Tennessee Market Highlights

Transcription

1 Tennessee Market Highlights July 21, 2017 Number: 29 Trends for the Week Compared to a Week Ago Slaughter Cows $1 lower Slaughter Bulls Steady to $1 lower Feeder Steers $1 to $3 higher Feeder Heifers $2 to $6 higher Feeder Cattle Index Wednesday s index: Fed Cattle The 5-area live price of $ is down $1.46. The dressed price is down $2.02 at $ Corn September closed at $3.79 a bushel, up 3 cents since last Friday. Soybeans August closed at $10.09 a bushel, up 20 cents since last Friday. Wheat September closed at $4.99 a bushel, down 11 cents since last Friday. Cotton December closed at cents per lb, up 1.84 cents since last Friday. Livestock Comments by Dr. Andrew P. Griffith FED CATTLE: Fed cattle trade was not well established at press. The expectation is for a softer trade given the increase in cattle on feed. The 5-area weighted average prices thru Thursday were $ live, down $1.46 from last week and $ dressed, down $2.02 from a week ago. A year ago prices were $ live and $ dressed. Cattle feeders were asking for higher prices even though live cattle futures were softer on the week. Higher asking prices on the cash market and softer futures prices had packers holding trade until after the cattle on feed report. Packers decided it would be wise to obtain a little more information in hopes the cattle on feed report would support the lower futures market price and thus support lower finished cattle prices on the cash market. This was a last gasp effort by packers who continue to be hampered by lower cutout prices. Even with information from the cattle on feed report, it makes it difficult to determine the direction of next week s prices. The expectation is for there to be little change. BEEF CUTOUT: At midday Friday, the Choice cutout was $ down $0.74 from Thursday and down $2.34 from last Friday. The Select cutout was $ down $0.99 from Thursday and down $0.81 from last Friday. The Choice Select spread was $12.32 compared to $13.85 a week ago. The decline in wholesale beef prices has been garnering significant attention throughout the beef industry for several weeks now, as it should. While beef prices have been declining, the Choice Select spread has narrowed at a fairly rapid pace. Using weekly data dating back to 2004, the Choice Select spread reached record highs the first couple of weeks of June and actually topped the $30 level. Since the middle of June the Choice Select spread has narrowed about $18. The widening and narrowing of the spread was mainly due to demand factors as opposed to supply factors. Since April, the weekly percentage of beef grading Choice has ranged from 69.8 percent to 73.2 percent and it is difficult to see much correlation between percent of beef grading Choice and the Choice Select spread over that time. From the demand standpoint, consumers were hungry for middle meats as was the export market during May and June. However, domestic consumers have shifted focus to ground beef as is evidenced by the price increase in fresh 90 percent lean beef from $218 to $233 (7% increase). OUTLOOK: Feeder cattle prices are riding seasonal price strength as summer is in full stride. Steer prices on Tennessee weekly auctions were $1 to $3 higher compared to last week while heifer prices were $2 to $6 higher compared to one week ago. Evaluating the last ten years of Tennessee price data for feeder steers weighing more than 700 pounds, prices in July have averaged 3.6 percent above the annual average price. Similarly, prices in August have averaged 4.3 percent above the annual average for the same weight class steer. A seasonal price trend is one tool producers should consider utilizing when timing the marketing of cattle. Another useful tool to time marketing is the futures market. The futures market is currently favorable to feeder cattle prices for the August feeder cattle contract, but traders have pushed the September contract higher than the August contract several times recently. This is an example of why multiple sources of information should be used when trying to achieve a higher value for livestock. Additionally, October and November feeder cattle futures are relatively strong compared to the deferred contracts going into Given the price levels for all feeder cattle futures contracts being traded, it would appear the market is somewhat out (Continued on page 2)

2 Livestock Comments by Dr. Andrew Griffith (Continued from page 1) of line given the fall 2017 contracts are trading at a $6 to $10 premium to the Spring 2018 feeder cattle contracts and the summer 2017 contracts are only slightly higher than fall contracts. This may lead some to believe the fall 2017 contracts are somewhat overbought and will soften once the summer market is complete while the same information may also indicate spring contracts are oversold. If the aforementioned is the case then fall prices will soften and spring prices will strengthen as the market moves closer to the given marketing time periods. Prices for both time periods are expected to maintain profitable price levels for feeder cattle, but spring contract prices are expected to outperform prices in the fall months. The July cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of July 1, 2017 totaled 10.82million head, up 4.5% compared to a year ago, with the pre-report estimate average expecting an increase of 2.8%. June placements in feedlots totaled 1.77 million head, up 16.1% from a year ago with the pre-report estimate average expecting placements up 5.9%. June marketing s totaled 1.99 million head up 4.0% from 2016 with pre-report estimates expecting marketings up 4.6%. Placements on feed by weight: under 800 pounds up 26.6% and 900 pounds over no change. the local marketplace. 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 August $ ; October $ ; December $ ; Feeder cattle August $ ; September $ ; October $ ; November $ ; September corn closed at $3.80 down $0.11 from Thursday.. ASK ANDREW, TN THINK TANK: A couple of weeks ago, a producer noticed the price he received for his calves at a local livestock market was not captured in the range of prices reported by the USDA- Agricultural Marketing Service for the particular auction. The producer s question was in relation to why all cattle prices were not reported in the daily and weekly reports. First, it is important to understand what is being reported and why some animals are not being reported. USDA feeder cattle reports capture prices of feeder cattle based on sex, frame size (large, medium, small), and muscle score (number 1, 2 and 3). However, regardless of frame or muscling, animals with defects such as limping, a wound, pinkeye, or other health problems are not reported in price reports because those animals are generally discounted and do not fit the description of the healthy animals being traded. Similarly, certain breeds (largely exotic breeds) of cattle are generally not reported, because they are not comparable to the common breeds of animals in Milk Futures Thursday July 20, 2017 Month Class III Close Class IV Close Jul Aug Sep Oct Nov Average Daily Slaughter Cattle Hogs Number of head This week (4 days) 116, ,500 Last week (4 days) 118, ,500 Year ago (4 days) 112, ,000 This week as percentage of Week ago (%) 98% 99% Year ago (%) 104% 102% 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, and cotton were up; wheat was down for the week. Since March 1st, September cash corn prices, in Tennessee, have traded between $3.37 and $4.12, a range of 75 cents (for reported elevator and barge point locations). Lower middle Tennessee has had the highest September cash price offerings ($3.70 to $4.12) while Northwest Tennessee has had the lowest ($3.37 to $4.00). Currently, harvest cash prices are trading in the middle-to upper portion of this 5-month range ($3.72 to $4.01). Given the above average growing conditions (91% of the corn crop in Tennessee is rated good-to-excellent) producers should consider pricing some additional production. Anticipated above average yields and prices (buoyed be drought concerns in the Northern plains) provide producers an excellent opportunity to market additional crop at profitable levels. The USD index has decreased 8% since March 1st, from to A decrease in the value of the USD relative to another currency is support for exports and detrimental to imports. December cotton closed up 1.84 cents this week. The past month December cotton futures have traded between 66 and 70 cents, however a move lower to the cent range is likely unless a production disruption occurs. Increased acreage and good growing conditions could push the domestic cotton crop above 19 million bales. September wheat futures have declined since the contract high of $5.74 ½ on July 5, closing the week below $5 for the first time in July. Record world wheat supplies continue to provide resistance to a continued rally in wheat futures, while the Northern Plains drought provides support to price improvement. Corn September 2017 corn futures closed at $3.79 up 3 cents since last Friday. For the week, September 2017 corn futures traded between $3.70 and $3.93. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Lower-middle Tennessee and weakened at Upper-middle Tennessee. Overall, basis for the week ranged from 21 under to 31 over the September futures contract with an average of 4 under the September futures contract at the end of the week. Corn net sales reported by exporters from July 7-13 were within expectations with net sales of 18.4 million bushels for the 2016/17 marketing year and 8.4 million bushels for the 2017/18 marketing year. Exports for the same time period were up from last week at 26.7 million bushels. Corn export sales and commitments were 99% 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 103%. Ethanol production for the week ending July 14 was million barrels per day up 19,000 from last week. Ethanol stocks were million barrels, up 956,000 barrels. Sep/Dec and Sep/Mar future spreads were 14 and 25 cents, respectively. Nationally, the Crop Progress report estimated corn silking at 40% compared to 19% last week, 53% last year, and a 5-year average of 47%; and corn condition at 64% good-to-excellent and 11% poor-to-very poor. In Tennessee, the Crop Progress report estimated corn condition at 91% good-to-excellent 1% poor-to-very poor; corn silking at 90% compared to 81% last week, 90% last year, and a 5-year average of 86%; and corn dough or beyond at 31% compared to 13% last week, 32% last year, and a 5-year average of 31%. In Tennessee, September 2017 cash forward contracts averaged $3.69 with a range of $3.56 to $4.01. December 2017 corn futures (Continued on page 4) 3

4 Crop Comments by Dr. Aaron Smith closed at $3.93 up 4 cents since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2017 Put Option costing 25 cents establishing a $3.75 futures floor. March 2018 corn futures closed at $4.04 up 4 cents since last Friday. Soybeans August 2017 soybean futures closed at $10.09 up 20 cents since last Friday. For the week, August 2017 soybean futures traded between $9.81 and $ Average soybean basis strengthened or remained unchanged at Memphis, Northwest Barge Points, and Lower-middle Tennessee and weakened at Upper-middle and Northwest Tennessee. Basis ranged from 41 under to 13 over the August futures contract at elevators and barge points. Average basis at the end of the week was 7 under the August futures contract. Net sales reported by exporters were within expectations with net sales of 15.1 million bushels for the 2016/17 marketing year and 55.9 million bushels for the 2017/18 marketing year. Exports for the same period were down from last week at 13.2 million bushels. Soybean export sales and commitments were 106% 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 102%. September soybean-to-corn futures price ratio was 2.68 at the end of the week. Aug/Sep and Aug/Nov future spreads were 5 cents and 13 cents, respectively. September 2017 soybean futures closed at $10.14 up 22 cents since last Friday. Nationally, the Crop Progress report estimated soybeans blooming at 52% compared to 34% last week, 56% last year, and a 5-year average of 51%; soybeans setting pods at 16% compared to 7% last week, 16% last year, and a 5-year average of 13%; and soybean condition at 61% good-to-excellent and 11% poor-to-very poor. In Tennessee, the Crop Progress report estimated soybean condition at 84% good-to-excellent and 4% poor-to-very poor; soybeans blooming at 57% compared to 40% last week, 52% last year, and a 5-year average of 41%; and soybeans setting pods at 22% compared to 6% last week, 25% last year, and a 5-year average of 17%. In Tennessee, October/November 2017 soybean cash contracts average $9.95 with a range of $9.58 to $ November/ December 2017 soybean-to-corn price ratio was 2.6 at the end of the week. November 2017 soybean futures closed at $10.22 up 21 cents since last Friday. Downside price protection could be achieved by purchasing a $10.40 November 2017 Put Option which would cost 58 cents and set a $9.82 futures floor. Cotton Delta upland cotton spot price quotes for July 20 were cents/lb ( ) and 69.3 cents/lb ( ). Adjusted world price (AWP) decreased 0.57 cents to 64.9 cents per pound. Net sales reported by exporters were up from last week with net sales of 27,200 bales for the 2016/17 marketing year and 166,200 bales for the 2017/18 marketing year. Exports for the same period were up from last week at 280,500 bales. Upland cotton export sales were 108% 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 107%. October 2017 cotton futures closed at up 1.96 cents since last Friday. Oct/Dec and Dec/Mar cotton futures spreads were cents and cents, respectively. Nationally, the Crop Progress report estimated cotton squaring at 70% compared to 61% last week, 74% last year, and a 5-year average of 75%; cotton setting bolls at 26% compared to 19% last week, 27% last year, and a 5-year average 28%; and cotton condition at 60% good-to-excellent and 10% poor-to-very poor. In Tennessee, cotton condition was estimated at 95% good-to-excellent and 0% poor-to-very poor; cotton squaring at 83% compared to 76% last week, 82% last year, and a 5-year average of 74%; and cotton setting bolls at 29% compared to 11% last week, 31% last year, and a 5-year average of 23%. December 2017 cotton futures closed at cents up 1.84 cents since last Friday. For the week, December 2017 cotton futures traded between 66.6 and cents. Downside price protection could be obtained by purchasing a 69 cent December 2017 Put Option costing 3.59 cents establishing a cent futures floor. March 2018 cotton futures closed at up 2 cents since last Friday. 4 (Continued on page 5)

5 Crop Comments by Dr. Aaron Smith Wheat In Tennessee, cash wheat ranged from $4.78 to $5.21. Wheat net sales reported by exporters were above expectations with net sales of 24.6 million bushels for the 2017/18 marketing year. Exports for the week were up from last week at 20.2 million bushels. Wheat export sales were 36% 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 35%. Sep/Dec and Sep/Jul future spreads were 23 cents and 59 cents, respectively. September 2017 wheat futures closed at $4.99 down 11 cents since last Friday. September 2017 wheat futures traded between $4.95 and $5.17 this week. September wheat-to-corn price ratio was Nationally, the Crop Progress report estimated winter wheat harvested at 75% compared to 67% last week, 75% last year, and a 5-year average of 73%; spring wheat headed at 91% compared to 79% last week, 95% last year, and a 5-year average of 87%; and spring wheat condition at 34% good-to-excellent and 41% poor-to-very poor. December 2017 wheat futures closed at $5.22 down 12 cents from last Friday. In Memphis, July 2018 cash forward contracts ranged from $5.61 to $5.65 for the week. July 2018 wheat futures closed at $5.58 down 11 cents since last Friday. Downside price protection could be obtained by purchasing a $5.60 July 2018 Put Option costing 46 cents establishing a $5.14 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, July 14, 2017 Thursday, July 20, 2017 Commodity Contract Month Friday Monday Tuesday Wednesday Thursday Soybeans Jul 9.85 ($/bushel) Aug Sep Nov Jan Mar Corn Jul 3.65 ($/bushel) Sep Dec Mar May Jul Wheat Jul 5.10 ($/bushel) Sep Dec Mar May Soybean Meal Jul 322 ($/ton) Aug Sep Oct Dec Jan Cotton Oct ( /lb) Dec Mar May Jul Live Cattle Aug ($/cwt) Oct Dec Feb Apr Feeder Cattle Aug ($/cwt) Sep Oct Nov Jan Mar Market Hogs Jul ($/cwt) Aug Oct Dec Feb

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 July 21, lbs lbs lbs lbs Heifers: Medium/Large Frame # lbs lbs lbs lbs Cattle Receipts: This week: 7,127 (11) Week ago: 7,264 (9) Year ago: 6,609 (10) 7

8 Tennessee lbs. M-1 Steer Prices 2 016, 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 % 2015, 2016 and 5-ye ar average 2011/2015 Avg / Prices Paid to Farmers by Elevators Friday, July 14, 2017 Thursday, July 20, 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 Blue Grass Stockyards July 20, load of 68 blk/bwf heifers; avg. wt. 735 lbs.; $ loads of 130 blk/bwf steers; avg. wt. 775 lbs.; $ Browning Livestock July 19, load of 56 steers; avg. wt. 917 lbs.; $ East Tennessee Livestock Center July 19, load of 60 steers; avg. wt. 835 lbs.; $ load of 58 Holstein steers; avg. wt. 875 lbs.; $ Video Board Sale and Graded Sales East Tennessee Livestock Center, Sweetwater, TN Graded Holstein Steer Sale Weighted Average Report for Friday Jul 14, 2017 Cattle Receipts: 788 For complete report: Lower Middle Tennessee Cattlemens Video Board Sale Feeder Cattle Weighted Average Report for 07/07/2017 Receipts: 589 For complete report: Video Board Sale and Graded Sales 7/18/17 TN Livestock Producers Fayetteville Receipts: 618 (317 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 Self-Reported and Self-Graded Livestock Markets 7/14/17 Coffee County Livestock Market Graded Goat and Sheep Sale Manchester, TN Receipts: 686 (531 Goats; 155 Sheep) 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 lbs Feeders lbs Replacement Nannys Yearlings lbs Small Nannys lbs Medium Nannys Thin Large Billys lbs Billys Thin SHEEP: Slaughter Lambs-Includes all breeds, sold per hundred weight (cwt). Choice and Prime lbs Good Choice and Prime lbs Good Choice and Prime lbs Good Choice and Prime lbs Good Choice and Prime lbs Feeders lbs Replacement Hair Ewes Yearlings lbs Ewes lbs Replacement Hair Lamb lbs /18/17 Somerville Livestock Sales Receipts: 182 Steers/Bulls: Med & Lg 1-2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs

10 Beef Industry News Featured Article from DROVERS CattleNetwork Japanese Firm Buys Creekstone Farms for $170 Million By Greg Henderson July 20, 2017 Creekstone Farms, the Arkansas City, Kan.-based packing company with $550 million in sales last year, has been sold to Japanese trading house Marubeni. Creekstone, the 12th largest U.S. packing firm, was owned by private-equity firm Sun Capital Partners. A Japanese news source reported the deal to be worth $170 million. Marubeni already owns an Australian feedlot, which means the company now has interests in two of the world s largest beef producing and exporting countries. International business analysts believe Marubeni sees changes in trade policy among major economies as business opportunities, and is making a play to be on the leading edge of U.S. beef exports to China with its purchase of Creekstone. Creekstone processed about 250,000 cattle last year, about 20% of which was exported to Europe, Japan and other countries. It received a license to export to China soon after the ban was lifted last month. Marubeni says it has targeted sales of $620 million from Creekstone by 2020 through increasing exports to China and other destinations. Department of Agricultural and Resource Economics 314 Morgan Hall 2621 Morgan Circle USDA / Tennessee Department of Agriculture Market News Service