Tennessee Market Highlights

Transcription

1 Tennessee Market Highlights December 7, 2018 Number: 49 Trends for the Week Compared to a Week Ago Slaughter Cows $1 higher Slaughter Bulls $1 higher Feeder Steers Steady to $3 lower Feeder Heifers Steady to $5 lower Feeder Cattle Index Wednesday s index: Fed Cattle The 5-area live price of $ was up $0.95. The dressed price of $ was down $0.20. Corn March closed at $3.85 a bushel, up 8 cents since last Friday. Soybeans January closed at $9.16 a bushel, up 22 cent since last Friday. Wheat March closed at $5.31 a bushel, up 16 cents since last Friday. Cotton March closed at cents per lb, up 1.23 cents since last Friday. Livestock Comments by Dr. Andrew P. Griffith FED CATTLE: Fed cattle trade was not established at press as bid prices were $114 to $116 and ask prices were near $120 on a live basis. The 5-area weighted average prices thru Thursday were $ live, up $0.95 from last week and $ dressed, down $0.20 from a week ago. A year ago prices were $ live and $ dressed. Limited cash trade for the week had occurred prior to this writing. Packers and feedlot managers were in a complete standoff with both holding paper knives. Feedlot managers appeared to hold leverage over packers with live cattle futures closing this week stronger than the previous week, but a paper cut is the extent of the wound they can inflict this week. The short term story for cattle is always interesting, and it can bring tremendous volatility at times. However, the long term expectation of the market is where decisions are made and dollars are made or lost. Cattle on feed will remain elevated in 2019 which should put pressure on prices, but international demand is difficult to predict. BEEF CUTOUT: At midday Friday, the Choice cutout was $213.57up $0.90 from Thursday and up $0.78 from last Friday. The Select cutout was $ up $2.03 from Thursday and up $1.61 from last Friday. The Choice Select spread was $13.32 compared to $14.15 a week ago. The domestic cattle markets continue to be supported by international beef demand based on strong October export quantities and values. From January through October, the United States has exported 1.91 billion pounds of beef (does not include variety meats) which is 12 percent higher than the same ten months one year ago. Similarly, the value of beef exports from January through October of 2018 was 19 percent greater than the same months in 2017 and totaled $6.19 billion. Demand from the top export destinations of Japan, Korea, and Mexico continues to strengthen year over year as exports to Taiwan, Philippines, Vietnam, and Indonesia continue to expand in both quantity and value. Beef exports to China are slowly increasing, but they remain a small export market for U.S. beef. Though growth is evident for the top three beef export destinations, beef exports to Canada are 3 percent lower than last year on a quantity basis and 6 percent lower on a value basis. Beef exports to Hong Kong are a mixed bag with a 5 percent decline on a quantity basis but a value increase of 17 percent. OUTLOOK: Calf prices found some support the week following Thanksgiving and that may have been because there were some favorable weather conditions, but the market did not maintain support this week as Tennessee calf and feeder cattle prices declined compared to last week. By this time of year, the fall run of cattle is generally complete. However, there may still be some calves coming to market due to the frequent precipitation received during the traditional marketing time period that is keeping downward pressure on calf prices. There is still an expectation for calf prices to turn the corner before the end of the year, but time is limited with only two marketing weeks before many auction barns close the gates for Christmas and the New Year holiday. Given that calf prices have been sluggish this fall, producers still hanging on to the calf crop may benefit from hanging on a little longer as January generally brings slightly higher prices. The market is still several months from the grass fever time period which will provide little to no support for calves that are ready to be weaned today. It is not only the cash market that is acting sluggishly. Feeder cattle futures have been testing the bottom end of their five month trading range this week with several contracts trading below support levels. It is becoming increasingly diffi- (Continued on page 2)

2 Livestock Comments by Dr. Andrew Griffith (Continued from page 1) cult to understand the feeder cattle market price declines with the live cattle contract heading in the opposite direction and only marginal increases in the grain markets. One reason for lower prices may be due to cattle feeders having less cash in hand due to several months of negative margins, but margins have been positive the past couple of months. Another reason may be due to the number of cattle on feed which is high at this time. Regardless of the reason feeder cattle prices are struggling, stronger finished cattle prices are sure to pull feeder cattle prices to the upside and result in positive gains for feeder cattle producers. ASK ANDREW, TN THINK TANK: University of Tennessee Extension has a group of area farm management specialists that have been working with farm families for more than 30 years as it relates to record keeping and financial analysis. A new project the group is starting in 2019 is a program called Beef Gauge. Beef Gauge is a project where area specialists will work with cow-calf producers to begin benchmarking production practices being performed by producers, herd data statistics, production costs, and revenue. The goal of the program is to help producers identify efficiencies and inefficiencies in their operation so they can improve profitability of the operation. With adequate participation, analysis of producer data should allow one to determine the factors that increase profitability. Beyond improving producer efficiency, a producer will be able to compare his or her farm to the averages of farms in their area and across the state. If a reader has interest, please contact the county Extension office and request the contact information for the area farm management specialist. 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 December $ ; February $ ; April $ ; Feeder cattle January $ ; March $ ; April $ ; May $ ; December corn closed at $3.74 up $0.02 from Thursday. Milk Futures Thursday, December 6, 2018 Month Class III Close Class IV Close Dec Jan Feb Mar Apr Average Daily Slaughter Cattle Hogs Number of head This week (4 days) 120, ,250 Last week (4 days) 119, ,500 Year ago (4 days) 119, ,000 This week as percentage of Week ago (%) 101% 101% Year ago (%) 101% 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, cotton, wheat, and soybeans were up for the week. For the month of November, March 2019 corn futures were up 2 cents (opened at $3.75 ¾ and closed at $3.77 ¾) with a trading range of $3.67 ¼ to $3.90; December 2019 corn futures were up 1 ¾ cents (opened at $3.98 and closed at $3.99 ¾) with a trading range of $3.91 ¼ to $4.06 ¾; January 2019 soybean futures were up 44 ½ cents (opened at $8.50 ¼ and closed at $8.94 ¾) with a trading range of $8.45 ¾ to $9.00 ¾; November 2019 soybean futures were up 37 cents (opened at $9.02 ¼ and closed at $9.39 ¼) with a trading range of $8.98 to $9.48; March 2019 wheat futures were unchanged for the month (opened and closed at $5.15 ¾) with a trading range of $5.03 ¼ to $5.29; July 2019 wheat futures were down 6 ¼ cents (opened at $5.33 ½ and closed at $5.27 ¼) with a trading range of $5.17 to $5.47 ¾; March 2019 cotton futures were up 0.61 cents (opened at 78.3 and closed at 78.91) with a trading range of to 82; and December 2019 cotton futures were up 0.08 cents (opened at and closed at 77.03) with a trading range of to 79. Commodities were up across the board this week. Looking toward to the 2019 crop, producers may want to consider pricing some production with December corn futures currently above $4 and November soybean futures above $9.50. This early in the 2019 production season it is not advisable to get too aggressive with pricing but starting to consider price offering when futures prices are near these level is warranted. Pricing 10-20% should be considered given the large amount of trade, political, and global economic uncertainty. Corn Ethanol production for the week ending November 30 was million barrels per day, up 21,000 from the previous week. Ethanol stocks were million barrels, up 100,000 barrels. Corn net sales reported by exporters from November were above expectations with net sales of 46.4 million bushels for the 2018/19 marketing year. Exports for the same time period were up 11% compared to last week at 45.9 million bushels. Corn export sales and commitments were 43% of the USDA estimated total annual exports for the 2018/19 marketing year (September 1 to August 31) compared to a 5-year average of 47%. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Upper-middle Tennessee. Overall, basis for the week ranged from 26 under to 6 over the March futures contract with an average of 2 under at the end of the week. March 2019 corn futures closed at $3.85 up 8 cents since last Friday. For the week, March 2019 corn futures traded between $3.80 and $3.86. May 2019 corn futures closed at $3.92, up 7 cents since last Friday. Mar/May and Mar/Dec future spreads were 7 and 18 cents. In Tennessee, September 2019 corn cash forward contracts averaged $3.88 with a range of $3.76 to $4.03. December 2019 corn futures closed at $4.03, up 4 cents since last Friday. Downside price protection could be obtained by purchasing a $4.10 December 2019 Put Option costing 29 cents establishing a $3.81 futures floor. Soybeans Net sales reported by exporters were within expectations with net sales of 32.7 million bushels for the 2018/19 marketing year and 0.2 million bushels for the 2019/20 marketing year. Exports for the same period were up 22% compared to last week at 37.6 million (Continued on page 4) 3

4 Crop Comments by Dr. Aaron Smith bushels. Soybean export sales and commitments were 47% of the USDA estimated total annual exports for the 2018/19 marketing year (September 1 to August 31), compared to a 5-year average of 73%. Average soybean basis weakened at Northwest Tennessee and strengthened or remained unchanged at Memphis, Northwest Barge Points, and Upper-middle Tennessee. Basis ranged from 61 under to 22 under the January futures contract at elevators and barge points. Average basis at the end of the week was 38 under the January futures contract. January 2019 soybean futures closed at $9.16, up 22 cents since last Friday. For the week, January 2019 soybean futures traded between $8.97 and $9.23. March 2019 soybean futures closed at $9.29, up 22 cents since last Friday. Jan/Mar and Jan/Nov future spreads were 13 and 45 cents, respectively. In Tennessee, October/November 2019 soybean cash contracts average $9.19 with a range of $8.65 to $9.36. November 2019 soybean futures closed at $9.61, up 22 cents since last Friday. Downside price protection could be achieved by purchasing a $9.80 November 2019 Put Option which would cost 66 cents and set a $9.14 futures floor. Nov/Dec 2019 soybean-to-corn price ratio was 2.38 at the end of the week. Cotton Net sales reported by exporters were down from last week with net sales of 94,900 bales for the 2018/19 marketing year and 80,500 bales for the 2019/20 marketing year. Exports for the same time period were 158,600 bales, up 26% from last week. Upland cotton export sales were 70% of the USDA estimated total annual exports for the 2018/19 marketing year (August 1 to July 31), compared to a 5-year average of 60%. Delta upland cotton spot price quotes for December 6 were cents/lb ( ) and cents/lb ( ). Adjusted World Price (AWP) increased 1.42 cents to cents. March 2019 cotton futures closed at 80.23, up 1.32 cents since last Friday. For the week, March 2019 cotton futures traded between 78.6 and cents. Mar/May and Mar/Dec cotton futures spreads were 0.94 cents and -2.2 cents. May 2019 cotton futures closed at 81.17, up 1.22 cents since last Friday. December 2019 cotton futures closed at 78.03, up 1 cent since last Friday. Downside price protection could be obtained by purchasing a 79 cent December 2019 Put Option costing 5.78 cents establishing a cent futures floor. 4 (Continued on page 5)

5 Crop Comments by Dr. Aaron Smith Wheat Wheat net sales reported by exporters were above expectations with net sales of 26.2 million bushels for the 2018/19 marketing year. Exports for the week were up 93% compared to last week at 17.7 million bushels. Wheat export sales were 56% 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 75%. March 2019 wheat futures closed at $5.31, up 16 cents since last Friday. March 2019 wheat futures traded between $5.10 and $5.32 this week. March wheat-to-corn price ratio was Mar/May and Mar/Jul future spreads were 5 cents and 9 cents. May 2019 wheat futures closed at $5.36, up 15 cents since last Friday. In Tennessee, June/July 2019 wheat cash contracts ranged from $5.10 to $5.49 for the week. July 2019 wheat futures closed at $5.40, up 13 cents since last Friday. Downside price protection could be obtained by purchasing a $5.50 July 2019 Put Option costing 37 cents establishing a $5.13 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, November 30, 2018 Thursday, December 6, 2018 Commodity Contract Month Friday Monday Tuesday Wednesday Thursday Soybeans Jan ($/bushel) Mar May Jul Aug Sep Corn Dec ($/bushel) Mar May Jul Sep Dec Wheat Dec ($/bushel) Mar May Jul Sep Soybean Meal Dec ($/ton) Jan Mar May Jul Aug Cotton Dec ( /lb) Mar May Jul Oct Live Cattle Dec ($/cwt) Feb Apr Jun Aug Feeder Cattle Jan ($/cwt) Mar Apr May Aug Sep Market Hogs Dec ($/cwt) Feb Apr May Jun

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 Prices on Tennessee Reported Livestock Auctions for the week ending December 7, 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 # lbs lbs lbs lbs Heifers: Medium/Large Frame # lbs lbs lbs lbs Cattle Receipts: This week: 8,049 () Week ago: 6,404 (7) Year ago: 10,127 (11) 7

8 Tennessee lbs. M-1 Steer Prices 2017, 2018 and 5-year average Tennessee lbs. M-1 Steers Prices 2017, 2018 and 5-year average /2016 Avg / 2016 Avg Area Finished Cattle Prices 2017, 2018 and 5-year average Tennessee Slaughter Cow Prices Breakers 75-80% 2017, 2018 and 5-year average 2012/2016 Avg Prices Paid to Farmers by Elevators Friday, November 30, 2018 Thursday, December 6, 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 8

9 Graded Sales, Video Board Sales, Video Sales & Loads East Tennessee Livestock Center - December 5, load out of 85 steers; BQA certified producer; est. wt. 820 lbs.; 95% M&L-1s, 5% M&L-2s; medium flesh; 100% blk/bwf; $ Self-Reported and Self-Graded Livestock Markets lbs lbs lbs lbs Hardin County Stockyard - December 5, steers, 853 lbs, M&L 1, Black/BWF Red/RWF CHX, 5 flesh, $ Warren Co. Livestock Graded Sale, McMinnville, TN Weighted Average Report for Wednesday Dec 5, 2018 Cattle Receipts: 1553 Blk, Bwf and Char For complete report: Self-Reported and Self-Graded Livestock Markets 12/04/18 TN Livestock Producers Fayetteville Receipts: 452 (121 graded & grouped) Steers: Med & Lg 1-2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs Bulls: Med & Lg lbs lbs lbs lbs lbs /03/18 Morris Brothers Stockyard, Pikeville, TN Receipts: 100 Last Week: Last Year: 226 Steers: Heifers: lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Bulls: Under lbs lbs lbs lbs lbs lbs

10 Beef Industry News Featured Article from BEEF Magazine When it comes to bulls, keep the best and cut the rest By Tom Brink December 5, 2018 When our marketing staff discusses bull sale results, we often hear that the top half of the bulls sold very well, with prices as high (or nearly as high) as a few years ago when the calf market was stronger. But for the bottom quarter of the offering, it is a different story. Demand dries up and bidders become scarce. Related: Seedstock Directory Indeed, tolerance for lower-end bulls is weakening to the point that average prices at some sales are being negatively impacted. To some degree, this situation is not new. Lower quality bulls have always been harder to sell and they consistently bring less money. However, what does appear different today is the expanding price differential between superior bulls and those for which we might say, Well, he s just a bull. Related: 6 resources for buying bulls before breeding season begins Buyers are looking for higher-end bulls, which they ll pay good money to own, while eschewing anything that does not meet their increasingly stringent criteria. Bulls that ring the bell for phenotype and that have good, well-balanced EPDs enjoy strong demand. Another contributing factor could be the increased use of artificial insemination in commercial herds, particularly on heifers. Such programs may make bull buyers more careful about the walking bulls they purchase, desiring them to more closely match the A.I. sires they re using. What this means for the future is that some seedstock producers will need to refocus their efforts and do more to produce a higher percentage of top-quality bulls, while eliminating mediocre animals. This is obviously easier said than done, because biology always gives us a bell curve to deal with. Not every bull can offer what the Lot 1 bull offers in genetic quality and kind. Yet marketplace signals are clear and unlikely to change for the foreseeable future. Bottom-enders are getting harder to sell at an acceptable price. For serious seedstock producers who want to stay ahead of this trend, there are things that can be done. First, do everything in your power to ensure that the genetic and management inputs used to produce your next calf crop are the best you can make them. Secondly, keep your standards high and keep a sharp knife handy. Demand for mediocre bulls is not what it used to be, so the goal becomes to produce as few as possible maybe none at all. The thousands of bull prices our marketing team has analyzed over the past two years has made that fact pretty much irrefutable. Sure, there are still some bottom feeders who buy cheap bulls without regard to much else but price. However, such buyers are getting more scarce all the time, and their absence is noticeable at many sales where they actively participated and floored the market in previous years. The success of today s value-added marketing option is an influential factor that weighs in to this discussion, because it has garnered the attention of progressive commercial cow-calf producers. For the most part, ranchers know they need top-notch bulls to produce the highly marketable calves that fit these price-advantaging programs. Department of Agricultural and Resource Economics 314 Morgan Hall 2621 Morgan Circle arec.tennessee.edu USDA / Tennessee Department of Agriculture Market News Service