Margin Watch: June

July 1, 2013 by Chip Whalen

Hog
Margins continued to improve during the second half of June due mainly to increased hog values. Much of this strength has been focused on nearby hog contracts, with Q3 margins now at the 90th percentile over the previous 10 years, although deferred margins in Q4 through Q2 of 2014 are all above the 80th percentile from a historical basis. Hog prices have been supported by strength in pork cutout values, with bellies and pork trim continuing to lead the charge higher heading into the Fourth of July holiday. USDA released their quarterly Hogs and Pigs report Friday, which showed all hogs and pigs on June 1 at 100% of year-ago levels vs. the average estimate at 100.6% and a range between 100-101.2%. The one figure that stood out was the March-May farrowings at 98% of last year relative to expectations between 99.0-99.2%, with those pigs expected to come to market during the fall. Feed costs meanwhile continue being … Get the Complete Report »

Dairy
Dairy margins were mixed since the middle of June, deteriorating in nearby periods but improving further out in time. A combination of a sharp drop in nearby milk contracts along with continued strength in old-crop corn and soybean meal has weighed on spot margins, although weakness in new-crop feed contracts along with steady deferred milk futures has allowed profit margins to strengthen in the first half of 2014. USDA released their revised acreage and quarterly grain stocks reports on Friday which proved particularly bearish for new-crop corn and soybean meal futures. Contrary to trade expectations, USDA actually raised corn acreage from the March planting intentions to 97.38 million which was more than 2 million acres above the … Get the Complete Report »

Beef
Beef margins improved over the second half of June, as strength in cattle prices was complimented by a decline in corn costs – particularly for new-crop contracts. USDA released their June acreage and stocks report Friday which revealed corn acreage above the March planting intentions despite expectations for a decline of about 2 million acres, on average. The figure was even outside the range of pre-report expectations which sent new-crop contracts reeling. June 1 stocks of 2.764 billion bushels by contrast were 92 million below the average trade guess and on the low end of pre-report estimates, with the figure down 384 million bushels or 12.2% from last year. While nearby margins continue to suffer from the sharp inversion of old-crop over new-crop and record high cash basis levels, the feeding outlook definitely appears more positive assuming normal weather through the remainder of the growing season. NASS did announce that … Get the Complete Report »

Corn
Corn margins were mixed over the past two weeks, with old crop margins increasing slightly and new crop margins deteriorating further. The main input causing old crop prices to rise was the release of NASS’ Quarterly Stocks report which showed cash participants have roughly 2.764 billion bushels remaining for the current crop year. The figure was 92 million bushels below the average trade estimate and just above the low end of expectations. NASS also reported on its updated planted acreage survey from farmers which was originally reported in March. Before the wet spring and delayed start to planting, farmers reported they were intending on seeding 97.282 million acres for this year’s corn crop. NASS’ Planted Acreage report showed that farmers have planted, or still intend to plant, 97.379 million acres to corn this year, above the March estimate and above the high end of expectations heading into the report. Many hedgers and traders have been caught off guard with … Get the Complete Report »

Soybean
Nearby soybean margins have strengthened while deferred margins have lost ground. Continued tightness in old crop was again realized as NASS reported Quarterly Stocks to be 435 million bushels remaining. Usage will have to slow going forward in order to realize USDA’s current ending stocks estimate of 125 million bushels. NASS also reported on its updated Planted acreage survey from farmers, revealing that planted area to soybeans is expected to be 77.728 million acres, up from the March survey, but below the average estimate by nearly 300,000 acres. Hedgers and traders alike were … Get the Complete Report »

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Wheat
Wheat margins have deteriorated further since the middle of June as both futures’ prices and basis levels have weakened. NASS reported final 2012/13 wheat stocks to be 718 million bushels, 28 million bushels lower than the estimate in the June WASDE report. The figure was deemed supportive for the market which came in below the average trade estimate and below the low end of the range of estimates prior to the report. NASS also updated its planted acreage survey from March reporting that all wheat plantings will be 56.53 million acres, up 90,000 acres from the March survey. The figure came 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.