CIH: 2012 margins weaken
Dairy income margins remain negative for the second quarter of 2012 and below historical averages through the end of the year, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging, LLC. Dairy margins were weaker over the past two weeks, particularly in nearby periods where the loss in milk value exceeded the savings from lower feed costs since the end of March.
While milk prices remain on the defensive, there are some rays of hope that the market may begin to stabilize. The export market has been positive, with data from the Census Bureau showing cumulative year-to-date (YTD) shipments through February for total cheese and nonfat dry milk/slim milk powder up 3.4% and 5.0%, respectively, from 2011.
Also, dairy cow slaughter is running ahead of the comparative period last year. With negative nearby milk margins and strong demand for leaner dairy cow beef, due to the consumer fallout from LFTB, dairy producers may be receiving the economic incentive they need to reduce the dairy cow herd.
The corn market has been under pressure recently, due to a record planting pace through mid-April, as well as the lack of a reduction in old-crop corn ending stocks in the April World Ag Supply & Demand Estimates report – contrary to trade expectations.
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