Margin Watch: Mid-November

November 17, 2012 by Chip Whalen

Hog
Margins improved significantly since the end of October, primarily due to a sharp selloff in corn and soybean meal following USDA’s November WASDE report. Hog prices did firm some in nearby contracts while remaining largely steady in deferred periods. USDA raised yield and production for both the corn and soybean crops in their latest report, with corn production increasing 19 million bushels and soybean production 111 million as a result. Demand was raised for both crops to offset the higher production, but ending stocks increased and the balance sheet eased in each case. Meanwhile, weather has recently turned more favorable in South America which appears to be weighing on the soybean complex in particular. The hog market has been … Get the Complete Report »

Dairy
Dairy margins held relatively steady since the end of October, with lower milk prices and feed costs largely offsetting in the past couple weeks. USDA released their November WASDE report, raising yield and production estimates for both the corn and soybean crops. The soybean balance sheet in particular caught the trade by surprise, with yield up 1.5 bushels per acre from October to 39.3 bushels and above the range of expectations. This change raised production by 111 million bushels, although all but 11 million of that was offset by higher demand as both the crush and export forecasts were increased. Corn yield was raised by 0.3 bushels per acre to 122.3 bushels, raising production by 19 million bushels from October. While this was offset by … Get the Complete Report »

Beef
Beef margins were relatively steady over the past two weeks, with the biggest improvement noted in the June 2013 marketing period that is now positive again. With the exception of far deferred contracts, live cattle futures were basically flat since the end of October while feeder cattle contracts were slightly weaker. Corn also declined as a result of the USDA’s November WASDE report which was regarded as bearish by market participants. Yield and production were increased slightly from last month by 0.3 bushels per acre and 19 million bushels, respectively, to 122.3 bushels per acre and 10.725 billion bushels. The production figure was about 100 million bushels above the average of market expectations, although within the range of estimates. USDA increased ending stocks by 28 million bushels to 647 million, as increased domestic use slightly offset higher imports. Beef prices have been on … 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 a slowing of 10% for the crop year. Export demand has been quite poor for some time, with roughly 403 million bushels sold – 35% of the total projected exports for the marketing year. Although the quantity sold represents an average sales pace for this time of year, the volumes are at multi-decade … 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 quite … 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 large quantities of wheat recently, the E.U. will be relied upon fulfill demand. There is concern however that the E.U. will … Get the Complete Report »

About the Author

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