Margin Watch: Mid-December

December 16, 2013 by Chip Whalen

Hog
Hog finishing margins were mixed since the end of November, weakening in nearby Q1 while holding relatively steady in both Q2 and Q3. Now that we are in the month of December, we dropped tracking the current Q4 and started monitoring the fourth quarter of 2014 which is just off the 90th percentile of the previous 10 years. The other 3 quarters of next year remain well above the 95th percentile and continue to offer outstanding opportunities for hog producers to protect margins and secure profitability in 2014. Most of the weakness in nearby margins over the past couple weeks has resulted from a setback in the hog market. Despite the impact from … Get the Complete Report »

Dairy
Dairy margins strengthened significantly since the end of November due to a sharp rally in milk prices over the past couple weeks. Now that we are in the month of December, we stopped tracking the current Q4 period and added the fourth quarter of 2014 which is just over the 80th percentile of the previous 10 years. Both Class III and Class IV milk futures have surged recently in response to strong prices for both cheese and non-fat dry milk powder. Spot NDM prices on the CME are trading at their highest level since October 2007 while CME block cheddar prices on the spot market have been flirting over $1.90/lb. which is unusual for December and represents price strength that similarly has not been witnessed since 2007. It appears that dairy product markets remain … Get the Complete Report »

Beef
Beef margins deteriorated since the end of November, as live cattle prices declined while feeder cattle prices increased and corn held relatively steady. Although nearby placements continue to reflect positive margin opportunities through the marketing period against April live cattle, deferred margins remain negative beyond that. Nearby fat cattle prices have been under pressure due to an increase in slaughter weights which has led to higher beef production. The average dressed cattle weight for the week ending December 14 was 807 pounds, up 0.9% from last year as weights continue trending higher despite the removal of Zilmax earlier this fall. Part of the reason for the increased weights also stems from the fact that there are fewer cows in the slaughter mix as more heifers have been retained for increased dairy production. Competition for feeders meanwhile has helped to … Get the Complete Report »

Corn
Corn margins have been flat since the beginning of December as prices have given up early-month appreciation. The USDA updated its projection for ending stocks to be 95 million bushels lower than November’s expectation at 1.792 billion bushels. The reduction came as a result of increased demand from exports as well as corn for ethanol. Lower supplies due to increased demand tend to be positive for prices; however, the market continues to contend with large ending stocks domestically as well as prospects for larger global production. The USDA also updated its forecast for global stocks, reducing the … Get the Complete Report »

Soybean
Soybean margins have risen only slightly since the beginning of December. The USDA recently updated its expectation for domestic ending stocks to be 20 million bushels lower than November’s estimate to 150 million bushels. Increases in demand particularly for exports and domestic crush were the reason for the increase. Currently, exporters have sold nearly 97% of the USDA’s updated forecast with 8 full months remaining in the crop year. Global demand for soybean meal continues unabated as well forcing the crush rate higher. On the global balance sheet, the USDA made few changes, but did increase its forecast for Argentine production 1 million metric tons to 54.5 MMT due to … Get the Complete Report »

Wheat
Wheat margins have lost ground since the beginning of December as global supplies have exceeded expectations. The USDA recently updated its expectation for domestic ending stocks and increased the estimate 10 million bushels to 575 million bushels. The increase resulted from larger expected imports from Canada. While the current ending stock estimate remains below last year’s figures, the marketplace sees competition for exports and usage for feed as headwinds. Wheat is currently priced out of most Midwest livestock rations but does still pencil in other regions. On the global front, the USDA … Get the Complete Report »

About the Author

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