Tennessee Market Highlights

Transcription

1 Tennessee Market Highlights August 17, 2018 Number: 33 Trends for the Week Compared to a Week Ago Slaughter Cows $1 lower Slaughter Bulls $2 to $3 lower Feeder Steers $2 to $3 lower Feeder Heifers $1 to $4 lower Feeder Cattle Index Wednesday s index: Fed Cattle The 5-area live price of $ was down $1.59. The dressed price of $ was down $2.73. Corn September closed at $3.64 a bushel, up 7 cents since last Friday. Soybeans September closed at $8.81 a bushel, up 31 cents since last Friday. Wheat September closed at $5.60 a bushel, up 14 cents since last Friday. Cotton December closed at cents per lb, down 3.84 cents since last Friday. Livestock Comments by Dr. Andrew P. Griffith FED CATTLE: Fed cattle traded $2 lower than last week on a live basis. Prices on a live basis were mainly $108 to $110 while dressed prices were mainly $171 to $174. The 5-area weighted average prices thru Thursday were $ live, down $1.59 from last week and $ dressed, down $2.73 from a week ago. A year ago prices were $ live and $ dressed. Weekly finished cattle prices have been below weekly 2017 price levels for 22 consecutive weeks with an average difference of $11.46 during that time period. This week may or may not result in the 23rd consecutive week of year-over-year declines. However, the streak is likely to end before August if cattle feeders can keep prices over $107 next week or $105 the following week. The finished cattle market has been amazingly flat since the beginning of July as cattle feeders did not succumb to leverage generally held by packers, but the last two weeks of trading would suggest that cattle feeders need to move cattle. Finished cattle prices continue to have downside price risk pressure, but cattle feeders will attempt to hold their ground. BEEF CUTOUT: At midday Friday, the Choice cutout was $ up $2.20 from Thursday and up $5.00 from last Friday. The Select cutout was $ up $0.23 from Thursday and up $3.32 from last Friday. The Choice Select spread was $9.61 compared to $7.93 a week ago. The last grilling holiday of summer is just a couple of weeks away which means retailers and restaurants are in the process of making their final meat purchases prior to the holiday weekend. Consumers are not at any shortage of meat as beef and pork production year to date are both 3.2 percent greater than 2017 while broiler (chicken) production through 31 weeks of 2018 is 0.2 percent higher than It may seem chicken production is lagging compared to beef and pork, but production in 2018 is 8.1 percent higher than the five year average production. Cattle producers hope retailers continue to promote beef items as they have most of the summer, because it may be the last little victory until end of the year holiday purchases provide support. Packers on the other hand have little to complain about as margins in the beef packing industry remain strong. The concern for many diversified packers comes from the poultry sector where marketing production has become more challenging. OUTLOOK: Based on Tennessee weekly auction market averages, steer prices this week were $2 to $3 lower than last week while heifer prices were $1 to $4 lower. Similarly, slaughter cow prices continued their methodical march lower with prices $1 lower compared to one week ago. In the recent past, price movements in the cattle markets and most agricultural commodity markets for that matter have been attributed to weather events, trade issues, or some other news worthy disgruntlement. However, the softening that is taking place in today s market seems to have more to do with the seasonal price patterns established through supply and demand factors. This is not to say that prices are poor. On the contrary, prices of feeder cattle and slaughter cows are in decent shape. However, the price of feedlot ready cattle generally peak in the August time period and then begin to soften moving into fall. Thus, the softer prices on calves and feeder cattle this week may be a sign that the market is beginning its seasonal decline which is fully evident in the slaughter cow market. Calves and slaughter cows tend to take a larger hit in the fall than do feeder cattle. There are sure to be producers who try to time the market during the fall months which may result in $10 to $15 more per head on a certain week, but the strategy of trying to time the market when prices are heading lower does little to improve profitability. (Continued on page 2)

2 Livestock Comments by Dr. Andrew Griffith (Continued from page 1) There will be weeks moving through the fall marketing period where week-over-week prices are higher, but producers should be cognizant of the seasonal decline that looms over the market. The one group of producers that may find good news in this outlook is stocker and backgrounding operations. Lower overall investment costs reduce financial risks while margins generally stay about the same. The market does appear to be favorable toward margin operators this fall and through the winter with favorable value of gains on the table. ASK ANDREW, TN THINK TANK: Since the first of August, at least four different individuals have inquired about the Tennessee Beef Evaluation program. The Tennessee Beef Evaluation program is a retained ownership program in which producers can send cattle to a participating feedlot in Iowa where production, carcass, and financial data are collected. This program provides producers an opportunity to find out how their cattle perform in the feedlot and how they grade at harvest which essentially provides producers an opportunity to find out what is under their cattle s hide. Loads of cattle are coordinated throughout the year, but it is necessary to fill a semi load of cattle (48,000-50,000) before a load is shipped. To participate in the program, cattle should be dehorned, castrated, bunk broke, and double vaccinated for respiratory diseases with a modified live vaccine. Producers are encouraged to send a minimum of five head with no maximum limit if desiring to participate. Feeding cattle is not without risks and producers should evaluate all alternatives prior to making the decision to retain ownership. 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 $3.64 down $0.01 from Thursday. Milk Futures Thursday, August 16, 2018 Month Class III Close Class IV Close Aug Sept Oct Nov Dec Average Daily Slaughter Cattle Hogs Number of head This week (4 days) 118, ,750 Last week (4 days) 119, ,000 Year ago (4 days) 116, ,000 This week as percentage of Week ago (%) 99% 105% Year ago (%) 102% 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 Will producers in Tennessee have lower gross revenue this year, compared to 2017? Overview Corn, soybeans, and wheat were up; cotton was down for the week. The size of the U.S. corn and soybean crop, large domestic stocks carried over from 2017, continued trade disruptions, and faster crop maturity than normal will diminish (eliminate) early harvest price premiums and depress harvest basis below typical levels. From August 1 to October 31, 2017, the average cash prices for corn and soybeans across the state were $3.35/bu and $9.43/bu. So far, in August 2018, cash prices have averaged $3.63/bu and $8.59/bu. Cash wheat prices from June 1 to July 31, were $4.83 (2017) and $5.08 (2018). Cash cotton prices, from October 1 to November 30, 2017 averaged cents/lb, currently, cotton prices are cents/lb. So far, year-over-year average corn, cotton, and wheat prices are up, soybean prices are down. Tennessee yield estimates for corn, soybeans, cotton, and wheat for 2018 (2017) are: 174 bu/acre (171 bu/acre), 49 bu/acre (50 bu/acre), 1,050 lb/acre (1,033 lb/acre), and 63 bu/acre (70 bu/acre). Projected year-over-year yields in Tennessee are up for corn and cotton, down for soybeans and wheat. Using the average prices and average yields above, gross revenue for 2018 (2017) for corn, soybeans, cotton, and wheat are estimated to be: $632/acre ($573/acre), $421/acre ($472/acre), $856/acre ($717/acre), and $320/acre ($338/acre). On average, corn and cotton revenue are projected up, soybean and wheat revenue are projected down, for 2018 compared to In Tennessee, in 2017 and 2018, 24% of total row crop harvested acres were corn, 56% soybeans, 11% cotton, and 10% wheat. Using a weighted average, based on harvested acres Tennessee producers average per acre income for the four crops is projected down $1.64/acre at $509.62/acre. Increased year-over-year corn and cotton returns are offset by the reduction in soybean net returns due to the large percent of acres (56%) in soybeans relative to other crops. On average row crop producers in Tennessee are projected to have similar total gross revenue per acre in 2018 as 2017; however regional price and yield differences and crop mix will dictate individual circumstances. Corn Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Upper-middle, and Northwest Tennessee and weakened at Lower-middle Tennessee. Overall, basis for the week ranged from 20 under to 30 over the September futures contract with an average of 4 under at the end of the week. September 2018 corn futures closed at $3.64, up 7 cents since last Friday. For the week, September 2018 corn futures traded between $3.52 and $3.67. Corn net sales reported by exporters from August 3-9 were within expectations with net sales of 13.3 million bushels for the 2017/18 marketing year and 41.1 million bushels for the 2018/19 marketing year. Exports for the same time period were down 15% compared to last week at 48.0 million bushels. Corn 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 104%. Ethanol production for the week ending August 10 was million barrels per day, down 28,000 from the previous week. Ethanol stocks were million barrels, up 94,000 barrels. Sep/Dec and Sep/Mar future spreads were 14 and 26 cents, respectively. The Crop Progress report estimated corn condition at 70% good-to-excellent and 10% poor-to-very poor; corn dough at 73% compared to 57% last week, 58% last year, and a 5-year average of 56%; and corn dented at 26% compared to 12% last week, 15% last year, and a 5-year average of 13%. In Tennessee, corn condition was estimated at 68% good-to-excellent and 8% poor-to-very (Continued on page 4) 3

4 Crop Comments by Dr. Aaron Smith poor; corn dough at 94% compared to 88% last week, 89% last year, and a 5-year average of 88%; and corn dented at 56% compared to 24% last week, 49% last year, and a 5-year average of 46%. In Tennessee, September 2018 corn cash forward contracts averaged $3.52 with a range of $3.37 to $3.85. December 2018 corn futures closed at $3.78, up 7 cents since last Friday. Downside price protection could be obtained by purchasing a $3.80 December 2018 Put Option costing 21 cents establishing a $3.59 futures floor. March 2019 corn futures closed at $3.90, up 7 cents since last Friday. Soybeans Average soybean basis weakened or remained unchanged at Northwest Tennessee and strengthened or remained unchanged at Memphis, Northwest Barge Points, Lower-middle, and Upper-middle Tennessee. Basis ranged from 60 under to 12 over the September futures contract at elevators and barge points. Average basis at the end of the week was 23 under the September futures contract. September 2018 soybean futures closed at $8.81, up 31 cents since last Friday. For the week, September 2018 soybean futures traded between $8.39 and $8.88. Net sales reported by exporters were within expectations with net sales of 4.9 million bushels for the 2017/18 marketing year and 21.0 million bushels for the 2018/19 marketing year. Exports for the same period were down 42% compared to last week at 21.6 million bushels. Soybean export sales and commitments were 102% 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 104%. September soybean-to-corn price ratio was 2.42 at the end of the week. Sep/Nov and Sep/Jan future spreads were 11 and 24 cents, respectively. The Crop Progress report estimated soybean condition at 66% good-to-excellent and 10% poor-to-very poor; soybeans blooming at 96% compared to 92% last week, 93% last year, and a 5- year average of 92%; and soybeans setting pods at 84% compared to 75% last week, 77% last year, and a 5-year average of 72%. In Tennessee, soybean condition was estimated at 69% good-to-excellent and 7% poor-to-very poor; soybeans blooming at 93% compared to 89% last week, 92% last year, and a 5-year average of 85%; and soybeans setting pods at 78% compared to 68% last week, 77% last year, and a 5-year average of 66%. In Tennessee, Oct/Nov 2018 soybean cash contracts average $8.36 with a range of $8.09 to $8.72. November 2018 soybean futures closed at $8.92, up 31 cents since last Friday. Downside price protection could be achieved by purchasing a $9.00 November 2018 Put Option which would cost 36 cents and set an $8.64 futures floor. Nov/Dec 2018 soybean-to-corn price ratio was 2.36 at the end of the week. January 2019 soybean futures closed at $9.05, up 32 cents since last Friday. Cotton Delta upland cotton spot price quotes for August 16 were cents/lb ( ) and cents/lb ( ). Adjusted World Price (AWP) decreased 4.22 cents to cents. Net sales reported by exporters were down from last week at 77,700 bales for the 2018/19 marketing year and net sales cancellations of 11,700 for the 2019/20 marketing year. Exports for the same time period were 240,300 bales. Upland cotton export sales were 58% 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 35%. The Crop Progress report estimated cotton condition at 40% good-to-excellent and 34% poor-to-very poor; cotton squaring at 96% compared to 92% last week, 97% last year, and a 5-year average of 98%; cotton setting bolls at 77% compared to 60% last week, 77% last year, and a 5-year average of 78%; and cotton opening bolls at 13% compared to 9% last week, 10% last year, and a 5-year average of 9%. In Tennessee, cotton condition was estimated at 74% good-to-excellent and 9% poor-to-very poor; cotton setting bolls at 93% compared to 85% last week, 91% last year, and a 5-year average of 82%; and cotton bolls opening at 8% compared to 3% last year and a 5-year average of 3%. December 2018 cotton futures closed at 81.39, down 3.84 cents since last Friday. For the 4 (Continued on page 5)

5 Crop Comments by Dr. Aaron Smith week, December 2018 cotton futures traded between 80.6 and cents. Dec/Mar and Dec/Dec cotton futures spreads were 0.71 cents and cents, respectively. Downside price protection could be obtained by purchasing an 82 cent December 2018 Put Option costing 3.71 cents establishing a cent futures floor. March 2019 cotton futures closed at 82.1, down 3.61 cents since last Friday. December 2019 cotton futures closed at 77.38, down 2.62 cents since last Friday. Wheat In Tennessee, August 2018 cash wheat ranged from $5.42 to $6.03 for the week. Wheat net sales reported by exporters were above expectations with net sales of 29.5 million bushels for the 2018/19 marketing year. Exports for the week were up 34% compared to last week at 17.0 million bushels. Wheat export sales were 30% of the USDA estimated total annual exports for the 2018/19 marketing year (June 1 to May 31), compared to a 5-year average of 46%. The Crop Progress report estimated winter wheat harvested at 94% compared to 90% last week, 97% last year, and a 5-year average of 96%; spring wheat condition at 75% good-to-excellent and 5% poor-to-very poor; and spring wheat harvested at 35% compared to 13% last week, 38% last year, and a 5-year average of 27%. September 2018 wheat futures closed at $5.60, up 14 cents since last Friday. September 2018 wheat futures traded between $5.28 and $5.63 this week. September wheat-to-corn price ratio was Sep/Dec and Sep/Jul future spreads were 19 cents and 36 cents, respectively. December 2018 wheat futures closed at $5.79, up 10 cents since last Friday. In Tennessee, June/July 2019 wheat cash contracts ranged from $5.83 to $5.99 for the week. July 2019 wheat futures closed at $5.96, up 6 cents since last Friday. Downside price protection could be obtained by purchasing a $6.00 July 2019 Put Option costing 50 cents establishing a $5.50 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, August 10, 2018 Thursday, August 16, 2018 Commodity Contract Month Friday Monday Tuesday Wednesday Thursday Soybeans Aug ($/bushel) Sep Nov Jan Mar May Corn Sep ($/bushel) Dec Mar May Jul Sep Wheat Sep ($/bushel) Dec Mar May Jul Soybean Meal Aug ($/ton) Sep Oct Dec Jan Mar 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 Aug ($/cwt) Oct Dec Feb Apr

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 Prices on Tennessee Reported Livestock Auctions for the week ending August 17, 2018 Breakers 75-80% Boners 80-85% Lean 85-90% Bulls YG Heifers: Medium/Large Frame # lbs lbs lbs lbs Heifers: Small Frame # lbs lbs lbs lbs Heifers: Medium/Large Frame # lbs lbs lbs lbs Cattle Receipts: This week: 6,679 (9) Week ago: 8,174 (10) Year ago: 8,801 (10) 7

8 Tennessee lbs. M-1 Steer Prices 2017, 2018 and 5-year average Tennessee lbs. M-1 Steers Prices 2017, 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, August 10, 2018 Thursday, August 16, 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 Graded Sales, Video Board Sales, Video Sales & Loads East Tennessee Livestock Center - August 15, load out of 80 heifers; BQA certified producer; est. wt. 725 lbs.; 95% M-1s, 5% M-2s; medium flesh; 100% Black/BWF; $ load out of 80 Holstein steers; BQA certified producer; est. wt. 885 lbs.; 100% #1s; medium flesh; $90.50 Browning Livestock Market - August 15, load of 65 steers; M&L 1-2s; avg. wt. 800 lbs.; $ load of 76 steers; M&L 1-2s; avg. wt. 700 lbs.; $ East Tennessee Livestock Center Graded Holstein Steer Sale Weighted Average Report for Friday Aug 10, 2018 Cattle Receipts: 634 For complete report: Hardin County Stockyard Graded Feeder Cattle Sale - August 13, 2018 Loads: 135 hd M&L 1-2 Steers 785 lbs $ Current Delivery - Sold with a 6 cent slide and 2% shrink. 62 hd M&L 1-2 Steers 850 lbs $ Current Delivery - Sold with a 6 cent slide and 2% shrink. 123 hd M&L 1-2 Steers 800 lbs $ October Delivery - Sold with a 4 cent slide and 2% shrink. For complete report: Blue Grass Stockyards - August 14, load of 72 steers; mixed; avg. wt. 690 lbs.; $ load of 73 heifers; mostly blk/bwf; avg. wt. 690 lbs,; $ loads of 130 steers; mostly blk/bwf; avg. wt. 760 lbs,; $ load of 57 steers; mixed; avg. wt. 845 lbs.; $ load of 58 steers; mixed; avg. wt. 870 lbs.; $ loads of heifers; mostly blk/bwf; avg. wt. 880 lbs.; $ loads of steers; mostly blk.bwf; avg. wt. 920 lbs.; $ Self-Reported and Self-Graded Markets 8/14/18 TN Livestock Producers Fayetteville Receipts: 436 (180 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 Markets 8/13/18 Morris Brothers Stockyard, Pikeville, TN Receipts: 106 Last Week: Last Year: 214 Steers: Heifers: lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Bulls: lbs lbs lbs lbs lbs lbs lbs lbs /10/18 Coffee County Livestock Market Graded Goat and Sheep Sale Manchester, TN Receipts: 759 (335 Goats; 406 Sheep; 18 Other) Next Sale July 27, 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 Replacement Nanny Goats Yearlings Small Nannies Medium Nannies Thin Large Billies Billies Thin SHEEP: Slaughter Lambs-Includes all breeds, sold per hundred weight (cwt). Choice and Prime lbs Choice and Prime lbs Good Choice and Prime lbs Good (Continued on page 10) 9

10 Beef Industry News Featured Article from DROVERS Caviness Plans to Expand Packing Plant Capacity to 2,600 Head per Day Wyatt Bechtel August 16, 2018 Caviness Beef Packers plans to expand its Hereford, Texas packing plant in a move that will add an additional 800 head per day through the line. The Amarillo-based beef packing company released a statement about the planned expansion that will see construction begin in October Caviness plans to add a second harvest and processing shift while hiring 600 additional employees. Currently the plant processes 1,800 cattle per day. When the expansion is complete in fall of 2019 the plant will have a per day capacity of 2,600 cattle. Caviness is excited to expand its processing capacity at our Hereford plant. This location has been good to us and we have filled a need through the years. It is where it all started over 55 years ago in 1962 and we have been fortunate to be able to see continued growth, says Terry Caviness, CEO. We have good opportunities to further diversify and expand our higher end beef product offerings, says Trevor Caviness, president. beef and patty processing plant currently processes approximately 900,000 lb. of beef in Amarillo. Last year Caviness opened a packing plant in Kuna, Idaho through a partnership with J.R. Simplot Company. CS Beef Packers processes cull cows and bulls from dairy farms and ranches throughout the Intermountain West and has a capacity of 1,700 head per day. Self-Reported and Self-Graded Markets continued Choice and Prime lbs Good Choice and Prime lbs Good Choice and Prime lbs Feeders lbs Replacement Ewes: Yearlings lbs Ewes Ewes Fat Rams Cattle will primarily come from ranches and dairies in the region, along with some feedyards. The packing plant is predominantly a cull cow and bull processor. The Texas panhandle is a vibrant cattle region with wonderful folks that have a great work ethic. The cattle numbers from the supply side are favorable and we are excited to create more packing capacity and demand for cattle in the greater southwest, Terry Caviness adds. Companies are only as good as their people and we are fortunate to have many talented folks on our team. We look forward to bringing people up from within the organization as well as adding new talented team members. We will have many job opportunities coming on the horizon, says Allen Hare, HR Director. The Hereford plant was built in November 2008, and Rendering and Hide operations were added to the plant in A ground Department of Agricultural and Resource Economics 314 Morgan Hall 2621 Morgan Circle arec.tennessee.edu USDA / Tennessee Department of Agriculture Market News Service