Margin Watch: May

June 1, 2010 by Chip Whalen

Hog
Margins generally improved since the middle of May, particularly out in Q1 2011 which was up nearly $1.00/cwt. over the past two weeks. We began tracking Q2 2011 this period, which like the nearby second quarter is reflecting a forward profit margin for next summer well above the 90th percentile of the past 5 years. Hog values began to recover slightly following a correction that began the last week of April, while feed prices generally held steady although meal has weakened slightly. Hog slaughter continues to run around 4% below a year-ago, while the latest cold storage report indicated that pork inventories as of April 30 were down 21.2% from last year and 16.5% below the 5-year average… Get the Complete Report »

Dairy
Margins deteriorated over the past two weeks, particularly in nearby periods as milk has experienced a significant selloff while feed costs have generally held steady. Cheese and milk supplies appear to be on the rise, and heavy offers coming into the cheese pit appear to be weighing on the Class III futures market. The CWT announced its 10th round of herd retirements this summer to deal with the mounting supply issue, although it is unclear how many bids will be received as well as the price level of those bids. On a positive note, soybean meal prices are under pressure as demand continues to slow with ideas that the U.S. will harvest a massive crop this fall and face stiff competition… Get the Complete Report »

Beef
Margins deteriorated since the middle of May as cattle prices are firmly in retreat. While the fundamentals remain generally supportive for the beef market heading into the prime demand period of the summer grilling season, there was a feeling the market got ahead of itself and prices were due for a pullback. The latest Cattle on Feed report from the USDA showed total feedlot inventories with 1000 head or more as of May 1 were 10.453 million head, 3.4% smaller than last year and down 5.7% from the 5-year average. In addition, stocks of beef in cold storage continued to decline with a rapid depletion of fat beef trimmings inventories noted. Boneless beef stocks… Get the Complete Report »

Corn
Crop margins held relatively steady over the past two weeks as the market has generally been moving sideways since the middle of May. Crop condition and progress reports continue to suggest the potential for above-average yields this season. As of May 23, 93% of the crop had been planted with 71% emerged, compared to 87% planted and 55% emerged the week before. Both figures remain above the year-ago comparison of 80% and 50% respectively for the third week of May, as well as the 5-year average for this date at 89% and 62%, respectively. In addition, 71% of the crop was rated in good-excellent condition, up 4% from the previous week. The large jump in both emergence and crop condition… Get the Complete Report »

Soybean
Crop margins deteriorated slightly since the middle of May, as futures prices have remained under pressure from lower demand and favorable new-crop planting conditions. The USDA reported 53% of the crop planted as of May 23 with 24% emerged, compared to 38% planted last week and 13% emerged. While both figures are above the year-ago comparison at 44% and 15%, respectively, the planting progress trails the five-year average for the third week of May at 57% although the emergence is in line with the five-year average at 23%. The USDA has yet to report on crop condition ratings, although the first report should be released this coming week. Demand continues to slow down as weekly sales and shipments indicate that China has turned… Get the Complete Report »

Wheat
Crop margins continued to deteriorate since the middle of May as the market remains under pressure from weak demand and good new-crop progress reports. The USDA reported that 63% of the winter wheat crop is now heading, up from 52% last week. The latest figure compares to 66% last year and the five-year average of 68% for the third week of May. In addition, 66% of the crop was reported in good-excellent condition, unchanged from last week and well above both last year and the five-year average of 45% for this point in the season. Meanwhile, demand continues to be lackluster with export sales and inspections running at the low end of market expectations. Increased competition is even being noted in this hemisphere from suppliers in Europe and the Black Sea. Although new-crop margins for wheat to be harvested this summer are abysmal… Get the Complete Report »

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