Tennessee Market Highlights

Transcription

1 Tennessee Market Highlights September 29, 2017 Number: 39 Trends for the Week Compared to a Week Ago Slaughter Cows $4 to $6 lower Slaughter Bulls $5 to $6 lower Feeder Steers $2 to $7 lower Feeder Heifers $2 to $8 lower Feeder Cattle Index Wednesday s index: Fed Cattle The 5-area live price of $ is up $1.13. The dressed price is up $5.13 at $ Corn December closed at $3.55 a bushel, up 2 cents since last Friday. Soybeans November closed at $9.68 a bushel, down 16 cents since last Friday. Wheat December closed at $4.48 a bushel, down 1 cent since last Friday. Cotton December closed at cents per lb, down 0.01 cents since last Friday. Livestock Comments by Dr. Andrew P. Griffith FED CATTLE: Fed cattle traded steady compared to last week on a live basis. Prices on a live basis were mainly $108 while prices on a dressed basis were mainly $170 to $172. The 5-area weighted average prices thru Thursday were $ live, up $1.13 from last week and $ dressed, up $5.13 from a week ago. A year ago prices were $ live and $ dressed. Finished cattle prices held steady this week which is a positive sign for cattle feeders. This should bring some solace, because cattle feeders do not want to see prices reach into the abyss similar to last year. Again, there is no guarantee prices will not decline over the next couple of months, but the expectation is for prices to have a steadiness and slowly gain ground heading through the fourth quarter of There remain a large number of cattle on feed, but timely marketing the past 12 months has kept cattle current and the risk of a wall of cattle pushed to the sidelines. Cattle feeders have continued to purchase feeder cattle aggressively with the expectation of prices improving moving forward. BEEF CUTOUT: At midday Friday, the Choice cutout was $ up $0.31 from Thursday and up $5.21 from last Friday. The Select cutout was $ down $0.15 from Thursday and up $0.46 from last Friday. The Choice Select spread was $7.76 compared to $3.01 a week ago. September and October are two months when beef prices do more wallowing than moving in a defined direction. This wallowing is largely due to moving from the grilling holidays of summer to a time period of relatively strong beef supplies and indifference by consumers for beef products prior to the year-end holidays. Another factor impacting beef prices in early fall is competing meats such as pork. Pork production year-to-date is running 2.8 percent higher than last year and further increases in production are expected. The September 1 Hogs and Pigs report was released yesterday which brought a bearish price tone. All hogs and pigs totaled million head which is an increase of 2.5 percent compared to a year ago. Similarly, breeding hogs increased 1.2 percent compared to a year ago while the pig crop increased 2.2 percent. Additionally, market hogs weighing 120 pounds and over is 3.9 percent higher than last year. This increase in hogs weighing 120 pounds and heavier could push weekly harvest levels to 2.6 million head which will continue to increase 2017 pork production. OUTLOOK: Based on Tennessee weekly auction market averages, steer prices were $2 to $7 lower compared to last week while heifer prices were $2 to $8 lower. Similarly, slaughter cow prices were $4 to $6 lower while slaughter bull prices were $5 to $6 lower compared to a week ago. It could be debated if the softer prices are more a factor of feeder cattle futures markets or a factor of seasonal price trends. As it relates to feeder cattle futures, prices declined more than $5 at the beginning of this week when compared to where they finished the previous week. However, this week s prices were very similar to the prices witnessed Monday and Tuesday of the previous week. The safe answer is to say the futures market and seasonal price trends are at play which is probably correct, but they are probably not playing at equal forces. It would appear cattle traders are paying close attention to the futures market, but it seems they are placing slightly more emphasis on the seasonal trend of cattle prices as more animals begin making their way to town. Feeder cattle futures continue to be well supported through the first of 2018 with very few chinks in the armor which means prices for cattle ready to enter the feedlot will be supported the next several months. However, the support in the year- (Continued on page 2)

2 Livestock Comments by Dr. Andrew Griffith (Continued from page 1) at $3.55 up $0.03 from Thursday. ling market does not translate into perfect support in the freshly weaned calf market. It appears strong demand will continue for calves that will be placed on grass in stocker operations, but that will not keep prices from softening in October and November. It is safe to say calf prices are as strong as can be expected for the time of year considering 525 pound steers averaged $750 per head on Tennessee auctions this week. However, as the market moves into October and November, it is possible for 525 pound steer values to drop closer to $700 per head. Given the declining market, producers should sharpen the pencil and start calculating cost of gain versus value of gain to see if a few more dollars can be squeezed out of each head. Additionally, producers should consider alternative marketing opportunities. ASK ANDREW, TN THINK TANK: Bull lease questions come in waves, and a wave has recently come through. The most frequent question is in relation to what it should cost to lease a bull. The lease rate and structure will vary by the entity leasing the bulls. However, it is good to know some close figures when considering leasing a bull. One method used to lease bulls is by a percentage of the total purchase price of the bull. For instance, one entity in Tennessee leases bulls for one-third of the total purchase price. Thus, a bull that had an initial purchase price of $3,000 would be leased for $1,000 per year. Other entities may have a flat rate for a yearly bull lease ranging from $700 to $1,200 per year. For a producer only needing bulls for 60 to 90 days, bulls are often leased for less than the yearly rate. The lease rate is not the only concern. Producers leasing bulls should make sure bulls pass a BSE test, up to date on vaccinations, and are clear of venereal diseases before leasing an animal. 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 October $ ; December $ ; February $ ; Feeder cattle October $ ; November $ ; January $ ; March $ ; December corn closed Milk Futures Thursday September 28, 2017 Month Class III Close Class IV Close Sep Oct Nov Dec Jan Average Daily Slaughter Cattle Hogs Number of head This week (4 days) 118, ,000 Last week (4 days) 116, ,000 Year ago (4 days) 114, ,250 This week as percentage of Week ago (%) 102% 101% Year ago (%) 103% 104% 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 was up; soybeans and wheat were down; and cotton was mixed for the week. Today the USDA released the September 1 Grain Stocks report. The report provides an estimated stocks carry-over from the 2016/17 marketing year for corn and soybeans. Overall, the Grain Stocks report was supportive for corn and soybeans and bearish for wheat prices. Corn stocks as of September 1 were estimated to be billion bushels, the highest marketing year carry-over since However, the estimate was lower than the average pre-report guess of billion bushels. Adjusting for use, corn stocks-to-use (marketing year ending stocks divided by domestic consumption plus exports) was estimated at 15.7 %, the highest level since 2005/06. At face value the estimates released today were undoubtedly bearish, however the market already had the large stocksto-use ratio and 2016/17 ending stocks priced into the futures market. Moving forward, focus will now be squarely on yield revisions to the 2017 US crop, South American weather, and the USDA projected 964 million bushel decline in global corn stocks from the 2016/17 to 2017/18 marketing year end. September 1 soybean stocks were estimated at 301 million bushels, the most since The estimate was about 40 million bushels less than average pre-report guesses, so soybean futures reacted positively to the report. Soybean stocks-to-use are estimated to be at its highest level since 2006/07. Soybeans remain somewhat of an enigma with very strong year-over-year demand being countered by continued increases in production domestically and in South America. Moving forward Chinese imports and planting/ growing conditions in Brazil and Argentina will move markets in either direction. Similar to the past few years, soybeans appear poised for continued volatility. Wheat stocks as of September 1 were estimated down 292 million bushels from 2016 at billion bushels (the marketing year end for wheat is May 31). However, this indicates June through August use of wheat was only 668 million bushels down 10 percent from last year. Wheat use is hampered by an abundance of corn and other grains domestically and a large Russian wheat crop competing for exports. December cotton futures traded sideways for the week, between and cents. Losses from hurricane Harvey and Irma, in Texas and Georgia, could be 300, ,000 bales however at this time estimates are mostly speculation. Corn December 2017 corn futures closed at $3.55 up 2 cents since last Friday. For the week, December 2017 corn futures traded between $3.48 and $3.58. Across Tennessee, average basis (cash price-nearby futures price) weakened or remained unchanged at Memphis, Northwest Barge Points, Lower-Middle, and Upper-middle Tennessee and weakened at Northwest Tennessee. Overall, basis for the week ranged from 61 under to 10 over the December futures contract with an average of 29 under at the end of the week. Nationally, the Crop Progress report estimated corn dented at 93% compared to 86% last week, 96% last year, and a 5-year average of 95%; corn mature at 51% compared to 34% last week, 70% last year, and a 5-year average of 64%; corn harvested at 11% compared to 7% last week, 14% last year, and a 5-year average of 17%; and corn condition at 61% good-to-excellent and 13% poor-to-very poor. In Tennessee, the Crop Progress report estimated corn condition at 87% good-to-excellent and 3% poor-to-very poor; corn dented at 99% compared to 97% last week, 100% last year, and a 5-year average of 99%; corn mature at 95% compared to 88% last week, 97% last year, and a 5-year average of 91%; and corn harvested at 59% compared to 46% last week, 76% last (Continued on page 4) 3

4 Crop Comments by Dr. Aaron Smith year, and a 5-year average of 61%. Downside price protection could be obtained by purchasing a $3.60 December 2017 Put Option costing 11 cents establishing a $3.49 futures floor. Dec/Mar and Dec/Dec future spreads were 12 and 44 cents, respectively. Corn net sales reported by exporters from September were below expectations with net sales of 12.6 million bushels for the 2017/18 marketing year. Exports for the same time period were up from last week at 28.6 million bushels. Corn export sales and commitments were 24% 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 31%. Ethanol production for the week ending September 22 was million barrels per day down 37,000 from the previous week. Ethanol stocks were million barrels, down 398,000 barrels. In Tennessee, January 2018 cash forward contracts averaged $3.64 with a range of $3.50 to $3.77. March 2018 corn futures closed at $3.67 up 1 cent since last Friday. December 2018 corn futures closed at $3.99 up 3 cents since last Friday. Soybeans November 2017 soybean futures closed at $9.68 down 16 cents since last Friday. For the week, November 2017 soybean futures traded between $9.55 and $9.85. Average soybean basis weakened or remained unchanged at Memphis, Northwest Barge Points, Upper-middle, and Northwest Tennessee and strengthened at Lower-middle Tennessee. Basis ranged from 51 under to 10 under the November futures contract at elevators and barge points. Average basis at the end of the week was 34 under the November futures contract. Nationally, the Crop Progress report estimated soybeans dropping leaves at 63% compared to 41% last week, 65% last year, and a 5-year average of 63%; soybeans harvested at 10% compared to 4% last week, 9% last year, and a 5-year average of 12%; and soybean condition at 60% good-to-excellent and 12% poor-to-very poor. In Tennessee, the Crop Progress report estimated soybean condition at 82% good-to-excellent and 5% poor-to-very poor; soybeans dropping leaves at 54% compared to 37% last week, 66% last year, and a 5-year average of 53%; and soybeans harvested at 6% compared to 3% last week, 13% last year, and a 5- year average of 9%. In Tennessee, October/November 2017 soybean cash contracts average $9.35 with a range of $9.06 to $9.56. November/December 2017 soybean-to-corn price ratio was 2.73 at the end of the week. Downside price protection could be achieved by purchasing a $9.70 November 2017 Put Option which would cost 15 cents and set a $9.55 futures floor. Nov/Jan and Nov/Nov future spreads were 10 cents and 18 cents, respectively. Net sales reported by exporters were above expectations with net sales of million bushels for the 2017/18 marketing year and 4.4 million for the 2018/19 marketing year. Exports for the same period were up from last week at 36.2 million bushels. Soybean export sales and commitments were 36% 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 51%. January 2018 soybean futures closed at $9.78 down 16 cents since last Friday. November 2018 soybean futures closed at $9.86 down 12 cents since last Friday. Cotton Delta upland cotton spot price quotes for September 28 were cents/lb ( ) and cents/lb ( ). Adjusted world price (AWP) decreased 0.36 cents to cents per pound. Net sales reported by exporters were down from last week with net sales of 194,200 bales for the 2017/18 marketing year and 8,500 for the 2018/19 marketing year. Exports for the same period were down from last week at 131,900 bales. Upland cotton export sales were 52% 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 41%. October 2017 cotton futures closed at down 0.01 cents since last Friday. Oct/Dec and Dec/Mar cotton futures spreads were cent and cents, respectively. Nationally, the Crop Progress report estimated cotton bolls opening at 57% compared to 44% last week, 61% last year, and a 5-year average of 61%; cotton harvested at 14% compared to 11% last week, 9% last year, and a 5-year average of 9%; and cotton condition at 60% good-to-excellent and 14% poor-to-very poor. In Tennessee, cotton condition was estimated at 85% good-to-excellent 4 (Continued on page 5)

5 Crop Comments by Dr. Aaron Smith and 6% poor-to-very poor; cotton bolls opening at 65% compared to 50% last week, 78% last year, and a 5-year average of 65%; and cotton harvested at 1% compared to 7% last year and a 5-year average of 5%. December 2017 cotton futures closed at cents down 0.01 cents since last Friday. For the week, December 2017 cotton futures traded between and cents. Downside price protection could be obtained by purchasing a 69 cent December 2017 Put Option costing 1.92 cents establishing a cent futures floor. March 2018 cotton futures closed at up 0.2 cents since last Friday. Wheat In Memphis, old crop cash wheat ranged from $4.28 to $4.37. Wheat net sales reported by exporters were within expectations with net sales of 16 million bushels for the 2017/18 marketing year. Exports for the week were down from last week at 15.6 million bushels. Wheat export sales were 51% 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 55%. Dec/Mar and Dec/Jul future spreads were 18 cents and 42 cents, respectively. December 2017 wheat futures closed at $4.48 down 1 cent since last Friday. December 2017 wheat futures traded between $4.44 and $4.62 this week. December wheat-to-corn price ratio was Nationally, the Crop Progress report estimated winter wheat planted at 24% compared to 13% last week, 28% last year, and a 5-year average of 28%. In Tennessee, winter wheat planted was estimated at 1% compared to 1% last year and a 5-year average of 1%. March 2018 wheat futures closed at $4.66 down 3 cents from last Friday. June/July 2018 cash forward contracts ranged from $4.68 to $5.14 for the week. July 2018 wheat futures closed at $4.90 down 4 cents since last Friday. Downside price protection could be obtained by purchasing a $5.00 July 2018 Put Option costing 36 cents establishing a $4.64 futures floor. 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, September 22, 2017 Thursday, September 28, 2017 Commodity Contract Month Friday Monday Tuesday Wednesday Thursday Soybeans Nov ($/bushel) Jan Mar May Jul Aug Corn Dec ($/bushel) Mar May Jul Sep Dec Wheat Dec ($/bushel) Mar May Jul Sep Soybean Meal Oct ($/ton) Dec Jan Mar May Jul Cotton Oct ( /lb) Dec Mar May Jul Live Cattle Oct ($/cwt) Dec Feb Apr Jun Feeder Cattle Sep ($/cwt) Oct Nov Jan Mar Apr Market Hogs Oct ($/cwt) Dec Feb Apr May

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 Prices on Tennessee Reported Livestock Auctions for the week ending September 29, 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 # lbs lbs lbs lbs Heifers: Medium/Large Frame # lbs lbs lbs lbs Cattle Receipts: This week: 8,633 (11) Week ago: 10,053 (11) Year ago: 8,769 (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, September 22, 2017 Thursday, September 28, 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 Self-Reported and Self-Graded Livestock Markets East Tennessee Livestock Center - September 27, load out of 100 steers; BQA certified producer; est. wt. 800 lbs.; 95% L&M-1s, 5% L&M-2s; medium flesh; 100% Black/BWF; $ Video Board Sale and Graded Sales East Tennessee Livestock Center, Sweetwater, TN Graded Feeder Cattle Sale Friday Sep 22, 2017 Cattle Receipts: 613 For complete report: Sheep and Goat Sales Columbia Graded Sheep and Goat Sale Weighted Average Report for 09/25/2017 Receipts: 497 (349 goats; 148 sheep) Last Sale: 447 For complete report: Bred Heifer Sale Tennessee Livestock Producers / University of Tennessee Lone Oaks Farm Bred Heifer Sale September 23, 2017 Middleton, TN Tennessee Livestock Producers Consignment 86 head Black / BWF 6 8 months bred $ $2100 Average: $1,937 UT Heifer Development Program (3 consignors) 8 head Black / BWF 2 6 months bred $ $2250 Average: $1,963 Total 94 head $ Average: $1,939 9

10 Beef Industry News Featured Article from BEEF Magazine Marketing options for your calf crop By Myriah Johnson Sept 28, 2017 It has been, to say the least, a wild ride. Consider this scenario: feeder cattle prices have risen 25% since last October. Leading up to that, however, we saw a 45% decline in feeder cattle prices since the high in June While the markets may be volatile, one point of consistency every fall is that there is a host of alternatives to evaluate when thinking about marketing calves. Some producers have 2016 fall-born calves to sell, while others contemplate the best option for their 2017 spring-born calves. Here, we'll walk through options for each calving season. Marketing spring-born calves For calves born in spring 2017, the question is: "Do I sell now or later?" However, there are many different "laters." The choices here are: Strip the calves from their mothers and sell before the bawl is out of them Wean and background or precondition the calves Wean, background, place them on winter small grains pasture and pull them off by first hollow stem Wean, background and place them on winter small grains pasture through graze-out We will assume that the strip and sell calves will weigh 500 pounds in October 2017, the preconditioned calves will weigh 600 pounds in December 2017, those off winter small grains will weigh 800 pounds in March 2018, and those off the grazeout winter pasture will weigh 900 pounds in April Currently, we estimate the value of gain to be $1.70 per pound going from October to December, while it's estimated at 94 cents per pound going from October 2017 to March 2018, and 64 cents per pound going from October 2017 to April Again, the price discount going into next spring is steeper than what we see in the remaining few months this fall (Figure 1). If you are looking for the highest value of gain, that looks to be in just a few short months this fall. Marketing fall-born calves Calves born in fall 2016 are now hitting the yearling mark and probably weigh close to 800 pounds. The basic question many producers have is essentially the same: "Do I sell now or later?" At this writing, we estimate an 800-pound steer to bring $ per cwt in September Looking on down the road, we estimate that a 900-pound steer in Oklahoma City in November 2017 would bring $ per cwt based on the current futures price and historical basis. Looking to January 2018, we figure a 1,000-pound steer in Oklahoma City would bring $ per cwt. That is a pretty steep discount going from September to January nearly $20 per cwt. In most cases, it can be hard to overcome that kind of price decline. However, the lack of price decline (or near even prices) going from September to November can allow a producer to put gain on cattle and create value. In this alternative (September to November), the value of gain at $1.39 per pound is more than twice that if we extend out to January For those whose cost of gain is well below $1.39 per pound, producers who hold onto calves that gain a few extra pounds from September to November may find themselves a pretty good deal. In this case, a flat market is a friendly market after seeing the deep discounts in forward months last fall. Finish reading at: Department of Agricultural and Resource Economics 314 Morgan Hall 2621 Morgan Circle arec.tennessee.edu USDA / Tennessee Department of Agriculture Market News Service