Dairy margin outlook improves
Since the beginning of October, quarterly dairy margins have improved for the next three quarters (Q4 2012, Q1 & Q2 2013), flattening out in Q3 2013, according to Commodity & Ingredient Hedging’s (CIH) Margin Watch report. The profitability outlook for dairy producers continues to be quite favorable over the next four quarters, with margins above the 85th percentile of the last 5 years through Q3 2013. Milk prices have been flat to higher over the past two weeks, while feed costs continue to slide.
USDA’s National Ag Statistics Service recently updated its corn production forecast, dropping production by 21 million bushels, to 10.706 billion bushels, as higher planted and harvested area was offset by lower national yields. However, USDA lowered its forecast for corn exports by 100 million bushels, to 1.15 billion bushels, acknowledging the slow pace of sales and shipments to date and increased competition from South America. Corn ending stocks are now forecast to be 619 million bushels, down 114 million bushels from September.
Soybean stocks were estimated up 15 million bushels from September, to 130 million bushels. NASS reported increased planted and harvested area of 1.1 million acres as well as an increase in national yields of 2.5 bushels per acre to 37.8 bushels. These adjustments led to a 226 million bushel increase in production. Coupling this increase with the larger beginning stocks from the Quarterly Stocks report put total supplies up 265 million bushels from September. USDA offset the supply increase by raising demand forecasts for exports and crush by a combined 250 million bushels.
USDA reported September milk cow inventories to be lower from August and, along with a decline in production per head, helped support milk prices.
Exports for butter were weaker than average for July, while cheese exports were strong relative to seasonal trends, down 5% from June compared to down 9.5% on average. Cold storage for both cheese and butter were reported to be down in August from July in line with what normally would be expected over the period.