Tennessee Market Highlights

Transcription

1 Tennessee Market Highlights March 3, 2017 Number: 9 Trends for the Week Compared to a Week Ago Slaughter Cows Steady to $2 higher Slaughter Bulls $2 higher Feeder Steers $2 to $4 higher Feeder Heifers Steady Feeder Cattle Index Wednesday s index: Fed Cattle The 5-area live price of $ is up $0.45. The dressed price is up $4.07 at $ Corn March closed at $3.74 a bushel, up 9 cents since last Friday. Soybeans March closed at $10.27 a bushel, up 16 cents since last Friday. Wheat March closed at $4.33 a bushel, down 5 cents since last Friday. Cotton March closed at cents per lb, up 2.26 cents since last Friday. Livestock Comments by Dr. Andrew P. Griffith FED CATTLE: Fed cattle traded steady to $1 higher compared to last week on live basis. Prices on a live basis were mainly $125 to $126 while dressed prices were mainly $199 to $200. The 5-area weighted average prices thru Thursday were $ live, up $0.45 from last week and $ dressed, up $4.07 from a week ago. A year ago prices were $ live and $ dressed. Fed cattle prices held their ground this week as strong demand remains evident throughout the industry. The strong cash values since the first of the year have allowed cattle feeders to recoup some of the losses experienced throughout The ability of cattle feeders to market animals at an elevated level has allowed them to pay a little more for feeder cattle in the near term. However, cattle feeders are hesitant to push feeder cattle prices very high due to the heavy discounts in deferred live cattle futures. Cattle feeders will continue to pull cattle through the pens if finished cattle prices remain elevated. The question is if these prices will hold through the seasonally strong months of April and early May. It would be a positive sign for many. BEEF CUTOUT: At midday Friday, the Choice cutout was $ up $0.64 from Thursday and up $10.56 from last Friday. The Select cutout was $ down $0.39 from Thursday and up $7.98 from last Friday. The Choice Select spread was $5.66 compared to $3.08 a week ago. Neither Choice nor Select boxed beef had any trouble surpassing the $200 mark this week. In actuality, Choice prices steamrolled the $200 price level and kept trucking. Most of the support is coming from the loin and rib cuts as restaurants, grocers, and foodservice entities look to secure product earlier than normal. The increased interest in the middle meats means more focus is being shifted to Choice meat rather than Select grade meat which will continue to widen the Choice Select spread if the current trend continues. It is a little difficult to understand why retailers are aggressively purchasing product considering the lower expected price in the future. Either retailers suspect prices will continue to escalate which would contradict current information or retailers are in the business of buying high and selling low. Fundamentally speaking, retailers are probably making the correct decision considering the increases in beef exports and strong domestic beef demand the market has witnessed the past several months. OUTLOOK: A short cold snap and some severe weather did little to deter stocker producers from trying to source calves this week as steers were up $2 to $4 and heifers were steady compared to one week ago based on Tennessee weekly auction market averages. There is no doubt demand is good for lightweight calves as spring approaches, but the question for grazers in the Southeast is if enough grass made it through the drought of last summer and fall to maintain normal stocking rates. If there is not enough grass then the stocking rates will have to be reduced or producers will have to drill annual forages to support the animals through the grazing season. From a profitability standpoint, stocker producers are beginning to push against a time period when calf prices are trending higher and will peak in the next six to eight weeks. Paying higher prices for calves will certainly put pressure on achieving a reasonable margin. Alternatively, cow-calf producers may want to hold onto calves a few more weeks to squeeze another $20 to $30 per head out of them. The market is geared for some excitement and volatility the next few weeks as winter fades to spring and as feedlots try to dry out. Feeder cattle futures are sure to experience some volatility as prices generally experience a short seasonal price decline before finding support heading into April. Now is the time for fall calving producers to run numbers for spring (Continued on page 2)

2 Livestock Comments by Dr. Andrew Griffith (Continued from page 1) marketing opportunities. Many producers will wean the calves on the truck, but it may be prudent for producers to evaluate a preconditioning and backgrounding phase for calves that will soon be weaned. The futures market is not pricing in a favorable value of gain through the summer, but futures markets have led people down a less profitable path several times in recent memory. There is little to no reason to have a bearish outlook on feeder cattle heading into spring and summer. Feeder cattle futures appear to be undervaluing the animals but that is supported by the undervalued live cattle futures. It may take running value of gain and cost of gain values regularly the next few weeks to solidify a decision. FRIDAY S FUTURES MARKET CLOSING PRICES: Friday s closing prices were as follows: Live/fed cattle April $ ; June $ ; August $ ; Feeder cattle March $ ; April $ ; May $ ; August $ ; March corn closed at $3.75 up $0.02 from Thursday. ASK ANDREW, TN THINK TANK: This week there were two questions that paired well with each other. The first question was in relation to price differences of cattle being graded on the rail, and the second question was in relation to how a cowcalf producer can get paid for cattle that grade well. Finished cattle are graded based on quality grade (Prime, Choice, Select, etc.) and yield grade (1-5). Base prices are for Choice yield grade 3. Thus, premiums are received when cattle grade higher than Choice and yield grade 1 or 2. Premiums vary throughout the year given the demand for certain products. The Choice quality grade is broken down into lower one-third and upper two-thirds. Cattle grading in upper two-thirds Choice and meeting other Certified Angus Beef (CAB) requirements receive a CAB premium. Weekly premiums and discounts can be found at the following website mnreports/lm_ct155.txt. In relation to the second question, the only guaranteed way to know how a producer s cattle perform is to retain ownership through the feedlot. The Tennessee Beef Evaluation program assists producers in shipping cattle to a feedlot in Iowa and data is collected through the feeding and harvest phase. This type of information can be used to market feeder cattle in future years. Please send questions and comments to agriff14@utk.edu or send a letter to Andrew P. Griffith, University of Tennessee, 314B Morgan Hall, 2621 Morgan Circle, Knoxville, TN Graded Sheep and Goat Sale Columbia Graded Sheep and Goat Sale Weighted Average Report for 02/27/2017 Receipts: 387 (222 goats: 165 sheep) Last Sale 343 For complete report: Milk Futures Thursday March 2, 2017 Month Class III Close Class IV Close Mar Apr May Jun Jul Average Daily Slaughter Cattle Hogs Number of head This week (4 days) 115, ,750 Last week (4 days) 111, ,500 Year ago (4 days) 107, ,750 This week as percentage of Week ago (%) 104% 100% Year ago (%) 107% 104% USDA Box Beef Cutout Value Choice lbs Select lbs $/cwt - Thursday Last Week Year ago Change from week ago Change from year ago

3 Crop Comments by Dr. Aaron Smith Overview Corn, soybeans, and cotton were up; wheat was mixed for the week. This week started out with a bang as rumors regarding changes to RFS/Ethanol/ Biodiesel provided fuel for Tuesday s rally in corn and soybean markets. For the remainder of the week markets moved sideways to lower. The final projected prices and price volatility factors for crop insurance for corn, soybeans, and cotton in Tennessee were set this week. For corn, projected price was set at $3.96 with a price volatility factor of 0.19 (compared to last year - $3.86 and 0.17). For soybeans, projected price was set at $10.19 with a price volatility factor of 0.16 (compared to last year - $8.85 and 0.12). For cotton, projected price was set at $0.74 with a price volatility factor of 0.15 (compared to last year - $0.60 and 0.14). The volatility factor conveys the uncertainty or riskiness in the projected price and is calculated by averaging the implied volatility of the near-the-money options over the final five trading days of the projected price determination period (greater price volatility factors imply greater price riskiness or uncertainty). Price volatility factors are used in determining the premiums for crop insurance (higher volatility = higher premiums). As a result of the increased crop insurance guarantees (and commodity prices) it is very likely that national planted acreage for cotton and soybeans could be substantially higher than last year. December cotton futures closed perilously close to 75 cents on Friday. Cotton s uptrend remains firmly intact however pricing some 2017 cotton near 75 cents is a prudent risk management decision given increased domestic acreage and large global stocks. Pricing a quarter to a third of estimated production should be considered. Corn March 2017 corn futures closed at $3.74 up 9 cents since last Friday. For the week, March 2017 corn futures traded between $3.59 and $3.78. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest, and Upper-middle Tennessee and weakened at Northwest Barge Points and Lower-middle Tennessee. Overall, basis for the week ranged from 6 under to 38 over the March futures contract with an average of 16 over at the end of the week. Corn net sales reported by exporters from February were within expectations with net sales of 27.3 million bushels for the 2016/17 marketing year and 0.8 million bushels for the 2017/18 marketing year. Exports for the same time period were up from last week at 60 million bushels. Corn export sales and commitments were 77% of the USDA estimated total annual exports for the 2016/17 marketing year (September 1 to August 31) compared to a 5-year average of 74%. Ethanol production for the week ending February 24 was million barrels per day the same as last week. Ethanol stocks were million barrels, up 422,000 barrels. Mar/May and Mar/Dec future spreads were 6 and 25 cents, respectively. May 2017 corn futures closed at $3.80 up 8 cents since last Friday. In Tennessee, September 2017 cash forward contracts averaged $3.80 with a range of $3.64 to $4.05. December 2017 corn futures closed at $3.99 up 8 cents since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2017 Put Option costing 33 cents establishing a $3.67 futures floor. Soybeans March 2017 soybean futures closed at $10.27 up 16 cents since last Friday. For the week, March 2017 soybean futures traded between $10.12 and $ Average soybean basis weakened or remained unchanged at Memphis, Lower-middle, and Uppermiddle Tennessee and strengthened at Northwest Barge Points and Northwest Tennessee. Basis ranged from 30 under to 11 over 3 (Continued on page 4)

4 Crop Comments by Dr. Aaron Smith the March futures contract at elevators and barge points. Average basis at the end of the week was 5 under the March futures contract. Net sales reported by exporters were within expectations with net sales of 15.7 million bushels for the 2016/17 marketing year. Exports for the same period were down from last week at 36.3 million bushels. Soybean export sales and commitments were 94% of the USDA estimated total annual exports for the 2016/17 marketing year (September 1 to August 31), compared to a 5-year average of 90%. March soybean-to-corn futures price ratio was 2.75 at the end of the week. Mar/May and Mar/Nov future spreads were 10 cents and -5 cents, respectively. May 2017 soybean futures closed at $10.37 up 15 cents since last Friday. In Tennessee, October / November 2017 soybean cash contracts average $10.09 with a range of $9.66 to $ November/ December 2017 soybean-to-corn price ratio was 2.56 at the end of the week. November 2017 soybean futures closed at $10.22 up 14 cents since last Friday. Downside price protection could be achieved by purchasing a $10.40 November 2017 Put Option which would cost 80 cents and set a $9.60 futures floor. Cotton March 2017 cotton futures closed at up 2.26 cents since last Friday. For the week, March 2017 cotton futures traded between 75 and 78 cents. Delta upland cotton spot price quotes for March 2 were cents/lb ( ) and cents/lb ( ). Adjusted world price (AWP) increased 1.01 cents to cents per pound. Net sales reported by exporters were up from last week with net sales of 481,400 bales for the 2016/17 marketing year and 62,900 bales for the 2017/18 marketing year. Exports for the same period were down from last week at 319,200 bales. Upland cotton export sales were 94% of the USDA estimated total annual exports for the 2016/17 marketing year (August 1 to July 31), compared to a 5-year average of 88%. May 2017 cotton futures closed at up 1.89 cents since last Friday. Mar/May and Mar/Dec cotton futures spreads were 0.71 cents and cents, respectively. December 2017 cotton futures closed at up 1.05 cents since last Friday. Downside price protection could be obtained by purchasing a 75 cent December 2017 Put Option costing 4.65 cents establishing a cent futures floor. Wheat March 2017 wheat futures closed at $4.33 down 5 cents since last Friday. March 2017 wheat futures traded between $4.18 and $4.38 this week. March wheat-to-corn price ratio was 1.16.Wheat net sales reported by exporters were within expectations with net sales of 13 million bushels for the 2016/17 marketing year and 3.6 million bushels for the 2017/18 marketing year. Exports for the week were down from last week at 19.9 million bushels. Wheat export sales were 90% of the USDA estimated total annual ex- 4 (Continued on page 5)

5 Crop Comments by Dr. Aaron Smith ports for the 2016/17 marketing year (June 1 to May 31), compared to a 5-year average of 92%. In Memphis, old crop cash wheat ranged from $4.26 to $4.62. Mar/May and Mar/Jul future spreads were 20 cents and 35 cents, respectively. May 2017 wheat futures closed at $4.53 unchanged since last Friday. May 2017 wheat-to-corn price ratio was In Tennessee, June/July 2017 cash wheat ranged from $4.33 to $4.95. July 2017 wheat futures closed at $4.68 up 1 cent since last Friday. Downside price protection could be obtained by purchasing a $4.70 July 2017 Put Option costing 27 cents establishing a $4.43 futures floor. Additional Information: If you would like further information or clarification on topics discussed in the crop comments section or would like to be added to our free list please contact me at aaron.smith@utk.edu. 5

6 Futures Settlement Prices: Crops & Livestock Friday, February 24, 2017 Thursday, March 3, 2017 Commodity Contract Month Friday Monday Tuesday Wednesday Thursday Soybeans Mar ($/bushel) May Jul Aug Sep Nov Corn Mar ($/bushel) May Jul Sep Dec Mar Wheat Mar ($/bushel) May Jul Sep Dec Soybean Meal Mar ($/ton) May Jul Aug Sep Oct Cotton Mar ( /lb) May Jul Oct Dec Live Cattle Feb ($/cwt) Apr Jun Aug Oct Feeder Cattle Mar ($/cwt) Apr May Aug Sep Oct Market Hogs Apr ($/cwt) May Jun Jul Aug

7 Steers: Medium/Large Frame #1-2 This Week Last Week Year Ago Low High Weighted Average Weighted Average Weighted Average $/cwt lbs lbs lbs lbs lbs Steers: Small Frame # lbs lbs lbs lbs Steers: Medium/Large Frame # lbs lbs lbs lbs lbs Holstein Steers lbs lbs lbs Slaughter Cows & Bulls Breakers 75-80% Boners 80-85% Lean 85-90% Bulls YG Heifers: Medium/Large Frame # lbs lbs lbs lbs Heifers: Small Frame #1-2 Prices on Tennessee Reported Livestock Auctions for the week ending March 3, lbs lbs lbs lbs Heifers: Medium/Large Frame # lbs lbs lbs lbs Cattle Receipts: This week: 4,475 (7) Week ago: 5,880 (8) Year ago: 7,951 (11) 7

8 Tennessee lbs. M-1 Steer Prices 2016, 2017 and 5-year average Tennessee lbs. M-1 Steer Prices 2016, 2017 and 5-year average /2015 Avg /2015 Avg Area Finished Cattle Prices 2015, 2016 and 5-year average Tennessee Slaughter Cow Prices Breakers 75-80% 2015, 2016 and 5-year average 2011/2015 Avg / Prices Paid to Farmers by Elevators Friday, February 24, 2017 Thursday, March 2, 2017 Friday Monday Tuesday Wednesday Thursday Low High Low High Low High Low High Low High $/bushel No. 2 Yellow Soybeans Memphis N.W. B.P N.W. TN Upper Md Lower Md Yellow Corn Memphis N.W. B.P N.W. TN Upper Md Lower Md Wheat Memphis

9 Video Sales East Tennessee Livestock Center - March 1, load of 60 steers; avg. wt. 840 lbs.; $ load of 59 Holstein steers; avg. wt. 850 lbs.; $81.75 Self-Reported and Self Graded Livestock Markets 2/28/17 Somerville Livestock Sales Receipts: 104 Steers/Bulls: Med & Lg 1-2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Value Added Steers: Med & Lg lbs lbs /28/17 TN Livestock Producers Fayetteville Receipts: 350 (197 graded & grouped) Steers: Med & Lg 1-2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Bulls: Med & Lg lbs lbs lbs lbs /21/17 Woodbury Livestock Market, LLC Receipts: 326 (*Weaned/Vaccinated) Steers: Med & Lg 1-2 Heifers: Med & Lg lbs * lbs lbs * lbs * lbs lbs * * lbs * lbs lbs * * lbs * * lbs * lbs * lbs * * lbs * * lbs * Bulls: Med & Lg lbs lbs lbs lbs Self-Reported and Self Graded Livestock Markets lbs lbs /21/17 TN Livestock Producers Fayetteville Receipts: 685 (365 graded & grouped) Steers: Med & Lg 1-2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Bulls: Med & Lg lbs lbs lbs lbs /21/17 Somerville Livestock Sales Receipts: 107 Steers/Bulls: Med & Lg 1-2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs Value Added Steers: Med & Lg lbs lbs /20/17 Morris Brothers Stockyard, Pikeville, TN Receipts: 122 Steers: Heifers: lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Bulls: lbs lbs lbs lbs lbs lbs Over 799 lbs lbs lbs lbs lbs lbs lbs lbs

10 Beef Industry News Featured Article from AgWeb Beef Demand: Are Imports Hurting Prices? By Betsy Jibben February 27, 2017 With trade being a hot issue in agriculture, Gov. Terry Branstad (R-Ia.) is already prepping for his ambassadorship to China. At the USDA Agricultural Outlook Forum, he expressed that part of his focus will be on reopening the Chinese market to U.S. beef exports. Last year, we exported about $130 billion worth of agricultural products from the United States, said Philip Seng, president and CEO of the U.S. Meat Export Federation. Cattle producers want to continue to build export demand to help control some of the new range in prices. Prices are down compared to where we have been in the past two to three years, said Clay Burtrum, a producer from Stillwater, Ok. If you re a stocker producer or cow-calf producer, you have to manage your costs. The future of trade is uncertain with the possibility of the new administration exiting, reopening or adding new deals. Industry experts say any trade uncertainty is an issue. Any type of uncertainty with trade issues is not going to be good for price, said Craig VanDyke, risk management specialist with Top Third Ag Marketing. It s not encouraging buying. It s not going to get buyers aggressive. But industry leaders say demand has been strong internationally. We see international markets growing, said Seng. We re also doing a good job of displacing some of our competition here recently. We re continuing that string of solid exports, said Don Close, senior analyst for Rabo AgriFinance. That could be a huge positive factor for the U.S. beef going into Even though exports are strong, industry leaders say there seems to be a misconception about the U.S. importing beef, saying imports are not behind lower prices. Actually, our beef imports were down eleven percent in 2016 and they are expected to be down another seven to ten percent in 2017, said Greg Henderson, editorial director of Drovers magazine. How does that compare with recent years? Beef imports were down three percent compared to a decade ago. At the end of the day, the products we move, export and im- port, are different products, said VanDyke. We re importing more lean beef. Why? It s because we don t produce [much of] it. So, we have to grind it up here into our lower products to be able to move that product. Cattle numbers were down in 2014 because of the drought, said Seng. We imported more beef. There s been less beef coming in here the last couple of years. Seng says if the U.S. is going to continue to be one of the world s largest exporters, the country also has to be an importer. I see us continuing to import beef but I see us continuing to export much more beef, said Seng. There are some new deals in the works. In 2016, the U.S. and Brazil reopened its markets for fresh and frozen shipments for the first time since That made Brazil able to export from more areas of its country. They don t have an individual quota for themselves, said Kevin Good, senior analyst with CattleFax. Because of that, they re limited as far as how much product they can bring in without paying a pretty stiff tariff. I would not suspect Brazilian numbers to increase substantially going forward unless something changes from a trade standpoint. We imported massive amounts from Australia three or four years ago, said VanDyke. [When you look at] the quotas for Brazilian beef, they are so miniscule to me. [Those imports are] a non-factor for the time-being. There s also additional export potential in China. Chinese officials announcing plans last year to lift a ban on U.S. beef imports, a product China hasn t imported since The discussion is slow but we re making progress, said Colin Woodall, vice president of government affairs of the National Cattlemen s Beef Association. We did get an official announcement from the Chinese government that they lifted the ban. We have to focus on the export protocols. That means the U.S. is yet to ship beef to the country. There are concerns with eligible cattle from Canada and Mexico, said Seng. These are things I think can be worked out. Once the protocol is established, the Chinese will have to come over and audit. Back on the range, producers hope Washington will continue to build relationships that help expand the cattle trade. Department of Agricultural and Resource Economics 314 Morgan Hall 2621 Morgan Circle USDA / Tennessee Department of Agriculture Market News Service