Margin Watch: April

May 2, 2013 by Chip Whalen

Hog
Margins improved since the middle of April, particularly in nearby periods following a sharp rally in hogs that more than offset a similar increase in feed costs. While margins remain only slightly above average from a historical perspective, the recent strength in hog finishing profitability allowed Q3 margins to reach the 75th percentile of the past 10 years, offering an opportunity to initiate new positions for those looking to increase coverage. Recent strength in cash hogs appears to be supporting the rally in futures as demand concerns remain. Monthly Cold Storage data from USDA showed higher pork inventories in March despite an early Easter this year. Total pork in cold storage was 648.8 million pounds, up 6.3% from 2012 and 10% above the 5-year average. The growing stocks are a worrisome trend given … Get the Complete Report »

Dairy
Dairy margins dipped slightly since the middle of April as a sharp rise in corn and steady to lower milk prices combined to pressure profitability. In the bigger picture, forward margins still remain highly profitable, projected at or above the 90th percentile of the previous 10 years through the first quarter of 2014. As such, the current situation continues to offer great opportunities for dairies to protect strong levels of historical profitability. USDA reported corn planting as of Sunday, April 28 at only 5% complete, the slowest pace in 20 years which caused futures to trade limit up on Monday. Much of the increased acreage this season is projected to come from the Dakotas and Minnesota according to the Prospective Plantings report in March, and continued planting delays in those states may lead … Get the Complete Report »

Beef
Beef margins improved since the middle of April following higher cattle prices that more than offset an increase in corn costs over the past couple weeks. Deferred margins remain highly profitable against the October and December marketing periods in particular, existing above the 90th percentile of the previous 10 years. According to NASS, commercial beef production in March totaled 2.038 billion pounds, down 5.6% from last year although adjusting for the difference in slaughter days production was only down 1.1% from 2012. It appears a significant increase in bulls and cows in the slaughter mix has caused the choice/select spread to widen out, with more lean cow meat coming to market. Beef demand remains … Get the Complete Report »

Corn
Corn margins have improved over the last half of April primarily due to much stronger basis values. The main feature during the period has been domestic weather conditions. April turned out to be a frigid month coupled with drenching rains which has delayed corn plantings significantly. NASS recently reported 5% of the crop has been seeded to date compared to 53% the same time last year and 36% on average for the past decade. The current seeding pace ties the slowest on record with 1984 as the slowest starts to the planting season. Slow plantings tend to reduce the overall crop size potential come harvest as intended acres could potentially shift to other crops that would not face as adverse conditions during the critical growth phases as corn otherwise would face. That said, it is important to note that … Get the Complete Report »

Soybean
Soybean margins are higher since the middle of April entirely due to significant increases in basis values that more than offset slightly weaker futures’ prices. News during the period has been sparse as harvest in South America is nearing 50% complete with no significant deviations from expectations and domestic plantings won’t begin in earnest for a couple of weeks. NOPA released its results for March crushings on April 15, reporting 137.1 million bushels were crushed in the month of March, 2 million bushels less than what was anticipated. Given the tight old crop stocks, exports and crush will play a significant role in … Get the Complete Report »

Wheat
Wheat margins have improved moderately since the middle of April, particularly for deferred 2013 margins. Weather has been the feature during the period as record to near-record rainfall was witnessed throughout the Plains and Midwest which has helped replenish topsoil moisture levels. The rains have no doubt helped the crop; however, snow and deep freezes have also occurred which has cut into final yield potential. Winter crop conditions as reported by NASS have deteriorated over the last few weeks with 33% currently reported to be in good-to-excellent condition while 35% of the crop remains in … Get the Complete Report »

About the Author

There is a risk of loss in futures and options trading. Past performance is not indicative of future results. The information contained in this publication is taken from sources believed to be reliable, but is not guaranteed by Commodity & Ingredient Hedging, LLC, nor any affiliates, as to accuracy or completeness, and is intended for purposes of information and education only. Nothing therein should be considered as a trading recommendation by Commodity & Ingredient Hedging, LLC. The rules and regulations of the individual exchanges should be consulted as the authoritative source on all contract specifications and regulations.