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Dairy margin summary: Steady into November

Dairy margin summary: Steady into November
Dairy margins held largely steady since the end of October, changing by 5¢/cwt. or less in all forward marketing
periods, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging, LLC.
From a historical perspective, margins remain quite strong – above the 90th percentile of the past 10 years through the first half of 2014, and above the 80th percentile of Q3 as well. With the exception of nearby December futures, milk prices were flat over the past two weeks, while feed costs likewise have moved sideways following the release of USDA’s November World Ag Supply & Demand Estimates report.
Corn production was raised in line with expectations, with yield increasing 5.1 bushels per acre from September to 160.4 although harvested area declined 1.9 million acres to 87.2 million. While corn production increased 146 million bushels to 13.989 billion, much of that increase was offset by higher demand with ending stocks only rising 32 million bushels to 1.887 billion which was below the range of pre-report estimates. The soybean balance sheet likewise featured larger production offset by higher demand as lower prices stimulate increased usage.
Meanwhile, USDA resumed the monthly milk production report following its discontinuation due to the sequester earlier this year. September milk production totaled 15.8 billion lbs. which was about 1% above September 2012, with a slight 0.13% increase in cow numbers and a 0.82% gain in milk production per cow. The figures were considered supportive for prices as demand remains very strong.
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