Tennessee Market Highlights

Transcription

1 Tennessee Market Highlights April 6, 2018 Number: 14 Trends for the Week Compared to a Week Ago Slaughter Cows Steady to $2 higher Slaughter Bulls Steady to $1 higher Feeder Steers $4 to $7 lower Feeder Heifers Unevenly steady Feeder Cattle Index Wednesday s index: Fed Cattle The 5-area live price of $ is down $4.64. The dressed price is down $4.68 at $ Corn Through Thursday, May closed at $3.89 a bushel, up 2 cents since last Friday. Soybeans Through Thursday, May closed at $10.31 a bushel, down 13 cents since last Friday. Wheat Through Thursday, May closed at $4.64 a bushel, up 13 cents since last Friday. Cotton Through Thursday, May closed at cents per lb, up 0.97 cents since last Friday. Livestock Comments by Dr. Andrew P. Griffith FED CATTLE: Fed cattle traded $5 lower compared to a week ago on a live basis. Prices on a live basis were mainly $116 to $117 while dressed prices were mainly $187 to $188. The 5-area weighted average prices thru Thursday were $ live, down $4.64 from last week and $ dressed, down $4.68 from a week ago. A year ago prices were $ live and $ dressed. June and August live cattle contracts spent some time under the $100 price level this week before barreling back. At this juncture, it would seem that it would be difficult to push finished cattle prices below the $100 per hundredweight price line this summer. There is plenty of bearish information such as the number of cattle on feed and heavier carcass weights increasing beef supply, but that should be priced into the market at this time. The summer months will drag cash prices for finished cattle lower as is normally expected, but below $100 seems like a stretch. The key for cattle feeders the next several months is to stay current with marketings and look to the margin on the next set of feeder cattle to place. BEEF CUTOUT: At midday Friday, the Choice cutout was $ down $0.55 from Thursday and down $7.06 from last Friday. The Select cutout was $ up $0.61 from Thursday and down $10.81 from last Friday. The Choice Select spread was $7.62 compared to $11.31 a week ago. The beef export market remained strong through the end of February based on information collected by the Foreign Agricultural Service division of USDA. Beef exports in February totaled 74,554 metric tons which is 9.5 percent higher than February As it relates to the primary destination of U.S. beef, exports to Hong Kong were up 38 percent compared to one year ago while beef exports to South Korea increased 23 percent compared to last year. Beef exports to Japan were down 13 percent compared to last year, but the tide may well turn in Japan as the safeguard tariff rate declined from 50 percent to 38.5 percent on April 1st. The international market is an integral component of the U.S. beef sector. However, the domestic market plays a much bigger role in the business since only 10 to 12 percent of production is exported. The talking point from the domestic market is the impending grilling season. The question now is how strong demand will be and if consumers will spend some earnings from the reduced federal tax withholdings on beef. OUTLOOK: Feeder cattle futures have been on the decline for six straight weeks. From February 20th through April 3rd, April feeder cattle futures lost about $22 per hundredweight which is equivalent to $176 per head. Similarly, the August feeder cattle contract declined about $18 per hundredweight over the same time period. The cash market for calves and feeder cattle has been under the same duress. Based on Tennessee weekly auction market price data, steer calves and feeder cattle prices have declined $8 to $15 per hundredweight in the past six weeks. Though calf and feeder cattle prices are not immune to broader market signals, the cash market for calves and feeder cattle has held up nicely compared to the futures market. Despite a tough month and a half in the cattle markets, a little life came back in the market this week. Wednesday and Thursday trade pushed April feeder cattle $5.50 higher. This may not result in much fan fair at the local stockyard or immediately stronger prices, but it is a step in the right direction for producers needing to market animals. The advent of green pastures continue to support the grass cattle market as many stocker producers are looking for lightweight calves to turn out on grass. The grass cattle market will soon begin to dete- (Continued on page 2)

2 Livestock Comments by Dr. Andrew Griffith (Continued from page 1) riorate as May approaches. Alternatively, technical indicators and seasonal expectations should support yearling cattle prices from May through August. As producers move through the spring calf and feeder cattle market, it is important to remember the seasonal strength in the slaughter cow market. Slaughter cow prices have declined slightly as the calf and feeder cattle market have softened, but the slaughter cow market remains relatively strong as prices are in the $54 to $56 per hundredweight range. Prices for slaughter cows have the potential to sneak higher if nothing befalls the market. The only hesitation to saying prices will not soften is if there is a major sell off in the dairy cow herd. ASK ANDREW, TN THINK TANK: With the announcement of the retaliatory tariffs by China, several questions concerning this topic have risen. The primary agricultural products that could be impacted are soybeans and pork as China is the top export market for both of these products. The Chinese have also levied import tariffs on products such as beef, corn, cotton, and many other items. However, exports of these products are relatively small, and it is unlikely an import tariff by China will greatly influence the market of any of these goods. The one negative for the beef sector is that China is a market that was just reopened to U.S. beef last summer. The domestic beef cattle industry had and continues to have high hopes that opening the Chinese market to beef will provide support to domestic producers and processors. It will take time for everything to shake out, but there does not appear any reason to fret at this time as this should accelerate trade talks with China. 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 FRIDAY S FUTURES MARKET CLOSING PRICES: Friday s closing prices were as follows: Live/fed cattle April $ ; June $ ; August $ ; Feeder cattle April $ ; May $ ; August $ ; September $ ; May corn closed at $3.89 down $0.01 from Thursday. Milk Futures Thursday April 5, 2018 Month Class III Close Class IV Close Apr May June July Aug Average Daily Slaughter Cattle Hogs Number of head This week (4 days) 114, ,000 Last week (4 days) 118, ,250 Year ago (4 days) 112, ,500 This week as percentage of Week ago (%) 97% 93% Year ago (%) 102% 96% USDA Box Beef Cutout Value Choice 1-3 Select lbs lbs $/cwt - Thursday Last Week Year ago Change from week ago Change from year ago

3 Crop Comments by Dr. Aaron Smith Overview Corn, cotton, and wheat were up; and soybeans were down for the week. This past week was a volatile week in commodity futures markets. The biggest story in agricultural markets this week was the announcement, by China, of retaliatory tariffs on U.S. agricultural products such as soybeans, corn, wheat, sorghum, beef, and cotton. It is important to point out that these tariffs have not been implemented yet simply announced as potential retaliatory measures to be imposed in the future. If the tariffs were implemented it would not be good for U.S. agriculture, particularly for commodities that rely on exports to China, such as soybeans and cotton. Hopefully the two nations can work out their trade differences prior to the enactment of the tariffs. When the tariffs were announced on Wednesday futures prices immediately dropped: soybeans cents; corn cents; wheat cents; and cotton cents. By the close of Thursday all four commodities had regained all or most of these loses. While I m not yet convinced that the tariffs on soybeans will come in to effect (Chinese soybean consumers have as much to lose as US soybean producers), in the short-term we could potentially see accelerated export sales and shipments before the proposed tariffs are scheduled to be implemented as exporters attempt to secure and deliver product before tariff implementation. This could support prices in the short term. China made an additional announcement this week that did not receive nearly as much press as the potential 25% tariff on soybeans. China indicated that it was repositioning incentives (subsidies) in favor of soybeans over corn in four provinces: Liaoning, Jilin, Heilongjiang, and Inner Mongolia (all four are large corn and soybean producing provinces). While this repositioning of incentives will not impact short term demand for imported soybeans the long term implications could be substantial, by replacing imports or limiting import growth of soybeans. The change makes some sense as China currently has billion bushels of corn stocks carried over from the previous year and imports more than 3.5 billion bushels of soybeans annually. Shifting acreage from corn to soybeans could replace (over time) imports form the U.S. While it is unlikely that China would be self-sufficient in corn and soybean production in the next 5-10 years, a plausible scenario could be China plus South American production meeting Chinese corn and soybean demand in 5-10 years. This possibility should be a concern to U.S. crop producers and policy makers. Numbers as of futures close on Thursday, April 5, Corn Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Upper-middle, and Lower-middle Tennessee. Overall, basis for the week ranged from 23 under to 36 over the May futures contract with an average of 1 over at the end of the week. May 2018 corn futures closed at $3.89, up 2 cents since last Friday. For the week, May 2018 corn futures traded between $3.72 and $3.92. Corn net sales reported by exporters from March were below expectations with net sales of 35.4 million bushels for the 2017/18 marketing year and 0.4 million bushels for the 2018/19 marketing year. Exports for the same time period were down from last week at 49.8 million bushels. Corn export sales and commitments were 84% of the USDA estimated total annual exports for the 2017/18 marketing year (September 1 to August 31) compared to a 5-year average of 82%. Ethanol production for the week ending March 30 was million barrels per day, down 1,000 from the previous week. Ethanol stocks were million barrels, down 365,000 barrels. May/Jul and May/Dec future spreads were 9 and 24 cents, respectively. (Continued on page 4) 3

4 Crop Comments by Dr. Aaron Smith July 2018 corn futures closed at $3.98, up 2 cents since last Friday. In Tennessee, the Crop Progress report estimated corn planted at 1% compared to 1% last year and a 5-year average of 1%. In Tennessee, September 2018 corn cash forward contracts averaged $3.91 with a range of $3.77 to $4.14. December 2018 corn futures closed at $4.13, up 2 cents since last Friday. Downside price protection could be obtained by purchasing a $4.20 December 2018 Put Option costing 34 cents establishing a $3.86 futures floor. Soybeans Average soybean basis strengthened or remained unchanged at Northwest Barge Points, Memphis, Northwest, Lower-middle, and Upper-middle Tennessee. Basis ranged from 50 under to 4 over the May futures contract at elevators and barge points. Average basis at the end of the week was 17 under the May futures contract. May 2018 soybean futures closed at $10.31, down 13 cents since last Friday. For the week, May 2018 soybean futures traded between $9.83 and $ Net sales reported by exporters were above expectations with net sales of 41.6 million bushels for the 2017/18 marketing year and 13.2 million bushels for the 2018/19 marketing year. Exports for the same period were down from last week at 21.3 million bushels. Soybean export sales and commitments were 92% of the USDA estimated total annual exports for the 2017/18 marketing year (September 1 to August 31), compared to a 5-year average of 95%. May soybean-to-corn price ratio was 2.65 at the end of the week. May/July and May/Nov future spreads were 11 and 3 cents, respectively. July 2018 soybean futures closed at $10.42, down 13 cents since last Friday. In Tennessee, Oct/Nov 2018 soybean cash contracts average $10.18 with a range of $9.79 to $ November 2018 soybean futures closed at $10.34, down 13 cents since last Friday. Downside price protection could be achieved by purchasing a $10.40 November 2018 Put Option which would cost 62 cents and set a $9.78 futures floor. November/December 2018 soybean-to-corn price ratio was 2.50 at the end of the week. Cotton Delta upland cotton spot price quotes for April 5 were cents/lb ( ) and cents/lb ( ). Adjusted World Price (AWP) decreased 0.85 cents to cents. May 2018 cotton futures closed at cents, up 0.97 cents since last Friday. For the week, May 2018 cotton futures traded between and cents. Net sales reported by exporters were up from last week with net sales of 367,600 bales for the 2017/18 marketing year and 43,800 bales for the 2018/19 marketing year. Exports for the same period were up from last week at 452,400 bales. Upland cotton export sales were 108% of the USDA estimated total annual exports for the 2017/18 marketing year (August 1 to July 31), compared to a 5-year average of 92%. May/Jul and May/Dec cotton futures spreads were cents and -4.7 cents, respectively. 4 (Continued on page 5)

5 Crop Comments by Dr. Aaron Smith July 2018 cotton futures closed at 82.15, up 0.35 cents since last Friday. The Crop Progress report estimated cotton planted at 7% compared to 3% last year and a 5-year average of 3%. December 2018 cotton futures closed at 77.87, up 0.14 cents since last Friday. Downside price protection could be obtained by purchasing a 78 cent December 2018 Put Option costing 4.5 cents establishing a 73.5 cent futures floor. Wheat May 2018 wheat futures closed at $4.64, up 13 cents since last Friday. May 2018 wheat futures traded between $4.45 and $4.66 this week. May wheat-to-corn price ratio was Wheat net sales reported by exporters were within expectations with net sales of 4.0 million bushels for the 2017/18 marketing year and 7.4 million bushels for the 2018/19 marketing year. Exports for the week were up from last week at 15.7 million bushels. Wheat export sales were 92% of the USDA estimated total annual exports for the 2017/18 marketing year (June 1 to May 31), compared to a 5-year average of 100%. May/Jul and May/Sep future spreads were 17 cents and 34 cents, respectively. In Tennessee, June/July 2018 cash forward contracts ranged from $4.48 to $5.06 for the week. The Crop Progress report estimated winter wheat condition at 32% good-to-excellent and 30% poor-to-very poor. In Tennessee, winter wheat condition was estimated at 57% good-to-excellent and 6% poor-to-very poor; and winter wheat jointing was estimated at 29%. July wheat-to-corn price ratio was July 2018 wheat futures closed at $4.81, up 13 cents since last Friday. Downside price protection could be obtained by purchasing a $4.85 July 2018 Put Option costing 25 cents establishing a $4.60 futures floor. September 2018 wheat futures closed at $4.98, up 13 cents since last Friday. Additional Information: Links for data presented: U.S. Export Sales - USDA FAS: Weekly Export Performance Indicator EIA: Weekly ethanol Plant Production - EIA: Weekly Supply Estimates - Upland Cotton Reports - Tennessee Crop Progress - U.S. Crop Progress - USDA AMS: Market News - 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, March 30, 2018 Thursday, April 5, 2018 Commodity Contract Month Friday Monday Tuesday Wednesday Thursday Soybeans May ($/bushel) Jul Aug Sep Nov Jan Corn May ($/bushel) Jul Sep Dec Mar May Wheat May ($/bushel) Jul Sep Dec Mar Soybean Meal May ($/ton) Jul Aug Sep Oct Dec Cotton May ( /lb) Jul Oct Dec Mar Live Cattle Apr ($/cwt) Jun Aug Oct Dec Feeder Cattle Mar ($/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 April 6, lbs lbs lbs lbs Heifers: Medium/Large Frame # lbs lbs lbs lbs Cattle Receipts: This week: 6,778 (11) Week ago: 7,941 (10) Year ago: 5,640 (8) 7

8 Tennessee lbs. M-1 Steer Prices 2017, 2018 and 5-year average Tennessee lbs. M-1 Steers Prices 2017, 2018 and 5-year average /2016 Avg /2016 Avg Area Finished Cattle Prices 2017, 2018 and 5-year average Tennessee Slaughter Cow Prices Breakers 75-80% 2017, 2018 and 5-year average 2012/2016 Avg Prices Paid to Farmers by Elevators Friday, March 30, 2018 Thursday, April 5, 2018 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 Self-Reported and Self-Graded Livestock Markets Browning Livestock Market - April 4, load of 69 heifers; M&L1-2s; avg. wt. 705 lbs.; $ Dickson Regional Livestock - April 2, load of 50 steers; avg. wt lbs; M&L 1-2s; 5-6 flesh; Blk BWF and RWF; $ East Tennessee Livestock Center - April 4, load of 55 Holstein steers; avg. wt. 900 lbs.; $84.75 Self-Reported and Self-Graded Livestock Markets lbs lbs Bulls: Other: lbs Slaughter Cows (under 900 lbs): lbs Slaughter Cows (over 900 lbs): lbs Slaughter Bulls (over 1500 lbs): lbs Head Cows: Graded Sales Farmers Livestock Graded Holstein, Greeneville, TN Weighted Average Report for Thursday Mar 29, 2018 Cattle Receipts: 453 For complete report: Warren Co. Livestock Graded Sale, McMinnville, TN Weighted Average Report for Wednesday Apr 5, 2018 Cattle Receipts: 1513 Blk, Bwf and Char For complete report: Self-Reported and Self-Graded Livestock Markets 4/3/18 TN Livestock Producers Fayetteville Receipts: 534 (260 graded & grouped) Steers: Med & Lg 1-2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Bulls: Med & Lg lbs lbs lbs lbs /2/18 Morris Brothers Stockyard, Pikeville, TN Receipts: 81 Last Week: 87 Last Year: 131 Steers: Heifers: lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Over 799 lbs lbs

10 Beef Industry News Featured Article from AGWeb The Chinese Tariffs Nobody Is Talking About April 5, 2018 By Anna-Lisa Laca Farm Journal's Milk Online and Business Editor Earlier this week the Chinese government announced $50 billion in proposed retaliation tariffs against President Trump s menu of tariffs aimed at ending intellectual property theft. While the media has been focused on soybeans and pork, other agriculture commodities are targeted to be taxed too. Did you know corn, cotton, sorghum, wheat and beef are on the list? [See the full list of proposed tariffs here.] The reason they haven t been at the forefront of the discussion is that we don t do a ton of business with them on those products. We hardly do any business with them on that stuff, explains Andy Shissler of S&W Trading. It s really, really small dollars. According to Shissler the amount of money spent on the other agriculture commodities listed, pales in comparison to soybeans and that s why the trade isn t concerned about them. The soybean tariff is the scary one because they buy a lot of from us, he says. Corn is another grain on China s hit list. Both analysts agree China imports so little corn from the U.S. that those tariffs won t matter much. Our markets for DDGs and corn are so diversified I don t think [the tariffs] even make a dent in the shorter run, Payne says. Will they actually do it? It s important to keep in mind these tariffs are proposed, not implemented. Shissler isn t sure China will actually go through with the tariffs. I just don't know how a tariff would work, I really don't, he says. If they put a 25% tariff on soybeans and they still have to buy them, what does that do? From an end user standpoint we wouldn't want to pay 25% more for the two thirds that we use. Like other analysts, Shissler thinks the tariff talk is a negotiation tactic. I think the [administration] wanted to negotiate or whatever and then they didn't hear much back, so they do this and have probably gotten a response, he says adding that President Trumps goal to have $100 billion trade deficit is impossible. This year China is also poised to buy a fair amount of cotton from the U.S., says John Payne author of the This Week in Grain blog. China is 25% of our export market for cotton for this marketing year, he says. If they had the luxury to back off on cotton imports I m sure they would do it. They are going to be in here because they have to be. According to Payne, the cotton markets could suffer from the tariffs. For right now I do look for the cotton markets to take it on the chin a little bit, he says. Tariffs on cotton are going to be much more detrimental than anything else they are going to want to do. Department of Agricultural and Resource Economics 314 Morgan Hall 2621 Morgan Circle arec.tennessee.edu USDA / Tennessee Department of Agriculture Market News Service