Margin Watch: Mid-October

October 17, 2013 by Chip Whalen

Hog
Margins maintained their strength and advanced further through the first half of October following the same combination of higher hog prices and lower feed costs. Profitability is at or approaching 10-year highs in spot Q4 as well as through the first half of 2014, and well above the 80th percentile in Q3 also. As such, opportunities abound to protect favorable forward margins in the current environment that many producers are taking advantage of. Unfortunately, the budget impasse in Congress leaves the government shut down as of this writing, and USDA has yet to release the October WASDE report scheduled last Friday. Harvest progress appears to be advancing quicker than anticipated though, with current estimates that nearly half the soybeans and at least one third of the corn crop has already been gathered. Yield reports are also coming in much … Get the Complete Report »

Dairy
Dairy margins have continued to improve through the first half of October as feed costs remain under pressure while milk has strengthened. The spot Q4 margin is near the 90th percentile of the past 10 years while margins through the first half of 2014 are well above the 80th percentile, and Q3 is over the 70th percentile. Unfortunately due to the budget impasse in Congress, the resulting government shutdown has removed much of the transparency from the market with USDA reports not getting released. The October WASDE scheduled for last Friday has been postponed, with market participants eagerly awaiting updates to … Get the Complete Report »

Beef
Beef margins were mixed since the end of September, improving in nearby periods while weakening in deferred marketing slots. The first half of October has featured steady to weaker corn prices while cattle prices have been stronger. Feeders in particular have been on fire, explaining the margin deterioration in deferred marketing periods as the cost of feeders has exceeded the value of fat cattle despite cheaper projected feed costs. For cattle already on feed however, or for animals to be placed this fall, forward margins remain quite favorable – above the 90th percentile of the past ten years. Deferred margins by contrast are negative in the June, August and October 2014 marketing periods. As of this writing, the government is still … Get the Complete Report »

Corn
Corn margins have remained relatively flat since the beginning of October. News during the period has been nearly non-existent as the U.S. Department of Agriculture has been unable to report on exports, weekly harvest progress or its monthly supply and demand report due to the government shutdown. Though not an official stat, some private forecasters have estimated corn harvest around 30% complete as of Sunday, nearly 10% behind the five-year average for this time of year. Although progress continues to lag averages, no threatening weather is forecast over the next ten days which should allow producers to continue harvesting this year’s potentially record crop. The RFS biofuel mandate has been discussed during the period and while the EIA has not officially announced … Get the Complete Report »

Soybean
Soybean margins have been mixed over the past two weeks as nearby margins have been pressured while deferred margins have increased somewhat. The USDA’s doors remain closed as the government shutdown continues—leaving market participants without data on harvest progress, export sales or the always crucial monthly supply and demand report. Some private forecasters have reported harvest progress to be roughly 45% complete as of Sunday compared to 58% on a five-year average for this time of year. Although harvest progress remains behind, weather forecasts do not call for any threatening temperatures over the next ten days. Further, normal precipitation is expected which should allow for continued harvest progress. NOPA recently reported … Get the Complete Report »

Wheat
Wheat margins have improved since the beginning of October as continued demand from Brazil and China has been the theme. Export sales commitments continue to exceed the pace required to meet the USDA expectation amid heavy global competition. Domestic prices in China remain at a record high currently which will continue to incentivize their government to make purchases in an effort to maintain an adequate supply. The U.S. faces export competition from Europe, the Black Sea region and could soon see India re-enter the export market. India has kept a minimum price on what they would accept for their domestic wheat supplies since the summer when prices began to slip below cost of production. With the recent move higher in the … Get the Complete Report »

About the Author

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