CIH: Early June margins steady
Dairy producer margins were fairly steady over the first two weeks of June, with declining feed costs and milk prices roughly offsetting one another, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging, LLC. From a historical perspective, forward margins remain very strong, above the 80th percentile of the previous 10 years through the first half of 2014, and at the 90th percentile in Q4.
USDA released their June World Ag Supply & Demand Estimates report, which updated the new-crop balance sheet for both corn and soybeans. Pre-report expectations were for corn ending stocks to decline 246 million bushels from May, following a reduction in acreage due to the delayed spring planting. USDA left the acreage estimate unchanged, although yield was lowered 1.5 bushels per acre to 156.5 bushels/acre, as more corn is expected to pollinate under less ideal conditions later in the summer. As a result, ending stocks were only reduced 55 million bushels from last month to 1.949 billion bushels, which has put some pressure on the corn market.
The new-crop soybean balance sheet was left entirely unchanged.
Milk prices have held largely steady. USDA left their 2013 milk production forecast unchanged in the June WASDE, but lowered their estimate for 2014 as relatively weak milk-to-feed ratios in Q3 and Q4 are expected to slow production growth in the first half of next year. Forecasts for both 2013 cheese and butter prices were lowered from last month, reflecting greater stocks and weaker than expected prices to date.