Margin Watch: Mid-June

June 20, 2012 by Chip Whalen

Hog
Margins deteriorated slightly over the past two weeks primarily due to a continued surge in soybean meal futures. USDA released their June WASDE report which showed a continued decline in old-crop and new-crop soybean stocks, with the crush forecast increased due to strong demand for soybean meal. China’s imports were revised higher while a net reduction was noted for South American soybean production, maintaining the bullish posture of the market. U.S. corn ending stocks were left unchanged for both old and new-crop, while global ending stocks were increased in both crop years. Unlike … Get the Complete Report »

Dairy
Margins continued to improve since the end of May, primarily due to a surge in milk futures that more than offset a similar surge in soybean meal while corn prices were relatively flat over the past two weeks. A surge in cheese prices has paced the advance in Class III Milk futures with spot cheddar blocks closing this past week at $1.70/lb. – the highest price since December 5, 2011. April American Cheese production was up 3.3% from last year while stocks as of April 30 were only up 1% from a year ago, reflecting stronger demand for cheese as the stocks build failed to … Get the Complete Report »

Beef
Beef margins deteriorated since the end of May following a drop in cattle prices while the corn market held relatively steady. April beef exports were 207.8 million pounds carcass weight according to the USDA, up 6.8% from March but down 6.9% from April 2011. On a value-weighted basis however, April beef exports at $413.9 million, were up 9.2% from last year. The all-fresh beef price reached a record in May of $4.687/lb., up 1.8 cents/lb. from April and 24.4 cents/lb. higher than last year. Normally, cattle slaughter hits its seasonal highs in June, and beef prices tend to decline after … Get the Complete Report »

Corn
Nearby corn margins have deteriorated since the beginning of April while deferred 2012 margins are relatively flat for the period. USDA recently estimated ending stocks to be unchanged from February at 801 million bushels. Based off the accelerated pace of disappearance revealed in the NASS Quarterly Stocks report, the market had expected the USDA to reduce the ending stocks in the latest WASDE report. A few things were offered as reasons behind the status quo estimate. Firstly, wheat feeding had been picking up displacing corn in livestock rations both domestically as well as globally. Secondly, it was noted that due to the early planting pace this year, the USDA expects… Get the Complete Report »

Soybean
Both nearby as well as deferred soybean margins have continued to gain since the beginning of April, as cash and futures’ prices have moved higher. USDA recently estimated ending stocks down 25 million bushels from March to 250 million bushels, reducing the stocks/usage ratio to 8.2%. The U.S. export forecast was raised 15 million bushels to 1.29 billion bushels based off of lower expected production out of South America. The crush rate was also raised due to the exceptional pace of domestic soybean meal usage. These demand increases were partially offset by a combined reduction of seed and residual usage of 5 million bushels. The USDA also reduced … Get the Complete Report »

Wheat
Wheat margins have deteriorated marginally since the beginning of April, as the slight increase in basis values have done little to offset the lower futures’ prices. USDA recently reported ending stocks lower by 32 million bushels from March to 793 million bushels, reducing the stocks/usage ratio to 36.2%. Based off the Quarterly Grain Stocks report, Q3 disappearance was faster than usual and implied greater feeding during the period. As such, USDA raised feed usage by 35 million bushels but lowered seed usage by 3 million bushels addressing the smaller planted acreage estimate. Throughout the verbatim text, USDA refers to slower corn use due to increased… Get the Complete Report » … Get the Complete Report »

About the Author

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