USDA released two key reports since the middle of the month, the quarterly Hogs & Pigs inventory and the quarterly Grain Stocks. While the hog report was viewed as somewhat bearish, nearby futures prices have traded sharply higher over the past week. In particular, the number of hogs over 180 pounds was 3.4 per cent above last year when the market was only expecting a two per cent increase. Moreover, both the September-November and December-February period farrowing intentions were about one per cent above market expectations and reflect no supply contraction in the first half of 2012.

Meanwhile, corn stocks on 1 September at 1.128 billion bushels were 166 million above the average trade forecast and outside of the range of expectations between 820 million and 1.05 billion bushels. The final ending stocks for the 2010/11 marketing year suggest significant feed demand rationing in the June/July/August quarter, although analysts were confused by this given higher livestock numbers and no evidence of increased wheat feeding during the period.

With forward profit margins now having recovered to new highs well in excess of the 90th percentile, many Genesus clients are looking to increase coverage levels to secure these historically strong margins. In addition, our consultants are also working with clients to adjust existing strategies in light of the margin improvement seen.

• 4th quarter 2011: High offering $9.18, the low was ($8.23), last week ended with the high of $9.18 and the five-year percentile of 99.9 per cent.
• 1st quarter 2012: High offering $11.55, the low was ($4.22), last week ended with the high of $11.55 and the five-year percentile of 100.0 per cent.
• 2nd quarter 2012: High offering $16.70, the low was $2.42, last week ended with the high of $16.70 and the five-year percentile of 98.6 per cent.