Margin Watch: Mid May

May 17, 2010 by Chip Whalen

Hog
Margins continued to decline slightly since the end of April, as hog prices generally have dropped more than feed costs with all three markets in retreat. Even with the decline however, both spot and forward margins out into 2011 remain very high from a historical perspective, existing well above the 90th percentile of the past 5 years through 2010 and at the 90th percentile for Q1 2011. The USDA released their first balance sheet for 2010/11 this week, and the forecasts are welcome news for hog producers. Ending stocks are projected to grow for both corn and soybeans, with average farm prices seen declining year-over-year for both corn and soybean meal. Meanwhile, pork production is expected to be lower… Get the Complete Report »

Dairy
Margins continued to improve since the end of April as milk prices generally held steady while feed prices were in retreat. The USDA released their May supply/demand report this week, including the first estimates of the 2010/11 marketing year. The forecasts revealed expectations for ending stocks to build in both corn and soybeans in particular, which will lead to lower average farm prices year-over-year. While the growing season is still young and much can change, early indications are promising on the supply side with fast planting and favorable weather. At the same time, the USDA’s milk forecast revealed expectations for higher prices next year due to improved demand and tighter supplies… Get the Complete Report »

Beef
Margins are at or just slightly above breakeven through the first quarter of 2011, as feeder cattle prices remain very high relative to fat cattle prices, although both markets were down significantly Friday. On a positive note, corn prices are also in retreat in response to liquidation and uncertainty over import demand from China, who purchased corn in significant volume from the U.S. this past week for the first time in years. Meanwhile the USDA released their first balance sheet for the 2010/11 marketing year, showing marginal growth… Get the Complete Report »

Corn
Crop margins have been steady to lower since the end of April, with both old-crop and new-crop basis weakening and slightly lower futures prices as well. Corn futures continue to chop around as the market is pulled between bullish Chinese import news and bearish new-crop supply considerations. The USDA released their first balance sheet for the 2010/11 marketing year this week, and projected new-crop corn production of 13.37 billion bushels, up 260 million bushels from last year with ending stocks projected to increase 80 million bushels from the current year… Get the Complete Report »

Soybean
Crop margins deteriorated since the end of April, as futures prices have dropped while basis likewise weakened. It has become more evident that China’s buying program for U.S. soybeans has ended for the current crop year, although export projections have increased given the strong year-to-date pace of sales and shipments. Meanwhile, the USDA released their May supply/demand report this week, including the first projections for the 2010/11 crop year. Highlighting that balance sheet is an ending stocks estimate of 365 million bushels, up 175 million from the current year with the stocks/use ratio expected to more than double to 11.6%. This is due to the fact that demand… Get the Complete Report »

Wheat
Crop margins deteriorated over the past two weeks as futures prices declined while basis weakened as well. Although not much has changed in the market, the outlook continues to be bearish given enormous supply relative to demand. The USDA released their May crop report this week, including the first balance sheet for the 2010/11 marketing year. Although production is forecast down 173 million bushels from last year while demand is forecast up 68 million bushels, new-crop ending stocks are still forecast 47 million bushels higher than 2009/10 given the huge ending stocks this year that will be carried forward. World ending stocks are likewise forecast to increase almost 5 million… Get the Complete Report »

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