Margin Watch: Mid-September

September 17, 2013 by Chip Whalen

Hog
Forward profit margins strengthened significantly since the end of August on a combination of surging hog futures and steady to weaker corn and soybean meal prices. Profit margins are now well above the 90th percentile of the previous 10 years through the 3rd quarter of 2014, which is unusual given that such historically strong margins are typically difficult to achieve that far forward in time. USDA’s latest WASDE report increased the corn yield projection to 155.3 bushels per acre from 154.4 in August, with production forecast up 80 million bushels as a result to 13.843 billion. Ending stocks were raised 18 million bushels from last month to 1.855 billion, with the report indicating there is going to be plenty … Get the Complete Report »

Dairy
Dairy margins improved during the first half of September, as lower projected feed costs following the recent USDA report against a backdrop of steady milk prices helped to strengthen projected forward profitability. On both an absolute and relative basis, margin projections are currently strongest in nearby Q4 where they are above the 80th percentile of the previous 10 years, with margin projections through the first half of 2014 above the 70th percentile as you can see here. USDA released their September WASDE report last week which raised the … Get the Complete Report »

Beef
Beef margin projections were mixed over the past two weeks, deteriorating in nearby positions where cattle are already on feed and feed either entirely or in part priced. Forward margins improved slightly since the end of August as lower feed costs are helping to offset the impact of higher feeder prices, and/or steady to lower fat cattle prices. From a historical perspective, margins through the April marketing period still remain relatively strong above the 90th percentile of the previous 10 years, while negative margins are indicated after that in the June and August 2014 marketing periods. The main feature of the past two weeks was USDA’s September WASDE report which raised the … Get the Complete Report »

Corn
Corn margins have weakened moderately since the beginning of September as supply prospects for domestic farmers came into better focus. The USDA recently updated its supply and demand forecasts for this crop year, raising projected ending stocks 18 million bushels to 1.855 billion bushels due to larger national yields, nearly three times the current stocks on hand. The increase in projected stocks came as a bearish surprise as market participants expected a reduction in stocks. The national average for yields was increased 0.9 bushels per acre from the August estimate to 155.3 bushels per acre which if realized would result in a record … Get the Complete Report »

Soybean
Soybean margins have been largely volatile since the beginning of September as the market began to digest a potentially smaller harvest than previously expected. The USDA recently updated its expectation for supplies in the coming crop year, lowering ending stocks 70 million bushels to 150 million bushels, 25 million above the current stockpiles. The reduction in expected stocks came as the average national yield estimate was lowered by 1.4 bushels per acre to 41.2 bushels due to poor weather particularly in the western Corn Belt. Late season heat along with a lack of moisture during the critical reproductive phase … Get the Complete Report »

Wheat
Wheat margins have lost ground since the beginning of September and are now at the lowest level for the history of the December contract month. The USDA recently updated its balance sheet forecast for the new crop, raising ending stocks 10 million bushels to 561 million bushels. The increase was a result of larger import expectations due to the large Canadian crop. The USDA chose to leave all demand estimates alone but did adjust exports and food use between crop qualities. Food use for Hard Red Spring wheat was raised 10 million bushels, while food use for Hard Red Winter wheat was lowered 10 million bushels. Hard Red Spring wheat exports were … Get the Complete Report »

About the Author

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