Margin Watch: Mid-August

August 17, 2013 by Chip Whalen

Hog
Margins strengthened significantly since the end of July on a combination of higher hog prices and lower feed costs for corn in particular. Both Q4 and Q1 of 2014 are between the 95th and 100th percentiles of the previous 10 years, presenting hog producers with tremendous opportunities to protect forward profitability, while Q2 of next year is nearing the 90th percentile itself. USDA actually released what was considered a bullish report for both corn and soybeans at the beginning of this week in their August WASDE, however traders appear to be looking past the yield projections to the potential for much larger … Get the Complete Report »

Dairy
With the exception of spot Q3, dairy margins generally deteriorated since the end of July due to a sharp drop in milk prices that was not completely offset by lower feed costs. Forward margin projections have now dropped back below the 80th percentile in Q4, with margins in Q1 and Q2 now below the 70th percentile of the previous 10 years. Milk prices have come under pressure as recently improved dairy production margins have given rise to expectations of expanding milk production. While recent milk production trends aren’t necessarily signaling growth, dairy cow slaughter rates have been declining. Producers likely will continue enjoying elevated cow cull revenue due to smaller numbers of cattle on feed and lower beef production; however, better … Get the Complete Report »

Beef
Beef margin projections improved significantly since the end of July on a combination of higher cattle prices and lower feed costs. Forward margin projections are now above the 90th percentile of the previous 10 years in the October through April marketing periods, with exceptional strength noted in December and February in particular where new-crop corn prices start coming into play. USDA released their August WASDE report at the beginning of the week which was surprisingly bullish relative to trade expectations. NASS pegged US corn yield below the range of pre-report estimates at 154.4 bushels per acre, down 2.1 bushels from July. Given the slow development in this year’s crop, a 5-year average of ear weights was used to calculate the yield projection, and many analysts feel that including last season’s drought-reduced figure as 20% of that average distorted the figure. While several traders believe from Situs judi Online 99cash SBOBET is the best Sports Betting Odds that … Get the Complete Report »

Corn
Corn margins have rebounded to finish the period slightly lower after putting in new lows for the year. The USDA recently updated its supply and demand forecasts for the 2013/14 crop year, and surprised market participants by lowering the national yield average by 2.1 bushels per acre to 154.4 bushels. Pre-report expectations were for an increase in yield due to the favorable weather thus far in the growing season. Crop condition ratings have been above average all season and would suggest yields still have the potential to be … Get the Complete Report »

Soybean
Soybean margins have surged since the beginning of August as prices have risen moderately. The USDA recently updated its projection for 2013/14 ending stocks, and lowered production due to reduced yield prospects and fewer harvested acres. In July, NASS said they would re-survey soybean farmers as to their planting intentions for this year due to late planting. NASS ended up lowering harvested area by 500,000 acres. NASS also lowered the national yield potential 1.9 bushels per acre to 42.6 bushels. Interestingly, NASS had very little actual field samples to make a more accurate estimate for this year’s production and chose to use a five-year average of plant populations to form the yield estimate in this report. However, current crop conditions are quite … Get the Complete Report »

Wheat
Wheat margins have been extremely weak since the beginning of August, mainly due to weaker basis values. The USDA recently updated its forecast for the 2013/14 crop, lowering ending stocks 25 million bushels to 551 million bushels. The main adjustment to the balance sheet came on the demand side as exports were raised 25 million bushels reflecting the continued strong sales to date and an increased outlook for Chinese imports. The winter crop is nearly harvested and has aided in putting a cap on price due to increased supplies in the pipeline. The spring crop has just started being harvested with the progress coming in at 6% complete as of August 11. This is … Get the Complete Report »

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