Margin Watch: September

October 1, 2013 by Chip Whalen

Hog
Margins continued to strengthen significantly through the end of September, with a further rise in hog prices complimented by lower feed costs providing improvement on both the cost and revenue sides of the equation for hog finishers. USDA released both the Quarterly Hog and Pig report as well as the Quarterly grain stocks this past week, reporting all hogs and pigs as of Sep 1 at 100% of a year ago, 1.4% above the average trade guess. Countering this to some degree, the breeding herd was also pegged at 100% of last year vs. the average trade guess at 101.5% of a year ago. Perhaps more surprising were the June-Aug pig crop and pigs per litter figures at 2% above last year when the market was anticipating a figure equal to a year ago. Also, with the exception of hogs weighing over 180 pounds at 96% of last year, the other weight classes were all … Get the Complete Report »

Dairy
Dairy margins continued to strengthen through the end of September, due primarily to lower feed costs with milk prices generally steady over the second half of the month. From a historical perspective, margins are relatively strong, existing above the 80th percentile of the previous 10 years through the first half of 2014, and at the 75th percentile in Q3. USDA released their Quarterly Grain Stocks report on Monday which was considered quite bearish for both the corn and soybean meal markets. The figures become official ending stocks for the 2012-13 crop year, and in each case were reported above … Get the Complete Report »

Beef
Beef margins improved significantly over the second half of September, as lower feed costs and higher fat cattle prices more than made up for strengthening feeder cattle values. Projected forward margins remain well above the 90th percentile of the previous 10 years through the April 2014 marketing period, with negative margins still indicated in the summer of 2014 against the June and August marketing periods. USDA released their Quarterly Grain Stocks report Monday, pegging Sep 1 corn stocks at 824 million bushels. The figure was up 163 million bushels from the September WASDE report and 136 million higher than the average trade estimate, becoming the official ending stocks of the 2012-13 crop year. The report adds a bearish dimension to the harvest pressure that has already begun setting in, with growing expectations that USDA may raise the yield projection in the October WASDE based on early results being reported. Cattle prices meanwhile have … Get the Complete Report »

Corn
Corn margins have weakened further since the middle of September as excess domestic supplies are beginning to be realized. Harvest progress is in full swing with 12% of the U.S. corn crop harvested and better-than-expected yields out of the Eastern belt being reported. Current weather models do not forecast any adverse weather that would disrupt harvest for the next 10 days and will likely add to price pressure. NASS recently reported final ending stocks for old crop corn to be 824 million bushels, 163 million bushels above where the latest USDA supply and demand report had estimated stocks to be. The larger stocks are attributed to poor livestock feeding rates for the fourth quarter as prices remained high relative to other energy sources. Demand for new crop will now … Get the Complete Report »

Soybean
Soybean margins have weakened moderately since the middle of September as harvest pressure and larger old crop stocks have been realized. NASS recently pegged old crop ending stocks at 141 million bushels, up 16 million bushels from the expectation in last month’s supply and demand report. The USDA has estimated old crop ending stocks at 125 million bushels since February, giving the cash market plenty of time to ration demand. Adding to a slightly negative stocks report has been harvest pressure. Currently, U.S. farmers have reaped 11% of this year’s crop compared to 20% on average. As harvest progresses, the market will shift its focus on demand and South American production. Demand prospects are currently … Get the Complete Report »

Wheat
Wheat margins have surged since the middle of September as demand has come for domestic exports and livestock feeding. Export sales have surged of late as both China and Brazil have been large buyers in recent weeks. Exporters have shipped roughly 48% of the USDA forecast compared to 37% on average for this time of year and has lent support to market prices. NASS recently reported wheat quarterly stocks at 1.855 billion bushels, 83 million bushels below the pre-report expectations. The smaller-than-expected stocks are attributed to better livestock feeding for the first quarter. USDA also reported on small grains production, estimating Hard Spring wheat production at … Get the Complete Report »

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