Margin Watch: Mid-November

November 18, 2013 by Chip Whalen

Margins eased since the end of October, following weakness in hog prices and some strength in soybean meal while corn was steady to lower through the first half of the month. From a historical perspective, hog finishing margins remain extraordinarily strong just shy of the 100th percentile of the previous 10 years. The market still appears to be grappling with questions concerning hog supply given the PEDv outbreak and its potential impact on marketings heading into 2014. While hog slaughter continues to run behind the year-ago pace, it has been noted that the pace of marketing surged last year in response to soaring feed costs as some smaller producers liquidated herds. Meanwhile, weights continue increasing due to cheaper and more plentiful … Get the Complete Report »

Dairy margins advanced further over the second half of October, particularly in nearby periods as milk prices strengthened while feed costs declined. Margins are around the 90th percentile of the past 10 years in spot Q4 as well as the first quarter of 2014, while deferred margins are just over the 80th percentile in Q2 and Q3. Milk prices are obviously responding to strong demand signals, with August export figures reflecting significant year-over-year growth. Nonfat dry milk exports totaled 50,542 metric tons, up 19% from August 2012, while U.S. cheese exports hit a monthly record of 28,133 metric tons which was up 40% from last year. At the same time, the monthly Cold Storage report showed a sharp … Get the Complete Report »

Beef margins were mixed over the last half of October, steady to higher in nearby marketing periods, weaker in the April marketing period, and stronger in summer marketing periods where negative profitability is still indicated for cattle placed on feed during winter months. The focus continues to be on the nearby autumn placement period, where profitability can still be secured above the 90th percentile of the previous 10 years against fat cattle to be marketed against April futures. The past two weeks were marked by steady to declining cattle prices while corn was likewise weaker. With the government now open again, the market is anticipating the release of the … Get the Complete Report »

Corn margins have weakened slightly since the beginning of November as the marketplace continues to price in a record crop. The USDA is back and recently reported corn ending stocks to be 32 million bushels higher than the August estimate at 1.887 billion bushels. The increased stocks forecast resulted from an expectation of a larger crop that would be offset by increased demand. Total production was increased 146 million bushels to a record 13.989 billion bushels as national yields were increased 5.1 bushels per acre to 160.4 bpa and harvested area reduced 1.9 million acres to 87.2 million. With 84% of the domestic crop harvested, significant changes to the supply side will not be expected as the USDA finalizes 2013/14 production figures in January. On the demand side, the export shipment forecast was … Get the Complete Report »

Nearby soybean margins have gained ground since the beginning of November while deferred soybean margins have been flat-to-lower. The USDA recently updated its forecasts for the 2013/14 crop year, increasing expected ending stocks by 20 million bushels to 170 million bushels. The increase in expected supplies came mainly as a result of better-than-expected production results and larger beginning stocks. National yields are forecast to be 43 bushels per acre, up 1.8 bpa from the August estimate, with harvested area down 700,000 acres to 75.7 million acres. All told, production is forecast to be 109 million bushels higher at 3.258 billion bushels. With 91% of the domestic crop harvested, the marketplace will begin to … Get the Complete Report »

Wheat margins have set back further since the beginning of November as domestic harvest rolled on. The USDA recently updated supply and demand figures showing an increase in supplies due to better yields and increased imports. Production is estimated 16 million bushels higher to 2.13 billion bushels as national yields have come in better than expected. The winter wheat crop is currently rated at 65% in good-to-excellent condition as the crop enters dormancy, one of the best ratings in some time. On the demand side, feed and residual is expected to be up 30 million bushels with food use lowered 8 million bushels. All told, ending stocks are expected to be … Get the Complete Report » Read additional info at

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.

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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.

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