Tennessee Market Highlights

Transcription

1 Tennessee Market Highlights March 2, 2018 Number: 9 Trends for the Week Compared to a Week Ago Slaughter Cows Steady to $2 higher Slaughter Bulls $7 to $8 higher Feeder Steers Steady to $3 higher Feeder Heifers Steady to $2 lower Feeder Cattle Index Wednesday s index: Fed Cattle The 5-area live price of $ is down $1.35. The dressed price was down $0.15 at $ Corn May closed at $3.85 a bushel, up 11 cents since last Friday. Soybeans May closed at $10.71 a bushel, up 24 cents since last Friday. Wheat May closed at $5.00 a bushel, up 36 cents since last Friday. Cotton May closed at cents per lb, up 0.75 cents since last Friday. Livestock Comments by Dr. Andrew P. Griffith FED CATTLE: Fed cattle traded $1 to $2 lower than last week on a live basis. Prices on a live basis were mainly $126 to $127 while dressed prices were mainly $203 to $205. The 5-area weighted average prices thru Thursday were $ live, down $1.35 from last week and $ dressed, down $0.15 from a week ago. A year ago prices were $ live and $ dressed.cash cattle trade did not wait until the clock struck midnight to trade this week. Cattle feeders and packers were able to come to terms and trade cattle well before the end of business on Friday. Both parties had reason for urgency as it relates to trading cattle. Cattle feeders had urgency due to live cattle futures declining much of the week while packers have recently seen late week live cattle rallies that forced them to pay higher prices. Softer prices this week may have many asking the question if the spring highs for finished cattle are already set. Finished cattle prices generally surge in the spring months as grilling season approaches and the number of cattle coming off feed is seasonally lower. However, the dynamics are slightly different this year. BEEF CUTOUT: At midday Friday, the Choice cutout was $ up $0.46 from Thursday and up $4.68 from last Friday. The Select cutout was $ down $1.02 from Thursday and up $1.69 from last Friday. The Choice Select spread was $8.18 compared to $5.19 a week ago. The wholesale beef market seems to have a hint of spring to it with the surge in beef prices. Most of the support in this week s price increase comes from the rib primal which gains interest during grilling season. The spring market could very well be in play as retailers make purchases gearing up for the grilling season. If some of these purchases are in fact grilling season purchases then retailers and restaurants must think wholesale beef prices could continue moving higher in the next couple of months which would be the seasonal tendency for rib and loin cuts. Purchasing now is a gamble considering the expectation of increasing beef production. Based on weekly federally inspected beef production values, beef production through the first seven weeks of 2018 is 3.3 percent higher than the same seven weeks in Year-over-year increases are expected to continue and they could easily exceed the current increase of 3.3 percent. Regardless of the reason, packers will ride the wave of higher cutout prices and declining finished cattle prices as far as it will take them. OUTLOOK: The cattle market is wrought with risk, and these risks can be laden with challenges and opportunities. The cattle markets have experienced wild swings in the past four years that have offered several opportunities, but the challenges overshadow the success of many cattlemen in today s market. It would appear another challenging time is quickly approaching as it relates to markets and cattle prices. The 2018 feeder cattle market started off on a strong note as feeder cattle futures made $10 to $12 gains on most contracts and local cash prices increased $10 on feeder cattle and as much as $15 per hundredweight on calves. The calf and feeder cattle market price swing to the upside was largely due to strong finished cattle prices which meant cattle feeders had more dollars to spend on cattle to refill the pen. However, many of those pens may be occupied by cattle that came off wheat pasture early and those that would have normally went to wheat pasture but never had the opportunity. Thus, the weakness that was present in the market this week could be a factor of both reduced finished cattle prices and reduced pen space at some feedlots. If these two factors are the driving force behind the price decline for feeder cattle then the decline may be short lived and prices should be supported moving into the late spring and early summer. However, if the (Continued on page 2)

2 Livestock Comments by Dr. Andrew Griffith (Continued from page 1) from Thursday. price decline is due to a larger underlying issue such as increased beef production and no further increases in beef demand then softer prices may persist. Moving beyond market and price risk, many producers in Tennessee experienced an extremely dry January and an extremely wet February. The implications of these two events may not significantly influence cattle producer profitability, but similar weather patterns during April and May could result in reduced forage production or difficulties with properly harvesting hay. Drought or too much rain can negatively influence profitability of cattle producers, but sometimes the total cost of such an event is not realized until a later date. ASK ANDREW, TN THINK TANK: There have been several discussions this week concerning bull sales and expected progeny differences (EPDs) which is probably a factor of the impending breeding season. The discussions have ranged in topic and have included the timing of a bull sale, saturation of the bull market, bulls that should be steers, and matching EPDs to a herd of cattle or individual cattle to get the best end product from the dam. This is a wide range of topics, but they are all related to understanding the herd sire market and the intended market of the sire s offspring. Producers must first know and understand the genetic needs of their cattle herd before considering bulls for purchase which means there is a need for data. Once the genetic needs are identified, then bull purchasers can evaluate sires with EPDs that complement the cow herd and result in the desired progeny. A bull with the desired characteristics is worth more than a bull that will not meet the needs of the operation. A cheap bull may be just that, a cheap bull. Paying a little more may result in more profits down the road. 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 March $ ; April $ ; May $ ; August $ ; March corn closed at $3.77 down $0.02 Milk Futures Thursday March 1, 2018 Month Class III Close Class IV Close Mar Apr May June July Average Daily Slaughter Cattle Hogs Number of head This week (4 days) 117, ,500 Last week (4 days) 110, ,500 Year ago (4 days) 116, ,000 This week as percentage of Week ago (%) 106% 102% Year ago (%) 101% 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, soybeans, cotton, and wheat were up for the week. This week saw significant improvements in futures prices for all four commodities. Corn closed up 7-11 cents; soybeans closed up 9-24 cents; wheat closed up cents; and cotton closed up cents. The rally was fueled primarily by four factors: 1) continued dry weather concerns in Argentina, 2) continued buying by managed money, 3) strong export sales, and 4) drought concerns in the Southern and Northcentral Plains in the US. All four factors will continue to influence prices next week. Improved futures prices are a welcome sight by producers looking to price crop prior to planting, however, a potential fly-in-theointment of commodity prices could emerge from this week s announcement by President Trump of potential tariffs on steel (25%) and aluminum (10%). These tariffs could result in retaliatory action from trade partners that could have a detrimental impact on agricultural exports, particularly China. For reference, the USDA currently projects that the US will export 55% of wheat production, 14% of corn production, 48% of soybean production, and 68% of cotton production for the current marketing year. China is responsible for 9% of global wheat imports, 2% of global corn imports, 13% of global cotton imports, and 65% of global soybean imports. So, a trade dispute with China could dramatically impact domestic all domestic commodity prices, especially soybean prices. Given the current rally and uncertainty surrounding trade and weather, producers may want to use this rally to top off pre-plant pricing. Depending on the marketing strategy used, storage availability, and the producers risk tolerance, pricing a quarter to twothirds of the crop should be considered prior to planting. This will allow a base price to be established and allow producers to reevaluate as more is known about both production and price during the growing season. Corn Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest, Lower-middle, and Upper-middle Tennessee, and weakened at Northwest Barge Points. Overall, basis for the week ranged from 6 under to 40 over the March futures contract with an average of 14 over at the end of the week. May 2018 corn futures closed at $3.85, up 11 cents since last Friday. For the week, May 2018 corn futures traded between $3.74 and $3.88. Corn net sales reported by exporters from February were above expectations with net sales of 69 million bushels for the 2017/18 marketing year. Exports for the same time period were up from last week at 50.2 million bushels. Corn export sales and commitments were 75% 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 73%. Ethanol production for the week ending February 23 was million barrels per day, down 24,000 from the previous week. Ethanol stocks were million barrels, up 226,000 barrels. May/Jul and May/Dec future spreads were 7 and 19 cents, respectively. July 2018 corn futures closed at $3.92, up 10 cents since last Friday. In Tennessee, September 2018 corn cash forward contracts averaged $3.83 with a range of $3.72 to $4.08. December 2018 corn futures closed at $4.04, up 7 cents since last Friday. Downside price protection could be obtained by purchasing a $4.10 December 2018 Put Option costing 30 cents establishing a $3.80 futures floor. Soybeans Average soybean basis strengthened or remained unchanged at Northwest Barge Points, Memphis, Northwest, and Upper-middle Tennessee and weakened at Lower-middle Tennessee. Basis ranged from 43 under to 11 over the March futures contract at eleva- (Continued on page 4) 3

4 Crop Comments by Dr. Aaron Smith tors and barge points. Average basis at the end of the week was 9 under the March futures contract. May 2018 soybean futures closed at $10.71, up 24 cents since last Friday. For the week, May 2018 soybean futures traded between $10.43 and $ Net sales reported by exporters were above expectations with net sales of 31.5 million bushels for the 2017/18 marketing year and 4.5 million bushels for the 2018/19 marketing year. Exports for the same period were up from last week at 33.1 million bushels. Soybean export sales and commitments were 80% 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 92%. May soybean-to-corn price ratio was 2.78 at the end of the week. May/July and May/Nov future spreads were 8 and -34 cents, respectively. July 2018 soybean futures closed at $10.79, up 23 cents since last Friday. In Tennessee, Oct/Nov 2018 soybean cash contracts average $10.17 with a range of $9.91 to $ November 2018 soybean futures closed at $10.37, up 9 cents since last Friday. Downside price protection could be achieved by purchasing a $10.40 November 2018 Put Option which would cost 58 cents and set a $9.82 futures floor. November/December 2018 soybean-to -corn price ratio was 2.57 at the end of the week. Cotton Delta upland cotton spot price quotes for March 1 were cents/lb ( ) and cents/lb ( ). Adjusted world price (AWP) increased 3.4 cents to cents per pound. May 2018 cotton futures closed at cents, up 0.75 cents since last Friday. For the week, May 2018 cotton futures traded between and cents. Net sales reported by exporters were down from last week with net sales of 294,100 bales for the 2017/18 marketing year and 118,200 bales for the 2018/19 marketing year. Exports for the same period were down from last week at 278,700 bales. Upland cotton export sales were 98% 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 84%. May/Jul and May/Dec cotton futures spreads were 0.26 cents and cents, respectively. July 2018 cotton futures closed at 82.35, up 0.28 cents since last Friday. December 2018 cotton futures closed at 77.05, up 0.45 cents since last Friday. Downside price protection could be obtained by purchasing a 78 cent December 2018 Put Option costing 4.93 cents establishing a cent futures floor. Wheat In Memphis, old crop cash wheat ranged from $4.74 to $5.30. May 2018 wheat futures closed at $5.00, up 36 cents since last Friday. May 2018 wheat futures traded between $4.67 and $5.18 this week. May wheat-to-corn price ratio was Wheat net sales 4 (Continued on page 5)

5 Crop Comments by Dr. Aaron Smith reported by exporters were within expectations with net sales of 7.0 million bushels for the 2017/18 marketing year and 1.7 million bushels for the 2018/19 marketing year. Exports for the week were down from last week at 12.2 million bushels. Wheat export sales were 84% 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 92%. May/Jul and May/Sep future spreads were 14 cents and 28 cents, respectively. In Tennessee, June/July 2018 cash forward contracts ranged from $4.68 to $5.53 for the week. July wheat-to-corn price ratio was July 2018 wheat futures closed at $5.14, up 35 cents since last Friday. Downside price protection could be obtained by purchasing a $5.20 July 2018 Put Option costing 33 cents establishing a $4.87 futures floor. September 2018 wheat futures closed at $5.28, up 33 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, February 23, 2018 Thursday, March 1, 2018 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 2, lbs lbs lbs lbs Heifers: Medium/Large Frame # lbs lbs lbs lbs Cattle Receipts: This week: 7,368 (10) Week ago: 6,989 (9) Year ago: 4,475 (7) 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, February 23, 2018 Thursday, March 1, 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 Video Sales & Loads East Tennessee Livestock Center - February 28, load out of 86 heifers; est. wt. 635 lbs.; 80% L&M-1s, 20% L&M-2s; medium to med-minus flesh; 70% Black/BWF, 20% ChaX, 10% Red/RWF; $ Hardin County Stockyard - February 28, load of 65 steers; est. wt. 734 lbs.; M&L-1; Black/BWF, few ChaX; $ Self-Reported and Self-Graded Livestock Markets 2/27/18 TN Livestock Producers Fayetteville Receipts: 285 (122 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 Self-Reported and Self-Graded Livestock Markets Choice and Prime lbs Good Choice and Prime lbs Choice and Prime lbs Choice and Prime lbs Choice and Prime 125 lbs Feeders Yearlings Ewes Replacement Ewes: Ewes Fat lbs Rams Graded Sheep and Goat Sales Columbia Graded Sheep and Goat Sale Weighted Average Report for 02/26/2018 Receipts: 427 (356 goats; 71 sheep) Last Sale: 375 For complete report: 2/23/18 Coffee County Livestock Market Graded Goat and Sheep Sale Manchester, TN Receipts: 308 (189 Goats; 119 Sheep) Next Sale Mar 9, 2018 Goats sold per hundred weight (cwt) unless otherwise noted, weights, actual or estimated. Slaughter Classes: Kids Selection 1 Selection 2 Selection lbs lbs lbs lbs Feeders Yearlings Nannies lbs Nannies Over 125 lbs Nannies Thin Billies lbs Billies Thin SHEEP: Slaughter Lambs-Includes all breeds, sold per hundred weight (cwt). Choice and Prime lbs Good

10 Beef Industry News Featured Article from High Plains/Midwest AG Journal Bull buying made easier with 7 suggestions By David Burton, University of Missouri Extension Feb 28, 2018 Many cattlemen dread buying bulls, according to Eldon Cole, livestock specialist with University of Missouri Extension. Cole says he understands the concerns, but there are some basic things that can be done to reduce the anxiety involved in bull shopping and buying. First, know what your cows need to complement their genetic strengths or weaknesses. Do you have records that indicate you need more milk, more growth, more muscling, more marbling, more docility? Then look for a bull that can help those areas, said Cole. Second, do you have well-defined goals for your herd in the future? If not, work on setting some goals. These can assist in the bull selection process, said Cole. Third, have you had your market representative, veterinarian or even an extension livestock specialist assist you in herd evaluation? For most traits the low numbers indicate faster growth, more milk, easier calving, more carcass marbling, etc. A percentile rank higher than 50 means the animal is in the lower one-half of the breed for that trait. Admittedly, there are instances where a below average percent rank is acceptable. Once again, make sure your cow records support that move. Sixth, don t forget the accuracy for the EPDs. Young virgin bulls all have relatively low accuracies, mostly below Don t worry about that because they ll all be pretty much on the same playing field, said Cole. Accuracies can be boosted giving a young bull the edge over contemporaries by genomic testing. A test of their DNA increases accuracies as if the bull has produced 8 to 20 plus progeny. You can use the genomic data to enhance the EPDs. That combination is superior to either one alone, said Cole. Seventh, another trend in the numbers game is the move toward indexes. An index combines several EPD traits into one value usually reported in dollars and cents. Most breed associations are beginning to offer these in the form of maternal indexes and terminal indexes. This indexing system should help reduce the stress of having to know different EPDs for each breed, said Cole. Be cautious as their thoughts may have some bias but it is always good to get others opinions, said Cole. Fourth, do you have a reasonably good grasp of expected progeny difference jargon? This does not come overnight. However, it is critical that buyers understand the terminology. Research shows EPDs are 7 to 9 times more effective at predicting growth rate and several other traits than the adjusted weights are, said Cole. Fifth, Cole says to be sure and know the breed s percentile rank table to tell where an animal ranks within the breed for various traits that you need to change in your herd. More and more sales include an animal s percentile rank. Department of Agricultural and Resource Economics 314 Morgan Hall 2621 Morgan Circle arec.tennessee.edu USDA / Tennessee Department of Agriculture Market News Service