Margin Watch: Mid-October

October 18, 2010 by Chip Whalen

Hog
Margins deteriorated over the last 30 days, and rather significantly in the past week – particularly in nearby Q4 and Q1. The feed markets appear to have stabilized following the unprecedented USDA revisions between monthly reports. Hog values meanwhile continue to deteriorate on large supplies working their way through the pipeline, although optimism about liquidation is supporting deferred futures. This is making the margin much more attractive in Q2 and Q3, and our clients… Get the Complete Report »

Dairy
Margins declined significantly over the past two weeks, with nearby margins in Q4 now reflecting a loss where they were positive at the end of September. In fact, dairy producers are projected to lose money now through the third quarter of 2011, as feed costs and milk values have diverged. The October WASDE from the USDA was a shock to the market with corn yields declining a record 6.7 bushels per acre for a single month down to 155.8 bushels–below the range of pre-report estimates. As a result, ending stocks are now forecast at only 902 million bushels with a stocks/use ratio projected at 6.7%, the tightest since the 1995/96 crop year. Soybean meal prices have also advanced sharply over the past two weeks as soybean ending stocks were revised… Get the Complete Report »

Beef
Margins were mixed over the past two weeks, as nearby periods weakened while deferred margins in 2011 strengthened. Nearby live cattle futures have generally been flat to slightly higher since the end of September, while corn has rallied sharply which has hurt Q4 and Q1 margins against some fixed feed costs and feeder cattle purchases. In deferred Q2 and Q3 2011 however, the relationship between feeder cattle and fat cattle prices has more than offset the rise in corn prices and margins have improved as a result. The October WASDE report from the USDA has caused corn prices to rally sharply, with a record yield reduction… Get the Complete Report »

Corn
Margins have improved significantly over the last two weeks, as the futures market has accounted for all of the gain. NASS reported U.S. corn yields at 155.8 bushels per acre, down 6.7 bushels from the estimate in September, the largest reduction from September to October on record. NASS also adjusted harvested acres 258,000 higher from the September report. The net result was a reduced estimated carryout from USDA of 902 million bushels from 1.116 billion in September, sending the stocks/use ratio to the second lowest level in history at 6.7%. Out of the years NASS reduced the domestic corn yield… Get the Complete Report »

Soybean
Margins have improved significantly over the last two weeks primarily due to a higher futures market. NASS reported U.S. soybean yields at 44.4 bushels per acre, down 0.3 bushels from the estimate in September. NASS also reduced the amount of planted and harvested acres by 1.2 million. USDA raised domestic crush and export demand by a combined 50 million bushels, but did lower residual usage by 38 million bushels. The net result was a lower new-crop carryout to 265 million bushels, sending the stocks/use ratio to 8.0%. Export sales continue to drive higher prices. Sales for soybeans are currently… Get the Complete Report »

Wheat
Margins have improved moderately over the last two weeks, as the futures market has recovered from the lows established at the beginning of the month. NASS reduced harvested acres by 600,000, and also reduced yields by 0.2 bushels per acre. The net result after a few demand adjustments resulted in a lower carryout of 853 million bushels, down from 902 million estimated in September. Global weather issues have abated a bit, but continue to influence market direction. Rains in Russia have allowed growers to seed a higher percentage of land than previously thought, although the Russian ban on exports will continue well into 2011 and lifting of the ban will not be considered until the government has an idea of what size the crop will ultimately be. Ukraine has also issued… Get the Complete Report »

About the Author

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