Margin Watch: Mid-December

December 16, 2012 by Chip Whalen

Hog
Margins continued to deteriorate since the beginning of December as a result of generally higher feed costs and sliding hog prices. Hog finishing margins remain negative through the first quarter of 2013, but continue to show positive values through the remainder of the year. On the cost side, corn prices have fallen through the first half of December as domestic and export demand has waned due to historically high prices. South American weather fears, too, have abated somewhat which has opened the door to slightly weaker prices. The protein component has moved higher through the period, as soybean meal demand has been near record large for both exports and domestic usage. At the same time, fundamentals on the revenue side have been a bit negative. Weekly hog slaughter has remained … Get the Complete Report »

Dairy
Dairy margins were mixed since the beginning of December, weakening in Q1 but flat to stronger in all deferred periods. Feed prices were mixed over the period as demand for protein remains at historic levels globally while demand for corn and energy needs has been subdued. USDA recently increased the demand profile for soybean meal, increasing the estimate for exports by 300,000 short tons due to the rapid pace of sales and shipments to date and lowering domestic disappearance 100,000 short tons. Foreign demand for soybean meal continues to support prices. Corn prices remain range-bound as the marketplace has contended with lackluster domestic demand, production uncertainties out of South America and historically … Get the Complete Report »

Beef
Beef margins were mixed since the beginning of December, again strengthening in nearby marketing periods and weakening in August and October periods. From a historical basis, beef finishing margins remain strong for spring periods as well as for those in late 2013 to early 2014. Feed costs have fallen of late as domestic corn demand continues to lag. The export sales pace for corn is currently near a 10-year low in terms of commitments relative to what the USDA projects will ship out by the end of the marketing year. Further, South American production concerns have relaxed somewhat as Argentina’s weather has normalized of late and Brazilian weather has been a bit drier, aiding planting efforts. Although the weather for Argentina has normalized, USDA recently lowered the production potential due to the delayed planting status. Cattle prices have been … Get the Complete Report »

Corn
Corn margins have improved slightly since the middle of October as futures prices have strengthened while basis levels remain elevated. Harvest progress continues to advance at a rapid, near-record pace this year, with 91% of the crop harvested to date. Debates surrounding total production remain, as some market participants argue the USDA is still too high on the harvested acres estimate. USDA announced it would not make any changes to abandonment until the January crop report when production for the crop year is finalized. Demand prospects therefore will be the main focus for price direction in the near-term. Weekly ethanol production remains below last year’s level and is currently running 7.8% behind last year’s pace while the USDA estimates … Get the Complete Report »

Soybean
Nearby soybean margins have improved since the middle of October while deferred 2013 soybean margins have likewise strengthened during the period. Soybean harvest has advanced at a near-record pace this year as plant maturation occurred much earlier than normal due to the extreme heat this summer and early spring planting. The latest reports show that 87% of the crop has been harvested. With harvest advanced, the market will begin determining whether demand forecasts are achievable. NOPA recently released its crush figure for September, reporting 119.7 million bushels crushed for the month, up from 110.3 last year. NOPA members represent roughly 95% of all domestic crushing plants which would translate to approximately 126 million bushels crushed for the month including non-members of NOPA. The current USDA projection is for a crush rate of 1.54 billion bushels, translating to just over 128 million bushels per month. Export sales and shipments have been … Get the Complete Report »

Wheat
Wheat margins have strengthened a bit since the middle of October as futures prices have moved higher. Winter wheat plantings are now 88% complete with 63% of the crop emerged. Weather forecasts are slightly wetter past November 1 which should help early crop development prior to dormancy. Initial crop conditions were reported to be 40% good-to-excellent versus 46% at this time last year. On the global front, Ukraine recently announced a ban on exports after November 15 due to the poor harvest this past year and a lack of exportable surpluses. Russia also has produced a smaller crop and has seen domestic prices for wheat, flour, and barley increase of late causing the market to worry whether they will likewise place restrictions on exports as they did in 2010. With Egypt and China sourcing … Get the Complete Report »

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