Margin Watch: March

April 1, 2013 by Chip Whalen

Hog
Margins improved significantly since the middle of March due mostly to a sharp drop in feed prices. USDA released their quarterly stocks and Prospective Plantings reports on Thursday, and the corn stocks figure in particular was considered quite bearish. USDA pegged March 1 corn stocks at 5.4 billion bushels, 370 million above the average trade guess and outside of the pre-report range of estimates between 4.916 and 5.248 billion bushels. Contrary to trade expectations, the stocks figure implies very weak domestic feed and residual use during the December-February quarter and suggests the government may lower the annual projection in the upcoming April WASDE. While not as bearish as corn, the soybean stocks on March 1 were pegged at 999 million bushels which likewise was above the average trade estimate but within the range of expectations. As a result, soybean meal prices have … Get the Complete Report »

Dairy
Dairy margins improved significantly since the middle of March due to a combination of both higher milk prices and lower feed costs. Margins for dairy producers are now at or above the 90th percentile of the previous 10 years through the first quarter of 2014, offering tremendous opportunities for dairies to protect historically high levels of profitability. USDA released their quarterly grain stocks and Prospective Plantings report last Thursday, and the corn stocks figure in particular was quite bearish. USDA pegged March 1 corn stocks at 5.4 billion bushels, 370 million above the average trade guess and outside of the range of pre-report expectations between 4.916 and 5.248 billion bushels. The figure suggests much lower … Get the Complete Report »

Beef
Beef margins improved since the middle of March, with deferred periods maintaining very high levels of historical profitability at well above the 90th percentile of the previous 10 years. A sharp drop in corn prices that resulted from a bearish USDA quarterly stocks report was the main catalyst behind stronger profit margins over the past couple weeks. USDA reported March 1 corn stocks at 5.4 billion bushels, 370 million above the average trade guess and outside of the range of pre-report expectations between 4.916 and 5.248 billion bushels. The figure suggests domestic feed demand in the December-February quarter was down 50% from the first quarter and 30% below a year ago which is much different from what most traders and analysts had anticipated. As a result, it is likely the USDA will lower … Get the Complete Report »

Corn
Nearby corn margins have improved since the beginning of March as both futures’ prices and basis have moved higher. The USDA recently updated its balance sheets for the 2012/13 crop year, reporting an unchanged outlook for ending stocks at 632 million bushels. Some shuffling between categories did occur, as feed demand was increased by 100 million bushels due to the expanding poultry sector. Demand for exports was lowered by 75 million bushels to 825 million bushels, the lowest since the 1971/72 crop year, due to the slow pace of sales and shipments to date. Imports were increased 25 million bushels. Domestic crop insurance levels have been set at $5.65/bushel and will play an important role in marketings this year given the disastrous drought witnessed last year. On the global front, the USDA reduced expected … Get the Complete Report »

Soybean
Soybean margins have declined since the middle of March as futures’ prices have set back. NASS recently reported soybean stocks in all positions at 999 million bushels, down 27% from last year. The figure came in above the average pre-report estimate but within the range of expectations and was viewed as somewhat bearish. The stocks figure implies a negative residual usage figure, primarily used as a balancing item, which has only occurred one other time during the second quarter. NASS also released the results of their planting intentions survey that was conducted over the first two weeks of March. U.S. farmers intend to plant 77.1 million acres this year, slightly below last year and well below industry expectations. Depending on spring weather, this lower seedings figure could help to support … Get the Complete Report »

Wheat
Wheat margins have declined significantly as both futures’ prices and basis values have weakened. NASS recently reported March 1 wheat stocks at 1.234 billion bushels, above market expectations and at the high end of the range of estimates. The figure implies a slower feed rate than expected and seems counter to anecdotal reports in the cash market with news of wheat making its way into feed rations and ethanol grind. NASS also reported all wheat acreage to be 56.4 million acres, up from 55.7 million acres last year and right on with the pre-report expectation. Focus has begun to shift to crop conditions of the winter crop as it comes out of dormancy. Although conditions remain low relative to historic metrics, conditions in many of the plains states have … Get the Complete Report »

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