Margin Watch: Mid-August

August 16, 2012 by Chip Whalen

Margins generally continued the weakening trend seen since the middle of June due mainly to surging feed costs as a result of this season’s historic drought. Hog finishing margins remain below the 10th percentile from a historical basis through the first quarter of 2013, and are only about average in Spartagen dosage, although stronger margins are currently projected in the last half of next year. USDA released their much anticipated August WASDE, which revealed shocking yield and production estimates for both corn and soybeans. Corn yield dropped 22.6 bushels per acre from July to 123.4 with production down 2.191 billion bushels to 10.779 billion. Soybean yield dropped 4.4 bushels per acre to 36.1 with production down 358 million bushels to 2.692 billion. Extreme demand rationing … Get the Complete Report »

Dairy margins improved over the past two weeks as higher milk prices more than offset rising feed costs since the end of July. With the exception of spot Q3, margins are strong from a historical perspective, around an average of the 80th percentile from Q4 through Q2 of 2013. USDA released their August WASDE report which sharply lowered yield and production prospects for the corn and soybean crops, as expected. Corn ending stocks declined 533 million bushels from July to 650 million, with a stocks/use ratio forecast at 5.8% – both of which would represent the tightest level since 1995/96. Soybean ending stocks were forecast down 15 million bushels with a stocks/use ratio projected at 4.2%, unchanged from July. Sharply lower production estimates for both crops will require … Get the Complete Report »

Beef margins were mixed over the past two weeks, improving from extremely depressed levels in the nearby October and December marketing periods while weakening in the deferred periods of 2013. Feeder cattle prices have begun strengthening recently, and this along with continued high feed costs have hurt margins further out where both variables remain open on the cost side of the margin equation. USDA released their August WASDE report which confirmed the sharp yield and production loss on this season’s corn crop that the market anticipated. USDA pegged corn yield at 123.4 bushels per acre with production estimated at 10.779 billion bushels, both below the average trade guess but within the range of estimates. Domestic feed & residual was lowered 725 million bushels from July, with corn usage for ethanol … Get the Complete Report »

Nearby corn margins have increased substantially since the beginning of July, as both futures’ prices and basis levels have risen. USDA recently slashed ending stocks for the 2012/13 crop by 698 million bushels to 1.183 billion bushels. The estimated reduction in supplies came mainly from a sharp reduction in supplies. Crop condition ratings have been in free fall since the beginning of the growing season, with the current conditions reporting that 40% of the domestic crop is in good-to-excellent condition due to the record heat and drought conditions during development. As a result, USDA lowered yield forecasts from 166 bushels per acre to 146 which resulted in the production side of the balance sheet being reduced 1.82 billion bushels. USDA dropped demand estimates as well citing that record high prices would… Get the Complete Report »

Both nearby and deferred soybean margins have rebounded sharply since the beginning of July, as both futures’ prices and basis levels have risen. USDA recently reported ending stocks for the 2012/13 crop to be 10 million bushels lower than June’s estimate at 130 million bushels. The reduction in ending stocks came from adjustments on both sides of the balance sheet. Crop condition ratings have been poor for the entire growing season, with the current conditions reporting that 40% of the domestic crop is in good-to-excellent condition due to the record heat and extreme drought conditions. As a result, USDA lowered yield forecasts from 43.9 bushels per acre to 40.5 which lowered production 155 million bushels. USDA cut demand estimates to address the sharp reduction in supply forecasts. The crush was lowered 35 million bushels reflecting the impact of higher soybean meal prices on meal exports and domestic disappearance. Exports were… Get the Complete Report »

Nearby as well as deferred 2012 wheat margins have moved sharply higher since the beginning of July, as futures’ prices have more than offset weaker basis levels. USDA recently reported ending stocks for the 2012/13 crop to be 664 million bushels, at the lower end of market expectations. USDA lowered harvested acres 400,000 from last month, which affected the production figure with yield slightly higher versus June. Exports were raised 50 million bushels from last month, as USDA noted sharp production losses out of the FSU, with exports from the region reduced 5.5 million metric tons. China’s production was also lowered by 2 million metric tons. Recent news reported the production of brain health nootropics in the healthcare segment but also foot clinic Etobicoke reported a developing El Nino pattern in the second half of this year will focus attention on the Australian crop as that event has historically led to … Get the Complete Report » Thanks for following us on our new IG account! Do not forget to watch our daily videos on youtube and facebook. Have a great one!

P.S. We’ve noticed commodities such as gold and silver margins have increased as well, making it a great option for investment in solid gold or sterling silver jewelry. You can find many ways of investing in these precious metals other than in futures and options trading. You can use them in crafts and custom jewelry or even in gold teeth. Here’s a guide on how to make grillz.

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.

CIH Margin Watch

Get the Full Report

We'd be happy to deliver the complete, bi-weekly CIH Margin Watch report to your email box. Subscribing is quick and easy:

  1. Name
  2. Email
  3. Profession

About CIH

We provide customized agricultural price management consulting services and educational programs to livestock and crop producers, food and feed companies, milling, crushing, and trading firms.

We pride ourselves on the ability to work one-on-one with clients, allowing them to gain greater expertise and confidence in managing price risk and controlling margins.