Cattle on Feed report showed that while marketings were down in October, those fed supplies are coming to market at heavier weights which along with slack demand is pressuring beef cutout values. On a positive note… Get the Complete Report »


Corn crop margins remained relatively flat through the end of November as futures have traded sideways while basis levels have held steady. As harvest advances across the Corn Belt, there is a sense that basis may begin to weaken further as more elevators fill up to capacity. Export demand has also begun to suffer as a result of higher prices and increased competition from other origins including South American corn and FSU feed wheat. Futures spreads are still relatively wide, which would suggest storing the crop and protecting the margin using deferred contracts… Get the Complete Report »


Soybean crop margins improved considerably since the middle of November following a sharp rally in futures prices through the end of the month. A combination of strong demand from continued exports to China and robust domestic crush margins are helping to support futures as the harvest winds down. Some basis deterioration is being noted in certain parts of the country as elevator storage fills up, and cash premiums at the Gulf are finally back to a “normal” historical level for this time of year as the previous season’s shortage finally has faded into history. While spreads have weakened since last month… Get the Complete Report »


Wheat crop margins continued to improve since the middle of November as futures were relatively flat while basis levels strengthened around 20 cents. This comes as somewhat of a surprise given the lackluster export demand the U.S. continues to experience. U.S. wheat continues to trade at a significant premium in the cash market to both European and FSU-origin supplies, and the weekly pace of export sales has reflected this suggesting the export forecast will need to be cut further in the upcoming December USDA report. Producers may be holding onto their… Get the Complete Report »

About the Author

Chip Whalen, CIH

Chip Whalen

Chip is one of our resident educators with over fifteen years of teaching, trading, and senior risk management experience.

There is a risk of loss in futures and options trading. Past performance is not indicative of future results. The information contained in this publication is taken from sources believed to be reliable, but is not guaranteed by Commodity & Ingredient Hedging, LLC, nor any affiliates, as to accuracy or completeness, and is intended for purposes of information and education only. Nothing therein should be considered as a trading recommendation by Commodity & Ingredient Hedging, LLC. The rules and regulations of the individual exchanges should be consulted as the authoritative source on all contract specifications and regulations.

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