Margin Watch: Mid-January

January 17, 2014 by Chip Whalen

Hog
margins continued to strengthen starting off the New Year, with all of 2014 now well above the 90th percentile of the past 10 years. In fact, Q2 has recently made a new 20-year high and when you look at all four quarters together as an average, the projected margin is the strongest it has been since 2004. This is an extremely rare opportunity currently facing hog producers to lock in excellent returns for the entire year. The margin strength continues to be driven by concerns over reduced pig flow and pork supply through the first half of the year due to PEDv, while feed costs are largely expected to remain in check. While these two factors should continue to influence near-term margin direction, producers should not get complacent as potential headwinds loom. It was recently announced that a vaccine … Get the Complete Report »

Dairy
margins started off 2014 where they ended 2013 by strengthening further through the first half of January. Soaring milk prices are responsible for all of the margin improvement since the end of last year as feed costs have been steady to higher in the past couple weeks. Nearby milk values in particular have strengthened significantly, with the February Class III contract up $2.50/cwt. in just the past two weeks. The market has largely responded to the spot cheddar market where blocks and barrels have rallied 20 and 30 cents, respectively, since the beginning of the year to the strongest level for January since 2008. Meanwhile, export data for dairy products continues to … Get the Complete Report »

Beef
margins improved considerably since the beginning of the year, particularly against the nearby February and April fat marketing periods. The margin improvement was due mostly to surging live cattle prices as feed costs held relatively steady over the past two weeks. Deferred margins improved as well but remain negative from the June marketing period forward, as live cattle prices rose more than feeder values since the end of December. While supply issues certainly continue to support the cattle complex, beef demand also appears to be quite strong and seems to be a supporting factor as well. Based upon weekly data, December steer and heifer slaughter was down 2% from 2012; however, using USDA’s daily estimates, last week’s total of 451,000 head would actually be … Get the Complete Report »

Corn
Nearby corn margins improved over the first half of January while deferred 2014 margins were relatively flat. Corn quarterly stocks reported by NASS came in at 10.426 billion bushels, well below the pre-report estimate as well as outside the low end of pre-report estimates. The much lower stocks on hand figure suggests better feeding in livestock rations during the first quarter. NASS finalized the 2013 production figures, lowering production by 64 million bushels to 13.925 billion bushels which remains record-large. National yields were reduced 1.6 bushels per acre while harvested area was increased 500,000 acres. The additional harvested area likely represented … Get the Complete Report »

Soybean
Nearby soybean margins improved over the first two weeks of January while deferred 2014 margins lost ground. Soybean quarterly stocks reported by NASS came in at 2.148 billion bushels, below the pre-report estimate but within the range of estimates. NASS finalized the 2013 production figures, raising production 31 million bushels to 3.289 million bushels, the third largest crop on record. The increased supply resulted from increased yields and higher harvested area. National yields were increased 0.3 bushels per acre while harvested area was increased 200,000 acres. The USDA updated its ending stocks estimate for the 2013/14 crop year, leaving ending stocks unchanged from the December forecast at 150 million bushels. The increased supplies revealed in the Annual Production report are expected to be consumed through exports and crush. Exports were … Get the Complete Report »

Wheat
Wheat margins have continued to fall to start the New Year as supply concerns have been easing. Wheat quarterly stocks as reported by NASS came in at 1.463 billion bushels, above the pre-report estimate but within the range of estimates. The larger stocks on hand are being attributed to lower feed and residual usage over the first half of the crop year from June-November. The Winter Wheat Seedings report showed fewer winter wheat acres year-over-year at 41.892 million acres planted, roughly 1.7 million acres less than expected. The largest deviation from estimate came in Soft Red Winter wheat acreage as NASS reported 8.4 million acres planted compared to pre-report estimates of 9.7 million acres. The USDA updated its ending stock forecast for the 2013/14 crop year, raising the … Get the Complete Report »

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