Margin Watch: March

April 1, 2011 by Chip Whalen

Hog
Margins improved sharply since the middle of March, as soaring hog prices more than offset the rising cost of feed – even given the sharp advances on corn the past two days in response to USDA’s quarterly stocks and prospective plantings reports. Much of the reason for the margin improvement is that the last report on March 15 corresponded to the low from the significant selloff in hog futures in response to the Japanese earthquake and tsunami. While losses are still being tallied and the impact of the event measured, it appears most analysts concur that the country will need to import a large quantity… Get the Complete Report »

Dairy
Margins were mixed over the past two weeks, as profitability in nearby quarters improved while slipping slightly in Q4 and Q1 of next year. Milk prices recovered since the middle of March, although more so in deferred contracts rather than nearby. Feed costs meanwhile have soared – particularly for corn – as USDA revealed March 1 stocks some 200 million bushels below trade expectations. Apparently ethanol, and/or feed demand was much stronger in the Dec/Jan/Feb period than previously assumed which raises the importance of timely planting this spring and favorable weather conditions over the summer. Milk production in February was pegged at 15.055 billion pounds, up 2% from last year according to USDA, although cow numbers were unchanged from January with the increase resulting from greater… Get the Complete Report »

Beef
Production margins continued to strengthen during the second half of March as soaring live cattle prices have more than offset the rising costs of corn and feeders. In particular, nearby margins in Q2 and Q3 showed the greatest improvement where some or all of these costs are already fixed, allowing the rise in fats to go completely to the bottom line. New contract highs have been scored over the past two weeks in corn, feeder and live cattle prices, with underlying cash market fundamentals supportive of further gains. USDA released their quarterly stocks and prospective plantings reports this week, and the data was very bullish for corn. March 1 stocks were 200 million bushels below trade expectations, and old-crop futures are limit up two days in a row since the report… Get the Complete Report »

Corn
Margins have improved significantly since the middle of March, as futures have paced the gains. NASS reported the quarterly stocks figure at 6.522 billion bushels. The figure came in below the average trade estimate, and below the low of the range of estimates. Needless to say, this was a bullish influence on the market. The 2nd quarter usage represents roughly 25.8% of the entire year’s usage. The number reported equaled 26.05% of projected demand, implying that currently high prices have done little to ration demand. NASS also reported prospective planting intentions for this coming crop year. The figure reported was 92.178 million acres, slightly higher than the average estimate, but in-line with expectations. The market will shift its focus now to how the planting season comes along, with weather being the key influence. Export sales have ramped up significantly during the most recent break in price, and are now running roughly 150 million… Get the Complete Report »

Soybean
Nearby soybean margins have improved significantly since the middle of March, as the futures market has added back premium. NASS reported the quarterly stocks figure at 1.249 billion bushels. The figure came in below the average trade estimate, and below the low of the range of estimates. The report was viewed as bullish for prices. The 2nd quarter usage represents roughly 30.9% of the entire year’s usage. The number reported equaled 30.64% of projected demand. NASS also reported prospective planting intentions for this coming crop year. The figure reported was 76.609 million acres, down 1% from last year, and in-line with pre-report expectations. The market will shift its focus to early planting weather and premiums will be built in if progress is impeded. Export sales have slowed a bit during… Get the Complete Report »

Wheat
Margins improved significantly since the middle of March, as the futures market strengthened during the period. NASS reported quarterly stocks at 1.424 billion bushels. The figure came in slightly above the average trade estimate and was viewed as neutral to the market. The 3rd quarter usage represents roughly 20.5% of the entire year’s usage. The number reported was right in-line with that average. NASS also reported prospective planting intentions for all wheat. The figure reported was 58.0 million acres, slightly above the average trade estimate, and 4.4 million acres larger than last year. The market’s focus will continue to be on the weather, and if the winter crop conditions can improve at all. It is important to note that this year’s crop entered dormancy… Get the Complete Report »

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