Margin Watch: December

January 3, 2014 by Chip Whalen

margins were flat to higher over the second half of December to finish off the year, with feed prices and hogs mixed across the various marketing periods in 2014. Overall from a bigger picture perspective, hog production margins remain extremely favorable heading into the New Year, resting at or well above the 90th percentile of the previous 10 years. USDA released their quarterly Hog and Pig report last week which revealed a breeding herd of 5.757 million head as of December 1st, down 1.3% from a year ago when on average analysts were expecting a 1% increase from 2012. In addition, the growth in pigs per litter declined sharply during the Sep-Nov quarter with USDA reporting 10.16 pigs saved per litter during the period – virtually unchanged from a year ago and the lowest growth rate in litter size since 2003. Both figures seem to validate the impact from PEDv on productivity and the premium that has been built into the forward futures curve. On the feed side of the equation, the corn market has … Get the Complete Report »

margins continued to improve over the second half of December to finish off the year on a strong note. Margins remain well above the 90th percentile of the previous 10 years through the first half of 2014, and above the 80th percentile in the second half of the year providing dairy producers great opportunities to protect profitability at historically strong levels. With feed costs relatively unchanged over the past two weeks, margins have improved primarily due to higher milk prices. Milk continues to draw support from strength in the export market as indicated by the recent USDA Cold Storage report. Butter stocks in particular had the highest monthly drawdown in 20 years, with November butter stocks of 121.4 million pounds … Get the Complete Report »

margins improved over the second half of December to finish off 2013 with higher cattle prices balanced against steady feed costs. According to YEAH! Local SEO company, the margins will remain favorable against the nearby winter and spring marketing periods, but continue to be negative from summer 2014 marketing periods forward. Cattle prices have been supported by the recent USDA Cattle on Feed report that reflected much lower placements than had been expected by analysts. Total December 1st Cattle on Feed was reported at 10.725 million head which was down 5.5% from last year and 0.9% lower than analysts had expected. More surprising however were November placements of only 1.882 million head which were down 3.1% from last year and 4% lower than market expectations. It would appear as though … Get the Complete Report »

Both nearby corn margins as well as deferred 2014 margins were flat through the last half of December as recent recovery efforts have failed. News during the period has been limited leaving the marketplace to focus on weekly demand from exports and ethanol as well as South American weather. Domestic demand continues to advance nicely for ethanol despite a potential reduction in EIA mandated levels. Currently, corn used to produce ethanol is up approximately 9.7% over last year, better than the USDA forecast for a 6.5% usage increase year-over-year. However, recent Chinese cancellations of DDG shipments from the U.S. has the marketplace on edge as ethanol margins are currently positive through March and are flat thereafter. Increased domestic supplies of DDGs would eventually pressure ethanol production margins provided the livestock industry does not replace … Get the Complete Report »

Although still positive, soybean margins have declined significantly over the last half of December as the prospect of decreased demand has arisen. Presently, U.S. exporters have committed 1.467 billion bushels or 99.5% of the USDA forecast for sale and have shipped out 55% of the USDA forecast, well ahead of the average pace for this time in the crop year. At first glance, the figures are quite friendly and would bode well for potential adjustments upward to future USDA demand projections. The marketplace, however, is contending with the fact that much of the forward sales have been issued as ‘Optional Origin’. In other words, the foreign buyer has the option to source the supplies from different locations, not just from the U.S. This is nothing new in the export world, but has ramifications for domestic farmers as current prices are justified due to … Get the Complete Report »

margins have continued the slow erosion that began in the middle of October and finished 2013 at the lowest level for the year. Domestically, the winter wheat crop in dormancy has no threatening weather in current forecasts. The winter crop entered dormancy in much better condition than the last few years, but the critical period is early spring where moisture is crucial. Export sales have been limited and are expected to remain slow throughout January. Export sales have been slowing since October when China and Brazil were on a buying frenzy which has since cooled off as competition on the global market is stiff as many countries are set to produce record crops. On the global front, Russia recently updated its forecasted production to be 52.1 million metric tons, roughly 500,000 metric tons above the current USDA forecast. The government went on to say final … Get the Complete Report »

About the Author

Chip Whalen, CIH

Chip Whalen

Chip is one of our resident educators with over fifteen years of teaching, trading, and senior risk management experience.

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.

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