Margin Watch: Mid-October

October 17, 2012 by Chip Whalen

Hog
Margins improved moderately since the beginning of October, as both corn and soybean meal prices continued to correct lower while hog prices rose further. Hog producers continue to face steep losses through the first quarter 2013, at the same time profitability shows up beginning in the second quarter 2013 at current price levels. NASS recently updated their corn production forecast, lowering total production by 21 million bushels to 10.706 billion bushels as higher planted and harvested area was offset by lower national yields. With 79% of the corn crop harvested, production estimates will now take a back seat to demand going forward. USDA lowered its forecast for corn exports by 100 million bushels to 1.15 billion bushels, acknowledging the slow pace of sales and shipments to date and increased competition from South America. Corn ending stocks are now forecast to be … Get the Complete Report »

Dairy
Dairy margins improved in all forward periods since the beginning of October with the only exception being Q3 2013 where margins were flat. The profitability outlook for dairy producers continues to be quite favorable over the next four quarters, with margins above the 85th percentile of the last 5 years through Q3 2013. Milk prices have been flat-to-higher over the past two weeks, while feed costs continue to slide. NASS recently updated their corn production forecast, dropping production by 21 million bushels to 10.706 billion bushels as higher planted and harvested area was offset by lower national yields. USDA lowered its forecast for corn exports by 100 million bushels to 1.15 billion bushels, acknowledging the slow pace of sales and shipments to date and increased competition from … Get the Complete Report »

Beef
Beef margins improved since the beginning of October primarily as a function of lower feed costs, while fed cattle prices have held relatively steady. NASS recently updated production forecasts, revealing larger planted and harvested acreage that was offset by smaller yields and a corn crop down 21 million bushels from the September estimate at 10.706 billion bushels. USDA adjusted the demand side of the balance sheet, lowering projected exports by 100 million bushels to 1.15 billion bushels due to a tepid sales pace to date as well as increased competition from South America. Corn ending stocks are now projected at 619 million bushels, down 114 million bushels from the September estimate. Beef slaughter throughout September was below last year as well as the 5-year average with fewer animals on feed. The lower slaughter rate was offset by historically high … Get the Complete Report »

Corn
Nearby corn margins have deteriorated somewhat since the beginning of October while deferred 2013 margins have remained at previous levels. NASS recently updated its production forecast, lowering total production 21 million bushels to 10.706 billion bushels. Planted and harvested acres were raised slightly, but were offset by a reduction in yield of 0.8 bushels per acre to 122.0 bushels for the national average. Beginning stocks were lowered 193 million bushels from the September supply and demand balance sheet based off the September 1 Quarterly Stocks report indicating greater feed usage than expected during the fourth quarter. USDA also lowered projected exports 100 million bushels to 1.150 billion bushels due to the slow pace of sales to date as well as increased competition from South America. Domestic ending stocks are projected to be 619 million bushels along with historically tight stocks-to-usage ratio of 5.6%. Harvest progress is well advanced, with the latest progress report showing 69% of the crop has been … Get the Complete Report »

Soybean
Both nearby as well as deferred 2013 soybean margins have weakened since the beginning of October as futures’ prices have fallen. NASS recently updated its production forecast, increasing total production by a record large 226 million bushels to 2.86 billion bushels. Planted and harvested acres were both raised by 1.1 million acres; while national yields were also raised 2.5 bushels per acre to 37.8 bushels. Beginning stocks were also raised by 39 million bushels based on the September 1 Quarterly Stocks report which reported 2011/12 production to be higher than previously reported back in January 2012. Nearly all of the 265 million bushel increase in supply was offset by increased projections for demand. Export demand was increased by 210 million bushel to 1.265 billion bushels reflecting the record pace of sales to date. The USDA also raised its forecast for domestic crushings by 40 million bushels as demand for soybean meal and soybean oil has remained strong. USDA also noted the increase in soybean oil disappearance due to … Get the Complete Report »

Wheat
Wheat margins have lost ground since the beginning of October as futures’ prices have fallen. USDA recently estimated ending stocks to be 44 million bushels lower from September to 654 million bushels. On the production side, area planted was reduced by 300,000 acres while area harvested was increased 200,000 acres. National yield, however, was lowered 0.2 bushels per acre resulting in total production increasing by 1 million bushels to 2.269 billion bushels. On the demand side, USDA raised feed and residual usage 95 million bushels as domestic livestock feeders substituted cheaper alternatives, including wheat, to high-priced corn. The increase in feed was partially offset by a reduction in the export forecast of 50 million bushels. USDA acknowledged increased competition in the world market for wheat exports, raising Russia’s export forecast by 1 million tons this month, despite lower domestic production. India’s export forecast was also increased 1 million tons which will primarily affect soft red winter wheat exports from the U.S. Australia’s production and export forecast was reduced by 3 million tons from September, although USDA noted that Australia will remain competitive with the U.S. through the remainder of our current June-May marketing year. USDA went on to note that the impact of Australia’s lower production and export forecast would have more of an impact after … Get the Complete Report »

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