Tennessee Market Highlights

Transcription

1 Tennessee Market Highlights March 9, 2018 Number: 10 Trends for the Week Compared to a Week Ago Slaughter Cows Steady to $3 lower Slaughter Bulls $1 to $2 lower Feeder Steers Unevenly steady Feeder Heifers $1 to $3 higher Feeder Cattle Index Wednesday s index: Fed Cattle The 5-area live price of $ is down $0.04. The dressed price is down $0.45 at $ Corn May closed at $3.90 a bushel, up 5 cents since last Friday. Soybeans May closed at $10.39 a bushel, down 32 cents since last Friday. Wheat May closed at $4.89 a bushel, down 11 cents since last Friday. Cotton May closed at cents per lb, up 2.43 cents since last Friday. Livestock Comments by Dr. Andrew P. Griffith FED CATTLE: Fed cattle traded steady compared to a week ago on a live basis. Prices on a live basis were mainly $126 to $127 while dressed prices were mainly $203 to $204. The 5-area weighted average prices thru Thursday were $ live, down $0.04 from last week and $ dressed, down $0.45 from a week ago. A year ago prices were $ live and $ dressed. Cattle feeders and packers started trading cattle and dollars early this week as margins for both parties remain positive. The futures market did very little early in the week to show a price direction which likely had both parties eager to take their positive margins to the bank instead of waiting each other out to see what could happen. Cattle feeders will find it difficult to push fed cattle prices higher moving through the spring as the market is likely to have a contraseasonal tendency this year. The futures market is telling cattle feeders to sell inventory today because prices tomorrow are going to be lower. This marketing strategy may be worth considering for spring marketings. BEEF CUTOUT: At midday Friday, the Choice cutout was $ up $0.74 from Thursday and up $1.86 from last Friday. The Select cutout was $ up $1.13 from Thursday and up $3.33 from last Friday. The Choice Select spread was $6.71 compared to $8.18 a week ago. Spot market beef prices have been the highlight of the cattle industry the past few weeks. The market has certainly started showing some of the signs of grilling demand, but better yet, the market has been showing signs of strong beef demand. The strong beef demand is not only coming from the domestic market but also from the international market as exports continue to be strong. Beef exports in January totaled 105,486 metric tons which is a 9 percent increase from January one year ago. Not only did beef export volume increase, beef export value increased 21 percent compared to the same month last year and totaled $624.4 million. This means that exports in January accounted for 12.4 percent of January beef production. January exports are a good sign of maintaining growth in the beef export market. There are some international issues lurking that could hamper the market, but nothing has slowed the market. Packers may have to be innovative in coming months to keep wholesale beef prices elevated. OUTLOOK: Feeder cattle futures have been on a steady decline the past three weeks with losses on most contracts ranging from $6 to $9 during that time period. The current explanation for the decline is that feeder cattle futures are following live cattle futures. Is this the pressure that has been talked about by market analysts since last fall? It appears the market is in a bit of a correction mode as feeder cattle futures contracts have been tracing their steps back to early January lows. The next big question is if the market will continue tracing its steps to the December low. There is no way to tell at this time how low prices will go, but there is strong support at the December lows which means prices should not push lower than December lows. Readers of this article should not take the previous statement as a death sentence in the cattle markets. However, producers should understand and make note that there is downward price pressure and it could persist. Some producers may be questioning what is being said here as some producers have been experiencing stronger cattle prices. The market has seen some divergence as it is related to freshly weaned calves and feeder cattle. The calf market has really started gearing up as grass fever is on many stocker producers minds. Lightweight calf prices on Tennessee weekly auctions are $18 per hundredweight higher than the start of the year. Alternatively, the yearling market has started to experience some softening in the past few weeks. Based on (Continued on page 2)

2 Livestock Comments by Dr. Andrew Griffith (Continued from page 1) Tennessee weekly auction data, yearling prices are $9 per hundredweight higher than the start of the year. Though yearling cattle prices are higher than the start of the year, the market has started to slow with increased cattle on feed numbers and increased beef production. It may be the third quarter of the year before significant price support is witnessed in the feeder cattle market. ASK ANDREW, TN THINK TANK: Several questions have been filtering in concerning a survey that was recently administered by me and a group of researchers in the Department of Agricultural and Resource Economics. The survey was developed so we could get a better understanding of the types of pasture being utilized by producers, grazing management strategies being utilized, and to evaluate incentives for producers to diversify grass species across the operation. In less words, we are trying to determine if producers are utilizing cool and warm season forages to manage risk in the operation and if so what benefits they are experiencing from forage specie diversification. If producers are not using both warm season and cool season forages, we are trying to determine what incentives are necessary to induce inclusion of multiple forage species. A link to the survey was sent via on March 2nd. If readers of this article received that , we would greatly appreciate your input. 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 $3.83 down $0.03 from Thursday. Milk Futures Thursday March 8, 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) 116, ,500 Last week (4 days) 117, ,500 Year ago (4 days) 114, ,000 This week as percentage of Week ago (%) 100% 99% Year ago (%) 102% 103% 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 and cotton were up; soybeans and wheat were down for the week. On Thursday, the USDA released its monthly World Agricultural Supply and Demand Estimates (WASDE) report. The report provided bullish news for corn and cotton, bearish news for wheat and a mixed bag for soybeans. Corn futures rallied based on increased ethanol use (50 million bushels) and exports (175 million bushels). Domestic and foreign ending stocks were revised down 225 million bushels and up 70 million bushels from last month s projections, respectively. Compared to the previous marketing year s ending stocks, global corn ending stocks are projected to decrease by billion bushels. A substantial year-over-year decrease. The largest contributors to the decrease are increased global use and reduced South American production. Soybean supply and demand revisions provided information for both bulls and bears. For the bears, domestic use was decreased 25 million bushels, due to a 35 million bushel reduction in exports and 10 million bushel increase in crush. US ending stocks were increased by 25 million bushels to a robust 555 million bushels (302 million bushels in the previous marketing year). For the bulls, foreign stocks were decreased 162 million bushels from last month. The reduction in foreign stocks was largely a result of reduced production and stocks in Argentina. Cotton exports were increased 300,000 bales. This is after exports were decreased 300,000 bales on the February WASDE report. Cotton export sales pace remains very strong, so additional increases in future WASDE reports remains likely. Increased exports reduced ending stocks to 5.5 million bales. Only minor revisions were made to global cotton supply and use estimates. Wheat futures declined as domestic and global stocks were increased 25 million bushels and 78 million bushels from the previous month s estimate. The global supply and demand picture was not changed, with large stocks and flat demand prevailing, however market attention will continue to focus on the drought in the southern plains as it could reduce domestic production as we move into the spring. Corn Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee and weakened at Lower-middle Tennessee. Overall, basis for the week ranged from 12 under to 35 over the May futures contract with an average of 5 over at the end of the week. May 2018 corn futures closed at $3.90 up 5 cents since last Friday. For the week, May 2018 corn futures traded between $3.84 and $3.93. Corn net sales reported by exporters from February 23-March 1 were above expectations with net sales of 73.1 million bushels for the 2017/18 marketing year and 2.8 million bushels for the 2018/19 marketing year. Exports for the same time period were down from last week at 42.4 million bushels. Corn export sales and commitments were 79% 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 75%. Ethanol production for the week ending March 2 was million barrels per day, up 13,000 from the previous week. Ethanol stocks were million barrels, up 165,000 barrels. May/Jul and May/Dec future spreads were 8 and 17 cents, respectively. July 2018 corn futures closed at $3.98, up 6 cents since last Friday. In Tennessee, September 2018 corn cash forward contracts averaged $3.89 with a range of $3.80 to $4.15. December 2018 corn futures closed at $4.07, up 3 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. (Continued on page 4) 3

4 Crop Comments by Dr. Aaron Smith Soybeans Average soybean basis strengthened or remained unchanged at Memphis and Lower-middle Tennessee and weakened at Northwest Barge Points, Northwest, and Upper-middle Tennessee. Basis ranged from 53 under to 2 over the May futures contract at elevators and barge points. Average basis at the end of the week was 19 under the May futures contract. May 2018 soybean futures closed at $10.39, down 32 cents since last Friday. For the week, May 2018 soybean futures traded between $10.36 and $ Net sales reported by exporters were above expectations with net sales of 92.2 million bushels for the 2017/18 marketing year and 5.3 million bushels for the 2018/19 marketing year. Exports for the same period were up from last week at 36.7 million bushels. Soybean 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 93%. May soybean-to-corn price ratio was 2.66 at the end of the week. May/July and May/Nov future spreads were 9 and -9 cents, respectively. July 2018 soybean futures closed at $10.48, down 31 cents since last Friday. In Tennessee, Oct/Nov 2018 soybean cash contracts average $10.30 with a range of $10.02 to $ November 2018 soybean futures closed at $10.30, down 7 cents since last Friday. Downside price protection could be achieved by purchasing a $10.40 November 2018 Put Option which would cost 61 cents and set a $9.79 futures floor. November/December 2018 soybean-to-corn price ratio was 2.53 at the end of the week. Cotton Delta upland cotton spot price quotes for March 8 were cents/lb ( ) and cents/lb ( ). Adjusted world price (AWP) increased 1.04 cents to cents per pound. May 2018 cotton futures closed at cents, up 2.43 cents since last Friday. For the week, May 2018 cotton futures traded between and 86.6 cents. Net sales reported by exporters were up from last week with net sales of 383,900 bales for the 2017/18 marketing year and 252,100 bales for the 2018/19 marketing year. Exports for the same period were up from last week at 524,200 bales. Upland cotton export sales were 101% 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 86%. May/Jul and May/ Dec cotton futures spreads were cents and -5.8 cents, respectively. July 2018 cotton futures closed at 84.19, up 1.84 cents since last Friday. December 2018 cotton futures closed at 78.72, up 1.67 cents since last Friday. Downside price protection could be obtained by purchasing a 79 cent December 2018 Put Option costing 4.81 cents establishing a cent futures floor. 4 (Continued on page 5)

5 Crop Comments by Dr. Aaron Smith Wheat In Memphis, old crop cash wheat ranged from $5.07 to $5.24. May 2018 wheat futures closed at $4.89, down 11 cents since last Friday. May 2018 wheat futures traded between $4.86 and $5.10 this week. May wheat-to-corn price ratio was Wheat net sales reported by exporters were within expectations with net sales of 14.4 million bushels for the 2017/18 marketing year and 1.4 million bushels for the 2018/19 marketing year. Exports for the week were up from last week at 13.3 million bushels. Wheat export sales were 86% 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 94%. May/Jul and May/Sep future spreads were 16 cents and 33 cents, respectively. In Tennessee, June/July 2018 cash forward contracts ranged from $4.93 to $5.48 for the week. July wheat-to-corn price ratio was July 2018 wheat futures closed at $5.05, down 9 cents since last Friday. Downside price protection could be obtained by purchasing a $5.10 July 2018 Put Option costing 28 cents establishing a $4.82 futures floor. September 2018 wheat futures closed at $5.22, down 9 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 2, 2018 Thursday, March 8, 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 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 March 9, lbs lbs lbs lbs Heifers: Medium/Large Frame # lbs lbs lbs lbs Cattle Receipts: This week: 7,096 (8) Week ago: 7,368 (10) Year ago: 4,997 (8) 7

8 Tennessee lbs. M-1 Steer Prices 2017, 2018 and 5-year average Tennessee lbs. M-1 St eers 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 2, 2018 Thursday, March 8, 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 - March 7, load out of 85 steers; BQA certified producer; est. wt. 825 lbs.; 95% L&M-1s, 5% L&M-2s; medium flesh; 100% Black/BWF; $ load out of 55 steers; BQA certified producer; est. wt. 940 lbs.; 100% L&M-1s; medium flesh; 100% Black/BWF; $ load out of 90 Holstein steers; BQA certified producer; est. wt. 945 lbs.; 100% L&M-1s; medium flesh; $95.75 Athens Stockyard - March 6, load of Holstein steers; est. wt. 950 lbs.; $ load of heifers; est. wt. 635 lbs.; Blk/BWF; $ load of heifers; est. wt. 625 lbs.; mixed; $ load of steers; est. wt. 885 lbs.; mixed; $ Browning Livestock Market - March 7, load of 76 Steers; est. wt. 815 lbs.; L&M1-2s; $ load of 68 Heifers ; est. wt. 739 lbs.; L&M1-2s; $ load of 59 Heifers; est. wt. 836 lbs.; L&M1-2s; $ Hardin County Stockyard - March 7, load of 57 Steers; est. wt. 826 lbs.; L&M-1s; Black/BWF, ChaX; $ loads of 131 Heifers; est. wt. 707 lbs.; L&M-1s; Black/BWF, ChaX; $ Graded Sales East Tennessee Livestock Center, Sweetwater, TN Graded Feeder Cattle Sale Weighted Average Report for Friday Mar 2, 2018 Cattle Receipts: 326 For complete report: Self-Reported and Self-Graded Livestock Markets 3/6/18 TN Livestock Producers Fayetteville Receipts: 364 (169 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 /5/18 Morris Brothers Stockyard, Pikeville, TN Receipts: 91 Last Week: 17 Last Year: 106 Steers: Heifers: lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Over 799 lbs Bulls: lbs lbs lbs lbs lbs lbs lbs lbs Warren Co. Livestock Graded Sale, McMinnville, TN Weighted Average Report for Wednesday Mar 7, 2018 Cattle Receipts: 1508 For complete report: 9

10 Beef Industry News Featured Article from DROVERS The World Wants U.S. Beef: January Exports Up 9% USMEF March 8, 2018 January exports of U.S. beef were significantly higher than the large totals of a year ago, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). Beef exports totaled 105,486 metric tons (mt) in January, up 9 percent year-over-year, while export value surged 21 percent to $624.4 million. Exports accounted for 12.4 percent of total beef production in January, up slightly from a year ago. For muscle cuts only, the percentage exported increased from 9.5 percent to 10.1 percent. Beef export value averaged $ per head of fed slaughter, up 14 percent year-over-year. For muscle cuts only, beef exports reached 80,495 mt (up 15 percent) valued at $555.7 million (up 23 percent). Pork export volume increased 5 percent to 164,189 mt, while value climbed 9 percent to $454.2 million. Beef variety meat volume fell 5 percent to just under 25,000 mt, but value increased 7 percent to $68.8 million. Pork variety meat exports dropped 16 percent in volume (39,299 mt) but still managed a 2 percent increase in value to $91.5 million. January export results were solid overall and were especially strong for muscle cuts, said USMEF President and CEO Dan Halstrom. Despite the decline in variety meat volume, export value continued to increase. This underscores the important contribution variety meats deliver for producers and for everyone in the U.S. supply chain. Asian Markets Continue to Shine for U.S. Beef U.S. beef continued to gain momentum in the Japanese market, with January exports increasing 7 percent from a year ago in volume (23,968 mt) and 19 percent in value ($148.6 million). This included a 30 percent increase in chilled beef exports to 12,411 mt, valued at $92.4 million (up 38 percent). Frozen exports declined 13 percent in volume (8,141 mt) but increased slightly in value ($33.1 million). Frozen U.S. beef entering Japan is subject to a 50 percent safeguard tariff, which is scheduled to revert back to 38.5 percent on April 1, the beginning of the new Japanese fiscal year. Benefiting from a bilateral trade agreement with Japan, frozen beef from Australia is subject to a duty of 27.2 percent. This rate will decline to 26.9 percent on April 1. Other January highlights for U.S. beef included: Exports to South Korea, which reached a record $1.2 billion in 2017, increased 13 percent from a year ago to 17,133 mt, while export value soared 34 percent to $122.3 million. This included a 54 percent increase in chilled beef exports to 3,954 mt, valued at $36.9 million, up 63 percent. Through the Korea-U.S. Free Trade Agreement (KORUS), the duty on U.S. beef was reduced to 21.3 percent on Jan. 1, about 5 percentage points lower than Australia s rate for this year and down significantly from the pre-korus rate of 40 percent. Following large shipments in the fourth quarter of 2017, exports to Hong Kong slowed in January, but still easily exceeded last year s totals, increasing 41 percent from a year ago in volume (10,493 mt) and 53 percent in value ($79.8 million). Exports to China, which resumed in June after a 13-year absence, hit a new monthly high of 819 mt in January valued at $7.5 million. Exports to Taiwan posted impressive gains in January, increasing 17 percent in volume to 4,207 mt. Export value increased 41 percent to $42 million. Led by solid gains in Indonesia and Vietnam, exports to the ASEAN region climbed 22 percent in volume (3,108 mt) and 13 percent in value ($15.9 million). Strong results in Chile and Colombia fueled beef exports to South America, which increased 90 percent in volume (3,307 mt) and 65 percent in value ($13.9 million). Exports to Central America jumped 40 percent in volume (1,082 mt) and 32 percent in value ($5.9 million), led by a strong performance in Guatemala and larger variety meat shipments to El Salvador. Beef exports to Africa were mostly variety meat in 2017, but January produced a large increase in muscle cut exports to Angola and South Africa. As a result, total exports to Africa were up 19 percent in volume (954 mt) and surged 88 percent in value to $1.4 million. Department of Agricultural and Resource Economics 314 Morgan Hall 2621 Morgan Circle arec.tennessee.edu USDA / Tennessee Department of Agriculture Market News Service