Tennessee Market Highlights

Transcription

1 Tennessee Market Highlights February 9, 2018 Number: 6 Trends for the Week Compared to a Week Ago Slaughter Cows Steady to $2 higher Slaughter Bulls Steady Feeder Steers Steady to $3 higher Feeder Heifers $1 to $4 higher Feeder Cattle Index Wednesday s index: Fed Cattle The 5-area live price of $ is up $1.09. The dressed price was up $1.43 at $ Corn March closed at $3.62 a bushel, up 1 cent since last Friday. Soybeans March closed at $9.83 a bushel, up 5 cents since last Friday. Wheat March closed at $4.49 a bushel, up 3 cents since last Friday. Cotton March closed at cents per lb, down 0.62 cents since last Friday. Livestock Comments by Dr. Andrew P. Griffith FED CATTLE: Fed cattle trade was not well established at press. Bid prices on a live basis were mainly $126 with asking prices near $129 on a live basis and $202 on dressed basis. The 5-area weighted average prices thru Thursday were $ live, up $1.09 from last week and $ dressed, up $1.43 from a week ago. A year ago prices were $ live and $ dressed. Fed cattle trade was at a standstill most of the week as packers found it difficult to bid up cattle prices while wholesale beef prices floundered. Alternatively, cattle feeders were not willing to lower ask prices as February live cattle futures traded fairly steady most of the week. What is working against cattle feeders is the steep decline in deferred live cattle futures. As an example, April live cattle declined $1.76 from Monday s close thru Thursday s close. Additionally, April was trading at more than a $2.50 discount to February while June was trading with more than an $8 discount to April. These steep discounts on the futures market should keep cattle moving through the pens and to packers which should keep cattle weights manageable. BEEF CUTOUT: At midday Friday, the Choice cutout was $ down $2.03 from Thursday and down $2.98 from last Friday. The Select cutout was $ down $0.76 from Thursday and down $1.01 from last Friday. The Choice Select spread was $3.47 compared to $5.44 a week ago. Light boxed beef movement has allowed packers to keep wholesale beef prices elevated the first six weeks of the year, but a more seasonal tone came into the Thursday and Friday market. February beef demand is always weak relative to most other months and that weakness is beginning to show up in wholesale beef prices. The Choice and Select cutouts both remain above the $200 mark. This is important from the standpoint that the $200 mark was a major resistance point prior to the trough of cattle inventory in the current cattle cycle. Since that resistance was broken, the same price point has provided significant support. Choice and Select cutouts could dip below the invisible support line, but the risk of a total collapse is small. The Choice Select spread has once again narrowed and the spread is expected to continue narrowing through February as more focus is placed on end meats rather than middle meats. The Choice cutout will not see significant support until the second half of March or early April. OUTLOOK: Sometimes it seems as if the same thing is written every week in this publication, but reporting the market and providing analysis is sometimes repetitive. The feeder cattle futures price appears to be fairly strong relative to where it finished 2017 and where it started 2018, but most of the price movement this week led to softer prices. The futures market has started to price in a more seasonal price trend the first three quarters of the year, but it currently has a fourth quarter price that is stronger than the seasonal tendency. Most feeder cattle contracts are within $10 per hundredweight of their contract high which occurred in early November There is potential for the market to move higher, but it will be difficult for prices to exceed the price achieved during the early November time period. In other words, now may be a time to offset some price risk on cattle being sold in the second half of the year and more importantly on cattle being sold in the fourth quarter. Locking in a price may not be the best alternative as the market could gain a few dollars. Thus, setting a floor price may be a more appropriate route. The cattle herd is larger than it was one year ago and the calf crop in 2018 will be larger than it was in With that being said, the expectation is for fourth quarter prices to be softer than second and (Continued on page 2)

2 Livestock Comments by Dr. Andrew Griffith (Continued from page 1) third quarter prices. The current market is offering just as strong or stronger prices in October and November as in August and September. Stepping back into the present, calf and feeder cattle prices at Tennessee weekly auction markets remain steady to stronger compared to last week. Steer prices were steady to $3 higher than last week while heifer prices were $1 to $4 higher compared to a week ago. The current market has provided producers ample time to market cattle carried through the early winter and to add weight. Producers with calves that will be ready to wean in the next couple of months should continue to benefit from grass fever in March and early April. This coming week s temperatures should result in a little green up. If it does not green any then we may be finding out how bad the freeze actually hit forage in January. April $ ; June $ ; Feeder cattle March $ ; April $ ; May $ ; August $ ; March corn closed at $3.62 down $0.04 from Thursday. ASK ANDREW, TN THINK TANK: There was an opportunity this week to discuss hay and forage outlook with a group of economists across the Southeast and Southern Plains. Many of these economists focus their professional careers on livestock production or row crop production. A popular question was related to how the low December 1 hay stocks will play into the forage market in Hay production in 2017 was fairly strong in most parts of the United States. The Northern Plains and into Montana is where production was lacking due to persistent drought conditions. The issues that have led to increased hay disappearance have been flooding in Texas and extremely cold temperatures that have resulted in increased hay usage. To answer the question, hay is a regional product for the most part. Prices in a region are not likely to be greatly influenced by shortages in regions a long distance away. Additionally, the 2018 market will hinge largely on production moving into spring and summer. If production is negatively influenced this year, prices are sure to go up given the reduced stocks from last year. It may be time to fill the hay barn and do it early. 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 February $ ; Milk Futures Thursday February 8, 2018 Month Class III Close Class IV Close Feb Mar Apr May June Average Daily Slaughter Cattle Hogs Number of head This week (4 days) 116, ,500 Last week (4 days) 117, ,250 Year ago (4 days) 112, ,500 This week as percentage of Week ago (%) 99% 100% Year ago (%) 103% 105% 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 up; and cotton was mixed for the week. This week corn, soybean, cotton, and wheat prices moved mostly sideways with a narrow trading range. This is contrary to the dramatic swings seen in the stock markets over the past ten days. March corn futures have traded in a 22 cent range from $3.45 ½ to $3.67 ¾. As of Friday, the market closed near the high end of the trading range. December corn has continued a two month uptrend that has seen prices rise modestly from $3.80 on December 15th to $3.92 ¼ on February 9th. Small but positive gains for those looking to price 2018 production. March soybeans regained part of last week s decline closing at $9.83/bu. November soybeans continue to oscillate around $ The market appears reluctant to move higher or lower until more is known about South American production. Nearby cotton futures have trended down since the January 12 high of cents. Another run back above 80 cents is not impossible but more likely prices will consolidate in a 74 to 79 cent range. Harvest cotton futures appear to be consolidating between 74 and 76 cents. This is after the 8 cent increase from late October to present. On Thursday, USDA released the February WASDE report. Overall, corn, cotton, and soybeans closed up for the day and wheat closed down. Complete details of the report and market reaction for corn, soybeans, cotton, and wheat can be found at: ag.tennessee.edu/arec/pages/monthlycropcomments.aspx. The crop insurance price determination period for corn, soybeans, and cotton in Tennessee started February 1 and will conclude February 28. Corn and cotton use the December futures contract and soybeans use the November futures contract to determine the spring crop insurance price from February 1 to February 28. Currently (as of February 9), crop insurance prices (volatility) are: Corn - $3.93/bu (0.15); soybeans - $10.01/bu (0.13); and cotton - $0.75/lb (0.14). Final spring crop insurance prices will not be set until after February 28. Producers are reminded the sales closing date in Tennessee for all three commodities is March 15. Corn Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Northwest Barge Points, Memphis, Northwest, Upper-middle, and Lower-middle Tennessee. Overall, basis for the week ranged from 16 under to 30 over the March futures contract with an average of 9 over at the end of the week. March 2018 corn futures closed at $3.62, up 1 cent since last Friday. For the week, March 2018 corn futures traded between $3.56 and $3.67. Corn net sales reported by exporters from January 26-February 1 were within expectations with net sales of 69.7 million bushels for the 2017/18 marketing year. Exports for the same time period were down from last week at 37.8 million bushels. Corn export sales and commitments were 70% 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 68%. Ethanol production for the week ending February 2 was million barrels per day, up 17,000 from the previous week. Ethanol stocks were million barrels, up 444,000 barrels. Mar/May and Mar/Dec future spreads were 7 and 30 cents, respectively. May 2018 corn futures closed at $3.69, unchanged since last Friday. In Tennessee, September 2018 corn cash forward contracts averaged $3.74 with a range of $3.60 to $3.97. December 2018 corn futures closed at $3.92, unchanged since last Friday. Downside (Continued on page 4) 3

4 Crop Comments by Dr. Aaron Smith price protection could be obtained by purchasing a $4.00 December 2018 Put Option costing 28 cents establishing a $3.72 futures floor. Soybeans Average soybean basis strengthened or remained unchanged at Memphis, Northwest, Upper-middle, and Lower-middle Tennessee and weakened at Northwest Barge Points. Basis ranged from 33 under to 10 over the March futures contract at elevators and barge points. Average basis at the end of the week was 11 under the March futures contract. March 2018 soybean futures closed at $9.83, up 5 cents since last Friday. For the week, March 2018 soybean futures traded between $9.67 and $9.96. Net sales reported by exporters were above expectations with net sales of 27.3 million bushels for the 2017/18 marketing year and 0.3 million bushels for the 2018/19 marketing year. Exports for the same period were up from last week at 56.5 million bushels. Soybean export sales and commitments were 75% 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 90%. March soybean-to-corn price ratio was 2.72 at the end of the week. Mar/May and Mar/Nov future spreads were 10 and 17 cents, respectively. May 2018 soybean futures closed at $9.93, up 3 cents since last Friday. In Tennessee, Oct/Nov 2018 soybean cash contracts average $9.81 with a range of $9.51 to $ November 2018 soybean futures closed at $10.00, up 1 cent since last Friday. Downside price protection could be achieved by purchasing a $10.20 November 2018 Put Option which would cost 64 cents and set a $9.56 futures floor. November/December 2018 soybean-to -corn price ratio was 2.55 at the end of the week. Cotton Delta upland cotton spot price quotes for February 8 were cents/lb ( ) and cents/lb ( ). Adjusted world price (AWP) decreased 1.9 cents to cents per pound. March 2018 cotton futures closed at cents, down 0.62 cents since last Friday. For the week, March 2018 cotton futures traded between and cents. Net sales reported by exporters were up from last week with net sales of 402,400 bales for the 2017/18 marketing year and 118,500 bales for the 2018/19 marketing year. Exports for the same period were up from last week at 432,500 bales. Upland cotton export sales were 88% 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 80%. Mar/May and Mar/Dec cotton futures spreads were 0.95 cents and cents, respectively. 4 (Continued on page 5)

5 Crop Comments by Dr. Aaron Smith May 2018 cotton futures closed at 77.63, down 0.98 cents since last Friday. December 2018 cotton futures closed at 75.52, up 0.44 cents since last Friday. Downside price protection could be obtained by purchasing a 76 cent December 2018 Put Option costing 4.74 cents establishing a cent futures floor. Wheat In Memphis, old crop cash wheat ranged from $4.52 to $4.73. March 2018 wheat futures closed at $4.49, up 3 cents since last Friday. March 2018 wheat futures traded between $4.38 and $4.64 this week. March wheat-to-corn price ratio was Wheat net sales reported by exporters were within expectations with net sales of 14.4 million bushels for the 2017/18 marketing year. Exports for the week were down from last week at 17.2 million bushels. Wheat export sales were 79% 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 87%. Mar/May and Mar/Jul future spreads were 12 cents and 25 cents, respectively. May 2018 wheat futures closed at $4.61, up 2 cents since last Friday. In Tennessee, June/July 2018 cash forward contracts ranged from $4.47 to $5.11 for the week. July 2018 wheat futures closed at $4.74, up 1 cent since last Friday. Downside price protection could be obtained by purchasing a $4.80 July 2018 Put Option costing 23 cents establishing a $4.57 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, February 2, 2018 Thursday, February 8, 2018 Commodity Contract Month Friday Monday Tuesday Wednesday Thursday Soybeans Mar ($/bushel) May Jul Aug Sep Nov Corn Mar ($/bushel) May Jul Sep Dec Mar Wheat Mar ($/bushel) May Jul Sep Dec Soybean Meal Mar ($/ton) May Jul Aug Sep Oct Cotton Mar ( /lb) May Jul Oct Dec Live Cattle Feb ($/cwt) Apr Jun Aug Oct Feeder Cattle Mar ($/cwt) Apr May Aug Sep Oct Market Hogs Feb ($/cwt) Apr May Jun Jul

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 February 9, 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: 6,620 (11) Week ago: 9,537 (11) Year ago: 6,485 (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 Breakers 75-80% 2017, 2018 and 5-year average 2012/2016 Avg Prices Paid to Farmers by Elevators Friday, February 2, 2018 Thursday, February 8, 2018 Friday Monday Tuesday Wednesday Thursday Low High Low High Low High Low High Low High $/bushel No. 2 Yellow Soybeans Memphis N.W. B.P N.W. TN Upper Md Lower Md Yellow Corn Memphis N.W. B.P N.W. TN Upper Md Lower Md Wheat Memphis

9 Video Sales & Loads Self-Reported and Self-Graded Livestock Markets Athens Stockyard - February 7, loads of heifers; mixed; est. wt. 615 lbs.; $ load of heifers; mixed; est. wt. 625 lbs.; $ load of steers; BLk/BWF; est. wt. 685 lbs.; $ load of steers; Blk/BWF; est. wt. 845 lbs.; $ load of steers; Blk/Chx; est. wt. 880 lbs.; $ East Tennessee Livestock Center - February 7, load out of 125 Holstein steers; BQA certified producer; est. wt. 900 lbs.; 95% #1s, 5% #2s; medium flesh; $96.00 Hardin County Stockyard - February 7, load out of 85 steers; est. wt. 870 lbs.; Medium and Large 1; Black and Black White face; sold with a 2% shrink, 4 cent slide and current delivery for $ Self-Reported and Self-Graded Livestock Markets 2/6/18 TN Livestock Producers Fayetteville Receipts: 312 (109 graded & grouped) Steers: Med & Lg 1-2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Bulls: Med & Lg lbs lbs lbs lbs lbs

10 Beef Industry News Featured Article from Feedstuffs What s the real driver behind strong beef demand? The answer might surprise you February 8, 2018 A year ago, says David Williams, you could have done 100 surveys on what people thought would be the cattle market drivers in 2017, and nobody would have picked the right answer. Sure, robust domestic demand and a strong export market were the reasons that cattle prices last year caught everyone by surprise. But dig a little deeper, Williams told the crowd at the Learning Lounge on the trade show floor during the Cattle Industry Convention in Phoenix, and the underlying strength of that demand will surprise you. It was ground beef, or more accurately, the 90 CL and 50 CL trimmings that go into making the ground beef that consumers enjoy. Generally, the 90 trimmings are very lean and come from cull cows and bulls; the 50 trimmings come from fed cattle carcasses and are mixed with the fat trimmed from those carcasses. may be the high for the year. As the industry gets into the larger placements of the last several months, there will be plenty of fed cattle coming to town and cash prices for fed cattle could dip below $100 per cwt this summer. Much of the cattle market for 2018 hinges on drought and resulting pasture conditions. If weather isn t in play, the expansion phase could continue, slowly, into 2020, he says. But weather is a big factor early in the year. Beef producers have seen good profitability the last three or four years, he told the audience. But as we come into the 2018 timeframe, we have a lot of unknowns. We ve seen some margin in the first half of the year [for fed cattle], but what will hold us as we get to the back half of the year with possible dry conditions on pasture? That was a giant mover in the marketplace last year, said Williams, vice president of Informa Economics IEG. And I still think that the way the U.S. consumer is moving ground beef, all-beef hot dogs those things are becoming more and more popular and the consumer is willing to pay up for those. Take, for example, McDonald s recent announcement about its Quarter Pounder. They are moving away from frozen imported beef and will begin to use all domestic, fresh U.S. product, he said. It s currently in five or six states right now. They re planning on, sometime in 2018, that it will be nationwide. So that s going to bring a whole nother demand level for the packers and further processors that make ground beef, to be able to supply that fresh product. And, while beef production will be higher in 2018, demand for all cuts of beef, both domestically and worldwide, won t slow down, Williams predicts. The U.S. dollar is weakening, and that s good news for U.S. beef exports, because it makes our beef less expensive worldwide. And he predicts that grocery stores will feature beef heavily, especially this spring and summer, which will keep domestic demand robust. For prices, he thinks the dollars that fed cattle are fetching now Department of Agricultural and Resource Economics 314 Morgan Hall 2621 Morgan Circle arec.tennessee.edu USDA / Tennessee Department of Agriculture Market News Service