Margin Watch: March

April 1, 2010 by Chip Whalen

Hog
Margins improved dramatically since the middle of March, aided by the USDA’s quarterly Hogs & Pigs report released last week, as well as this morning’s Prospective Plantings and quarterly grain stocks reports. The hog report revealed a smaller breeding herd relative to market expectations, down 3.9% from last year and 1.3% below the average trade guess. In addition, Dec-Feb farrowings as well as the Mar-May and June-Aug farrowing intentions were also below pre-report expectations, signaling lower pork production. Meanwhile, the corn stocks report added credence to the hog figures as corn stocks on March 1 were 189 million bushels above the average trade estimate, pointing to lower feed demand. In addition, the USDA noted 2.3 million additional corn acres are intended to be planted this spring. As a result of these developments, margins are now… Get the Complete Report »

Dairy
Margins improved since the middle of March, resulting from both a recovery in milk prices as well as sharply lower feed prices. The USDA released their Prospective Plantings report this morning which revealed corn acreage up 3% from last year with producers expecting to seed an additional 2.3 million acres, while soybean acres likewise are expected to increase 600,000 from 2009. In addition, the quarterly grain stocks revealed more corn and soybeans on hand relative to pre-report market expectations. Milk prices have firmed recently as cheese prices have been bid up, although milk production has been increasing with output in Wisconsin up 5% in the July-Feb period. Cow numbers in the state also increased 3,000 head during the period with production… Get the Complete Report »

Beef
Margins strengthened through the end of March on both higher cattle prices and lower feed costs. The USDA released their monthly Cattle-on-Feed report March 19 which initially led to a sharp selloff although the market has since recovered. The report was considered somewhat bearish because February placements of 1.665 million head were only 0.8% lower than last year and were over 1% higher than the average of analysts’ pre-report estimates. In the bigger picture though, the report reveals a continued trend of lower beef production which should be positive for prices longer-term. On the feed side, the USDA released their Prospective Plantings and quarterly grain stocks this morning, both considered bearish for corn. March 1 stocks were above trade expectations by almost 200 million bushels, indicating weaker domestic feed demand while the planting figure… Get the Complete Report »

Corn
Crop margins continued to erode through the second half of March as futures have sold off sharply to their lowest point since September of last year. The market has been under pressure due to weaker export demand as well as expectations which were confirmed this morning of higher acreage this spring. The USDA released their Prospective Plantings report which revealed expected corn area up 2.3 million acres or 3% above last year. The large soybean crop in South America may have steered producers to plant more corn along with new-crop margins that are still positive compared to soybeans. In addition, the USDA revealed in their quarterly stocks data that March 1 corn stocks were nearly 200 million bushels above pre-report trade expectations, confirming lower domestic feed demand resulting from shrinking livestock herds. Basis levels have been largely steady over the past… Get the Complete Report »

Soybean
Crop margins were basically unchanged through the second half of March as the futures market has been moving sideways throughout the month. New-crop basis weakened 5 cents/bushel, representing the only basis change since the last report. The USDA released their Prospective Plantings and quarterly stocks reports this morning, which were considered bearish by the market. While planting intentions were in line with expectations, they are still up 600,000 acres from last year. Meanwhile, March 1 soybean stocks were at the high end of expectations, signaling that last year’s crop may have been underestimated by the USDA. As a result… Get the Complete Report »

Wheat
Crop margins weakened further through the second half of March as the futures market has declined to new life-of-contract lows. U.S. wheat remains uncompetitive in the world market, priced some $20-$30/ton higher than supplies from both Europe and the Black Sea region. Highlighting how competitive the global market has become, Russian wheat has recently traded into Latin America–despite the added freight cost relative to supplies from Argentina and the U.S. Meanwhile, the USDA released their Prospective Plantings and quarterly stocks report this morning, which was largely considered neutral for the wheat market. March 1 wheat stocks were in line with pre-report expectations, although the USDA did note a 2% increase in the winter… Get the Complete Report »

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