Margin Watch: September

October 2, 2012 by Chip Whalen

Hog
Margins improved slightly since the middle of September, following a further correction in both corn and soybean meal while hog prices rose. Overall, there was not much change in the profitability outlook for hog producers who are facing sharp losses through the first quarter of 2013 if the price profile does not change substantially. USDA released their September 1 grain stocks Friday, which revealed corn inventories below trade estimates. The stocks figure of 988 million bushels was 138 million below the average trade guess and 193 million bushels under the September WASDE estimate for 2012-13 beginning stocks. The report appears to have halted the correction in the corn market, and the balance sheet will tighten in the October WASDE without an increase in yield and/or harvested acres. Soybean stocks of 169 million bushels by contrast were 37 million above the average trade guess and 39 million above the September WASDE. This appears to be … Get the Complete Report »

Dairy
Dairy margins were mixed since the middle of September, strengthening in some periods and weakening in others. Overall, the profitability outlook for dairy producers remains quite favorable into 2013, with margins at the 80th to 90th percentile of the past 5 years through Q3 of next year. Milk prices have been relatively flat over the past two weeks, while feed costs continue moderating. USDA released their small grains summary and quarterly stocks report Friday, which revealed September 1 corn stocks at 988 million bushels. The figure was below the average trade guess of 1.126 billion as well as 193 million bushels below the estimate for 2011-12 ending stocks in the September WASDE. This automatically will tighten the balance sheet without an increase to either new-crop corn yields or harvested acres when the next WASDE is released October 11. Soybean stocks by contrast … Get the Complete Report »

Beef
Beef margins deteriorated over the past two weeks as cattle prices dropped sharply since the middle of September. While feed costs have moderated slightly as well, USDA’s quarterly stocks report Friday was bullish for corn and helped stabilize the market following its recent slide. September 1 corn stocks were pegged at 988 million bushels, below the average trade guess of 1.126 billion and also 193 million bushels under the most recent estimate for 2011-12 ending stocks in the September WASDE. As a result, new-crop ending stocks for 2012-13 will automatically tighten in the October WASDE without an increase in either yield and/or harvested acres. USDA’s Cattle on Feed report was somewhat friendly for the market as the total number of cattle on feed September 1st was 10.637 million head, down 0.6% from a year ago when the market was expecting only a 0.1% decline. In addition, cattle … Get the Complete Report »

Corn
Nearby corn margins have increased substantially since the beginning of July, as both futures’ prices and basis levels have risen. USDA recently slashed ending stocks for the 2012/13 crop by 698 million bushels to 1.183 billion bushels. The estimated reduction in supplies came mainly from a sharp reduction in supplies. Crop condition ratings have been in free fall since the beginning of the growing season, with the current conditions reporting that 40% of the domestic crop is in good-to-excellent condition due to the record heat and drought conditions during development. As a result, USDA lowered yield forecasts from 166 bushels per acre to 146 which resulted in the production side of the balance sheet being reduced 1.82 billion bushels. USDA dropped demand estimates as well citing that record high prices would … Get the Complete Report »

Soybean
Both nearby and deferred soybean margins have rebounded sharply since the beginning of July, as both futures’ prices and basis levels have risen. USDA recently reported ending stocks for the 2012/13 crop to be 10 million bushels lower than June’s estimate at 130 million bushels. The reduction in ending stocks came from adjustments on both sides of the balance sheet. Crop condition ratings have been poor for the entire growing season, with the current conditions reporting that 40% of the domestic crop is in good-to-excellent condition due to the record heat and extreme drought conditions. As a result, USDA lowered yield forecasts from 43.9 bushels per acre to 40.5 which lowered production 155 million bushels. USDA cut demand estimates to address the sharp reduction in supply forecasts. The crush was lowered 35 million bushels reflecting the impact of … Get the Complete Report »

Wheat
Nearby as well as deferred 2012 wheat margins have moved sharply higher since the beginning of July, as futures’ prices have more than offset weaker basis levels. USDA recently reported ending stocks for the 2012/13 crop to be 664 million bushels, at the lower end of market expectations. USDA lowered harvested acres 400,000 from last month, which affected the production figure with yield slightly higher versus June. Exports were raised 50 million bushels from last month, as USDA noted sharp production losses out of the FSU, with exports from the region reduced 5.5 million metric tons. China’s production was also lowered by 2 million metric tons. Recent news also reported a developing El … Get the Complete Report »

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