Tennessee Market Highlights

Transcription

1 Tennessee Market Highlights June 8, 2018 Number: 23 Trends for the Week Compared to a Week Ago Slaughter Cows $1 to $2 higher Slaughter Bulls Steady Feeder Steers Unevenly steady Feeder Heifers Unevenly steady Feeder Cattle Index Wednesday s index: $ Fed Cattle The 5-area live price of $ is up $4.43. The dressed price is up $3.27 at $ Corn July closed at $3.77 a bushel, down 14 cents since last Friday. Soybeans July closed at $9.69 a bushel, down 52 cents since last Friday. Wheat July closed at $5.20 a bushel, down 3 cents since last Friday. Cotton July closed at cents per lb, up 1.64 cents since last Friday. Livestock Comments by Dr. Andrew P. Griffith FED CATTLE: Fed cattle trade was not well established at press. Asking prices on a live basis were mainly $115 to $117 while bid prices were mainly $110 to $111. The 5-area weighted average prices thru Thursday were $ live, up $4.43 from last week and $ dressed, up $3.27 from a week ago. A year ago prices were $ live and $ dressed. The 5-area price with cattle traded thru Thursday can be misleading when the number of cattle traded is not included. In this week s case, only 455 head were marketed on a live basis thru Thursday and 813 head on a dressed basis. The spread between asking prices and bids was $5 to $7 which resulted in a standstill through much of the week. Trade was also slow to develop on Friday as cattle feeders and packers were both firmly holding their ground. Packers have leverage on cattle feeders due to several market ready cattle being available, but cattle feeders being current with marketing and stronger live futures provide them short term wiggle room. The next several weeks may be similar to this week with late week trade. BEEF CUTOUT: At midday Friday, the Choice cutout was $ up $0.18 from Thursday and down $1.43 from last Friday. The Select cutout was $ up $1.20 from Thursday and down $0.48 from last Friday. The Choice Select spread was $21.98 compared to $22.93 a week ago. Middle meats remain a top selection for Father s Day as many families treat their father to a nice steak item. This demand has contributed to strength in the rib and loin primal. However, the market tends to transition to more ground and processed beef items moving deeper into the summer. Moving towards Independence Day, consumers begin leaning toward grilling hamburgers and all beef hotdogs. Ground beef and processed beef items such as hotdogs result in a significant pull on 90 percent lean beef and 50 percent lean trimmings. Fresh 90 percent lean beef originates from slaughter cows, and the price has been inching its way higher since the beginning of the year. With current prices near $222 per hundredweight, a price peak just under $230 is not out of the question by the end of August. Fresh 50 percent lean trimmings originate from finished cattle and are trading at their steadiest state in several years with this week s price near $73 per hundredweight which is in line with the five year average price. The price of fresh 50 s is expected to remain steady in the near term. OUTLOOK: August is now the nearby contract for feeder cattle which means it is leading the way for calves and feeder cattle trading at local sale barns. Prices at local auction markets this week were unevenly steady compared to a week ago for steers and heifers. Using the weekly weighted average prices for Tennessee, some weight classes witnessed higher prices while the weight classes on either side of them may have resulted in lower prices or steady prices compared to the previous week s weighted average price. The unevenness in local prices could be the result of gyrations in the futures market or quality differences in cattle from one week to the next. USDA Market News reports are useful when trying to get a general idea of what cattle are worth. However, simply sorting cattle into weight classes by frame and muscling do not always tell the full story. Similarly, the reports provide a method of comment such as thin, fleshy, full, value added, etc. which improves the value of the information. However, nearly every spectrum that is used to describe cattle is continuous and not discrete. Thus, a group of hardened calves that need a few groceries but that would not qualify as thin will generally bring a higher price than the same weight calves that just came off the cow and are (Continued on page 2)

2 Livestock Comments by Dr. Andrew Griffith (Continued from page 1) $3.78 up $0.02 from Thursday. carrying good flesh yet they both may fit in the same description on a report. This means quality differences from one week to the next can greatly influence the price and that comparing the same weight class from one week to the next is not always as straight forward as it seems. Futures contracts on the other hand have a consistent description and thus represent the same type and quality of cattle at all times. The August contract has gained about $10 per hundredweight since the middle of May which was near the contract low. Alternatively, the August contract remains about $12 lower than the contract high established in November of Hindsight shows hedging opportunities, but the recent surge in prices may be enough to result in positive margins.. ASK ANDREW, TN THINK TANK: A question came in this week regarding pasture rental rates and rental rates for grazing cover crops. USDA-NASS publishes county rental rate estimates every other year which can be found online ( quickstats.nass.usda.gov/results/e0f5eb d7b-9e7f- E56A3365CF2B#9A9F55D7-E267-38C6-ACB9-DF106291B5A7). For Tennessee, rental rates are more easily accessed in a University of Tennessee publication ( extension.tennessee.edu/publications/documents/w377.pdf). As it relates to rental agreements for cover crops, the key to developing this rate is to know what it costs to put in the cover crop and factor in an acceptable return. A person could also base cover crop lease rates on gain if calves are grazing or they could use a dollar per head per day for calves or cows. The key to using a per head per day rate is maintaining an acceptable stocking rate to achieve good utilization but also to maintain the integrity of the cover crop. 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 June $ ; August $ ; October $ ; Feeder cattle August $ ; September $ ; October $ ; November $ ; July corn closed at Milk Futures Thursday, June 7, 2018 Month Class III Close Class IV Close June July Aug Sept Oct Average Daily Slaughter Cattle Hogs Number of head This week (4 days) 119, ,000 Last week (3 days) 120, ,667 Year ago (4 days) 118, ,250 This week as percentage of Week ago (%) 99% 99% Year ago (%) 100% 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 wheat were down; cotton was up for the week. This week provided confirmation that weather is firmly in the drive seat for row crop prices. Drought in the southern plains has pushed cotton prices to new highs. Severe drought in the southern plains and moderate drought in parts of North Dakota have helped hold wheat prices in a three week range between $5.02 and $5.54. Above average growing conditions throughout the Corn Belt and Mid-south contributed to week-overweek declines in corn and soybean harvest futures of 13 and 48 cents. This week cash soybean prices declined by 47 to 68 cents across Tennessee. Cash prices are now $9.35 to $9.85 at elevators and barge points. Harvest prices took a similar hit as soybean futures were driven lower on beneficial weather and favorable forecasts for much of the Corn Belt and Mid-south. Crop conditions provide limited insight into final yields, however the near record good-to -excellent crop condition ratings at the start of the 2018 crop year for corn and soybeans does have the attention of market participants. Condition ratings can change quickly but so far weather has been cooperative for corn and soybean production across most major growing regions in the US. December cotton futures continue to trend higher as drought concerns in Texas continue to fuel the futures market rally. The trend remains higher, however increased volatility entered the market this week with December futures on Monday down 142 points; Tuesday down 196 points; Wednesday up 157 points; Thursday up 224 points; and Friday down 19 points. This volatility is likely to continue until a more concise picture of harvested acreage and yield is revealed later this summer. On the supply side of the equation export shipments remain robust with export sales dropping off, which is typical for this time of year. Wheat prices continue to hold the range established the last three weeks. Lower projected yields from the southern plains are partially mitigated by good conditions across most of the corn producing states. Internationally, Russia and Australia could experience reductions in production due to dry weather. Corn Across Tennessee, average corn basis (cash price-nearby futures price) weakened or remained unchanged at Memphis, Northwest, and Lower-middle Tennessee and strengthened at Northwest Barge Points and Upper-middle Tennessee. Overall, basis for the week ranged from 16 under to 30 over the July futures contract with an average of 4 over at the end of the week. July 2018 corn futures closed at $3.77, down 14 cents since last Friday. For the week, July 2018 corn futures traded between $3.73 and $3.89. Corn net sales reported by exporters from May were within expectations with net sales of 33 million bushels for the 2017/18 marketing year and 16.5 million bushels for the 2018/19 marketing year. Exports for the same time period were down 24% compared to last week at 57 million bushels. Corn export sales and commitments were 98% 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 96%. Ethanol production for the week ending June 1 was million barrels per day, unchanged from the previous week. Ethanol stocks were million barrels, up 634,000 barrels. Jul/Sept and Jul/Dec future spreads were 9 and 21 cents, respectively. The Crop Progress report estimated corn condition at 78% good-to-excellent and 3% poor-to-very poor; corn planted at 97% compared to 92% last week, 95% last year, and a 5-year average of 95%; and corn emerged at 86% compared to 72% last week, 84% last year, and a 5-year average of 83%. In Tennessee, corn condition was estimated at 81% good-to-excellent and 3% poor-to-very poor; corn planted at 98% compared to 97% last week, 98% last year, and a 5-year average of 98%; and corn emerged at 95% compared to 89% last week, 94% last year, and a 5-year average of 93%. In Tennessee, September 2018 corn cash forward contracts averaged $4.00 with a range of $3.70 to $4.13. September 2018 corn futures closed at $3.86, down 14 cents since last Friday. De- (Continued on page 4) 3

4 Crop Comments by Dr. Aaron Smith cember 2018 corn futures closed at $3.98, down 13 cents since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2018 Put Option costing 26 cents establishing a $3.74 futures floor. Soybeans Average soybean basis weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, Upper-middle, and Lower-middle Tennessee. Basis ranged from 41 under to 12 over the July futures contract at elevators and barge points. Average basis at the end of the week was 9 under the July futures contract. July 2018 soybean futures closed at $9.69, down 52 cents since last Friday. For the week, July 2018 soybean futures traded between $9.62 and $ Net sales reported by exporters were below expectations with net sales of 6.1 million bushels for the 2017/18 marketing year and 1.3 million bushels for the 2018/19 marketing year. Exports for the same period were down 20% compared to last week at 19 million bushels. Soybean export sales and commitments were 99% 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 100%. July soybean-to-corn price ratio was 2.57 at the end of the week. Jul/Aug and Jul/Nov future spreads were 5 and 20 cents, respectively. August 2018 soybean futures closed at $9.74, down 52 cents since last Friday. The Crop Progress report estimated soybean condition at 75% good-to-excellent and 4% poor-to-very poor; soybeans planted at 87% compared to 77% last week, 81% last year, and a 5-year average of 75%; and soybeans emerged at 68% compared to 47% last week, 55% last year, and a 5-year average of 52%. In Tennessee, soybean condition was estimated at 81% goodto-excellent and 1% poor-to-very poor; soybeans planted at 69% compared to 63% last week, 61% last year, and a 5-year average of 55%; and soybeans emerged at 48% compared to 39% last week, 43% last year, and a 5-year average of 36%. In Tennessee, Oct/ Nov 2018 soybean cash contracts average $9.94 with a range of $9.64 to $ November 2018 soybean futures closed at $9.89, down 48 cents since last Friday. Downside price protection could be achieved by purchasing a $10.00 November 2018 Put Option which would cost 47 cents and set a $9.53 futures floor. Nov/Dec 2018 soybean-to-corn price ratio was 2.48 at the end of the week. Cotton Delta upland cotton spot price quotes for June 7 were cents/lb ( ) and cents/lb ( ). Adjusted World Price (AWP) increased 1.39 cents to cents. July 2018 cotton futures closed at cents, up 1.64 cents since last Friday. For the week, July 2018 cotton futures traded between and cents. Net sales reported by exporters were down from last week with net sales of 6,800 bales for the 2017/18 marketing year and 106,800 bales for the 2018/19 marketing year. Exports for the same period were up 54% compared to last week at 576,400 bales. Upland cotton export sales were 113% 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 101%. Jul/Oct and Jul/ Dec cotton futures spreads were cents and cents, respectively. Oct 2018 cotton futures closed at 93.66, up 0.3 cents since last Friday. The Crop Progress report estimated cotton condition at 42% good-to-excellent and 16% poor-to-very poor; cotton planted at 76% compared to 62% last week, 78% last year, and a 5-year average of 76%; and cotton squaring at 9% compared to 7% last week, 10% last year, and a 5-year average of 6%. In Tennessee, cotton condition was estimated at 75% good-to-excellent and 5% poor-to-very poor; cotton planted at 93% compared to 88% last week, 96% last year, and a 5-year average of 90%; and cotton squaring at 5% compared to 1% last week, 9% last year, and a 5-year average of 3%. December 2018 cotton futures closed at 92.6, up 0.24 cents since last Friday. Downside price protection could be obtained by purchasing a 93 cent December 2018 Put Option costing 6.3 cents establishing an 86.7 cent futures floor. 4 (Continued on page 5)

5 Crop Comments by Dr. Aaron Smith Wheat In Tennessee, June/July 2018 wheat cash contracts ranged from $4.90 to $5.52 for the week. July 2018 wheat futures closed at $5.20, down 3 cents since last Friday. July 2018 wheat futures traded between $5.03 and $5.37 this week. July wheat-to-corn price ratio was Wheat net sales reported by exporters were within expectations with net sales cancellations of 0.7 million bushels for the 2017/18 marketing year and net sales of 9.2 million bushels for the 2018/19 marketing year. Exports for the week were down 48% compared to last week at 8.5 million bushels. Wheat export sales were 96% 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 105%. The Crop Progress report estimated winter wheat condition at 37% good-to-excellent and 35% poor-to-very poor; winter wheat headed at 83% compared to 73% last week, 86% last year, and a 5-year average of 83%; winter wheat harvested at 5% compared to 9% last year and a 5-year average of 4%; spring wheat condition at 55% good-to-excellent and 11% poor-to-very poor; spring wheat planted at 97% compared to 91% last week, 99% last year, and a 5-year average of 94%; and spring wheat emerged at 81% compared to 63% last week, 88% last year, and a 5-year average of 82%. In Tennessee, winter wheat condition was estimated at 70% good-to-excellent and 4% poor-tovery poor; winter wheat headed at 99% compared to 98% last week; winter wheat coloring at 92% compared to 73% last week and 91% last year; winter wheat mature at 18%; and winter wheat harvested at 1%. Jul/Sep and Jul/Jul future spreads were 16 cents and 70 cents, respectively. September 2018 wheat futures closed at $5.36, down 4 cents since last Friday. July 2019 wheat futures closed at $5.90, down 3 cents since last Friday. Downside price protection could be obtained by purchasing a $6.00 July 2019 Put Option costing 56 cents establishing a $5.44 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, June 1, 2018 Thursday, June 7, 2018 Commodity Contract Month Friday Monday Tuesday Wednesday Thursday Soybeans Jul ($/bushel) Aug Sep Nov Jan Mar Corn Jul ($/bushel) Sep Dec Mar May Jul Wheat Jul ($/bushel) Sep Dec Mar May Soybean Meal Jul ($/ton) Aug Sep Oct Dec Jan Cotton Jul ( /lb) Oct Dec Mar May Live Cattle Jun ($/cwt) Aug Oct Dec Feb Feeder Cattle Aug ($/cwt) Sep Oct Nov Jan Mar Market Hogs Jun ($/cwt) Jul Aug Oct Dec

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 June 8, lbs lbs lbs lbs Heifers: Medium/Large Frame # lbs lbs lbs lbs Cattle Receipts: This week: 8,159 (11) Week ago: 4,102 (8) Year ago: 6,510 (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 Br eakers 75-80% 2017, and 5-year average 2012/2016 Avg Prices Paid to Farmers by Elevators Friday, June 1, 2018 Thursday, June 7, 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 Browning Livestock Market June 6, load of 81 heifers; M&L-1&2s; avg. wt. 526 lbs; $ load of 94 heifers; M&L-1&2s; avg. wt. 655 lbs; $ load of 62 heifers; M&L-1&2s; avg. wt. 818 lbs; $ Dickson Regional Livestock June 4, load of 72 heifers; M&L-1s; Black/BWF, Red/RWF and ChX: avg. wt. 742 lbs.; $ East TN Livestock Center June 6, load out of 100 steers; BQA producer; 95% L&M-1s; Medium flesh; Blk/BWF; est. wt. 840 lbs.; $ load out of 80 heifers; 95% M-1s; %5 M-2s; Medium flesh; Blk/ BWF; est. wt. 690 lbs.; $ load out of 95 Holstein steers; BQA producer; 100% 1s; Medium flesh; est. wt. 890 lbs.; $85.75 Hardin County Stockyard June 6, load of 62 steers; M&L-1&2s; blk/bwf and ChX; avg. wt. 790 lbs.; $ load of 41 steers; M&L-1s; blk/bwf and ChX; avg. wt lbs.; $ Graded Sales East TN Livestock Center Graded Feeder Sale, Sweetwater, TN Weighted Average Report for Friday, June 1, 2018 Receipts: 617 For complete report: 9

10 Beef Industry News Featured Article from BEEF Magazine Burke Teichert: 8 frequently asked questions, answered By: Burke Teichert As a result of these articles, I get a lot of . I try to respond to them all. Sometimes the answer is simple and quick. Sometimes it takes a little more thought and time. All of my recommendations come from many years of experience starting at childhood and including over 40 years being involved in the management of several large operations where we were expected to make a profit every year. Early on, I decided it was important to really know what works and what doesn t. I learned that knowing something (or thinking you know something) that isn t right can be a great hindrance to learning the truth. It is very easy to get caught up in old wives tales, paradigm lockdown, good but out-of-context research or just wrong thinking due to engrained practices or habits. After you fight your way out of the box, be careful to avoid building a new box. And always try to be a systems thinker taking into account the interconnectedness of soil, plants, insects, weather, livestock, our production system, marketing, our business model, profitability and people. In the next couple of articles, I want to provide some brief answers to questions that are frequently asked. Please understand that they are far from complete, but have weathered the test of time. Not every idea fits every place; so use them appropriately, but don t be afraid to try. So you ask why do I recommend: Terminal matings? Do it for greater profitability, simplicity of operations and to facilitate better grazing. Greater profitability comes because every cow can produce a calf to sell. Operational simplicity reduces cost and adds to profit. Improved grazing will ultimately add to carrying capacity and profitability. While it would be nice to be able to buy really good cows for terminal matings, they don t have to be all that good for profitability just average cows. Not buying bred heifers? Many bred heifers offered for sale have been over-developed. Thus, a good number of them are pregnant and in good condition because of feed and not because they are highly fertile and adapted to a tougher environment. Also, you must recognize that they will have the two toughest years of their life in front of them following a translocation to your place. You should also understand that a 6-year-old cow has a greater probability of having four more calves than a 2 year old if you routinely cull opens and dries. Maternal matings when and IF you can sell bred cows? If you can sell a good number of bred cows for a premium price each year, you can be as profitable as those who terminal cross. This is a win/win situation. The premium rewards the maternal producer for developing, breeding and calving heifers. At the same time, the premium is a low-cost substitute for the heifer development costs avoided by the terminal producer. Moderate size and milk? You can simply run more cows on the same land if they are smaller and give less milk. You will wean more pounds of calf per acre and sell those pounds for more money. Smaller cows giving less milk are usually more fertile, especially in the tougher years. By the way, frame size 6 and 1,400 pounds is not moderate. Exposing most of the heifer calf crop to bulls for a short period of time in non-terminal or maternal herds? Even with EPDs and genomic testing, no one can select heifers for your ranch as accurately as the bull and nature. Regardless of any other genetic differences, those heifers that calve later as 2 year olds cannot live long enough to catch up with those that calve early. On average, those calving as a result of first cycle breeding will produce one more calf and roughly 400 more pounds of calf over their lifetime. Remember, this is your cow herd we re talking about. It is supposed to be profitable every year. Put in the heifers that can be profitable quickly. If they are bred to the right bulls, the daughters will be OK. Minimal development of replacement heifers? It costs less. The heifers that are truly, innately fertile are the ones most likely to breed with minimal development. Research is showing that heifers can breed reasonably well when they reach 55% of expected mature cow weight. If you are calving in sync with nature, you will get good conception rates. Most of the pregnant heifers will become good cows, and the open heifers will be profitable when sold as feeders because of the lower cost. My preference is to develop heifers on pasture. When snow gets too deep or crusted to graze, still keep them out of a lot and use as low-cost feeds as possible. It s not difficult to get to 55% of mature cow weight. Selecting bulls from cows that always calve in the first cycle for maternal (non-terminal) herds? I personally think the heritability for first cycle conception in heifers and for the calving interval between first and second calf is higher than most of the estimates we see for fertility in general. I would not select a yearling bull from a 2 year old until she has calved in the first cycle as a three year old. Push on fertility and survivability. You might not win the weaning weight prize, but the growth rate can be good and you will have lots of animals to sell. Selecting the right seedstock provider? Commercial cattlemen have paid so much money for the wrong kind high growth, high carcass for so long that seedstock providers are incentivized to do the wrong thing for commercial maternal herds. There is nothing wrong with growth and carcass; and in terminal herds it is highly desirable. In maternal herds, other traits are more important. You need to find someone who will help you find bulls to produce functional and efficient females moderate size and milk, physical soundness, high fertility on low inputs, calving ease, survivability and good longevity. Your seedstock provider also should help you include heterosis for better fertility and survivability in your cows. Department of Agricultural and Resource Economics 314 Morgan Hall 2621 Morgan Circle arec.tennessee.edu USDA / Tennessee Department of Agriculture Market News Service