Margin Watch: Mid-June

June 16, 2013 by Chip Whalen

Hog
Margins improved significantly since the end of May on a combination of rising hog prices and lower feed costs. Hog finishing margins are now back above the 70th percentile of the previous 10 years in each of the next 4 quarters through the first half of 2014, offering producers another opportunity to protect strong historical profitability on the farm. USDA released their June WASDE report which updated the new-crop balance sheet for both corn and soybeans. Contrary to widespread expectations prior to the report, USDA left corn acreage unchanged from May although did lower their yield estimate by 1.5 bushels per acre to 156.5 bpa, citing the delayed planting this spring. As a result … Get the Complete Report »

Dairy
Dairy margins were fairly steady over the past two weeks since the end of May, with declining feed costs and milk prices roughly offsetting one another. From a historical perspective, forward margins remain very strong above the 80th percentile of the previous 10 years through the first half of 2014, and at the 90th percentile in Q4. USDA released their June WASDE, which updated the new-crop balance sheet for both corn and soybeans. Pre-report expectations were for corn ending stocks to decline 246 million bushels from May following a reduction in acreage due to the delayed spring planting. USDA left the acreage estimate unchanged, although yield was lowered 1.5 bushels per acre to 156.5 as more corn is expected to pollinate under less ideal conditions later in the summer. As a result … Get the Complete Report »

Beef
Beef margins deteriorated since the end of May, particularly in nearby marketing periods, although forward periods continue to reflect historically strong profitability where feeder costs remain open. The December and February marketing periods in particular are still around the 90th percentile of the previous 10 years, offering an excellent opportunity for feedlots to protect these margins. USDA released their June WASDE report which updated the new-crop corn balance sheet. Contrary to pre-report expectations, USDA did not adjust the acreage figure lower in consideration of the delayed spring planting. The yield estimate was reduced by 1.5 bushels per acre to 156.5 though, as more corn is expected to pollinate later in the summer now in generally less ideal conditions. As a result, ending stocks were … Get the Complete Report »

Corn
Corn margins have weakened slightly since the beginning of June. The University of Illinois updated its farmland crop estimates for both 2012 and 2013 with the most recent revenue and cost estimates now being reflected in the charts below. Higher than anticipated costs coupled with lower yields last fall have nearby corn margins now in the red while deferred margins for 2013 are still positive. The USDA recently updated its forecast for old crop ending stocks, increasing the expected balance 10 million bushel to 769 million bushels, which came as a result of higher use for ethanol, food but also higher imports. Old crop exports were again lowered by 50 million bushels to the lowest level since 1971-72. The USDA also updated its expectations for new crop, reducing yields by 1.5 bushels per acre to 156.5 bushels. USDA chose not to modify planted or harvested acres in this report, likely waiting until the June 28 Planting Report to adjust that figure. Expected production was … Get the Complete Report »

Soybean
Soybean margins have weakened slightly since the beginning of June. The University of Illinois updated its farmland crop estimates for both 2012 and 2013 with the most recent revenue and cost estimates now being reflected in the charts below. Counterbalancing adjustments were made resulting in nearly zero change for profitability for old or new crop. The USDA reported an unchanged estimate for old crop ending stocks at 125 million bushels by the end of the crop year. Although stocks are expected to be unchanged, demand categories were shuffled around with USDA’s crush estimate increasing 25 million bushels to 1.66 billion bushels reflecting the demand for the international markets as well as domestically.
Wheat margins have lost ground since the beginning of June. The University of Illinois updated its farmland crop estimates for both 2012 and 2013 with the most recent revenue and cost estimates now being reflected in the charts below. Higher costs in the U of I model had a bigger impact than better yields causing nearby margins to be slightly more negative than previously anticipated. The USDA recently updated the domestic old crop balance sheet, increasing expected supplies by 15 million bushels due to a reduction in exports as global competition has increased. The USDA also updated its new crop balance sheet, lowering ending stocks 11 million bushels to 659 million bushels. Production is forecast 23 million bushels higher as yields as generally better than previously thought, up 0.5 bushels per acre from the May estimate. Offsetting the increased supplies was an increase in … Get the Complete Report »

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