Tennessee Market Highlights

Transcription

1 Tennessee Market Highlights February 23, 2018 Number: 8 Trends for the Week Compared to a Week Ago Slaughter Cows $2 to $6 higher Slaughter Bulls Steady Feeder Steers Steady to $5 higher Feeder Heifers $1 to $5 higher Feeder Cattle Index Wednesday s index: Fed Cattle The 5-area live price of $ is down $0.14. The dressed price was $ Corn March closed at $3.66 a bushel, down 1 cent since last Friday. Soybeans March closed at $10.36 a bushel, up 15 cents since last Friday. Wheat March closed at $4.52 a bushel, down 5 cents since last Friday. Cotton March closed at cents per lb, up 5.73 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 $127 to $128 while dressed prices were mainly $204 to $205. The 5-area weighted average prices thru Thursday were $ live, down $0.14 from last week and $ dressed, up $2.45 from a week ago. A year ago prices were $ live and $ dressed. There was a hint of weakness in the finished cattle markets as cattle traded lower than the previous week. It would appear traders of live cattle futures are not as bullish as they were last week which resulted in cash cattle prices softening. There is little doubt cattle feeders are less than thrilled with the lower prices, but cattle feeding margins remain strong. The strong margins and a basis near zero should keep cattle feeders interested in marketing cattle. Similarly, the strong feeding margins should keep cattle feeders active in placing cattle. Looking forward a few weeks, it may be difficult to push finished cattle prices higher as the seasonal tendency would indicate due to the current strength. A steady market would be received well. BEEF CUTOUT: At midday Friday, the Choice cutout was $ down $0.32 from Thursday and up $8.88 from last Friday. The Select cutout was $ up $0.83 from Thursday and up $7.73 from last Friday. The Choice Select spread was $5.19 compared to $4.04 a week ago. Packers have been consistently faced with tighter margins the past couple of months as wholesale beef prices have floundered while cattle prices escalated. As margins tightened, packers were looking for any method to push spot market sales to higher price levels. They must have found a solution as boxed beef prices found traction during a traditionally sluggish time period. There are certainly retailers who are purchasing product for the spring months, but those sales are probably not as strong as what the current spot market price reflects. Aside from packers attempting to push beef prices higher, they have also been trying to find ways to pay less for finished cattle. This too was a success this week with lower finished cattle prices. Thus, lower input costs and higher output prices have allowed packers to experience improved margins. The values to keep an eye on that will have the greatest influence on beef prices are beef production, imports, and exports. Production is sure to increase, while import and export levels are less certain. OUTLOOK: The feeder cattle market had been trading with a full head of steam since early January. However, feeder cattle futures showed a hiccup starting on Wednesday. It is difficult to determine if the lower prices late this week are leading the market to lower prices or if it is a minor correction in the market. Despite the turn in the futures market on Friday, prices on Tennessee weekly auctions were stronger than the prior week. Steer prices in Tennessee were steady to $5 higher while heifer prices were $1 to $5 higher than last week. The expectation moving through the spring is for strength in the calf market as the seasonal tendency for freshly weaned calves is stronger prices. Though there is an expectation for calf prices to continue increasing through March and maybe into early April due to grass fever, weakness in the feeder cattle market can and will quickly dampen buyers attitudes. The current feeder cattle contract price movement may bring a call to action for producers looking to market animals in the near term. With the sudden dip in prices, it could mean producers should be marketing animals now if the expectation is for prices to continue declining. Based on the March feeder cattle contract, there appears to be support near the $145 level and even stronger price support at the $140 price. Similarly, the August feeder cattle contract has strong support at (Continued on page 2)

2 Livestock Comments by Dr. Andrew Griffith (Continued from page 1) 314B Morgan Hall, 2621 Morgan Circle, Knoxville, TN the $148 and $143 price levels. The point being made here is that downside price risk does exist in the feeder cattle market. However, it appears the downside price risk is limited to price levels that are still fairly strong. The slaughter cow market is showing a few signs of life heading into the late winter and early spring. One might say the slaughter cow market has underperformed up to this point, but there remains time for prices to continue improving in the late spring months. Alternatively, slaughter cow prices in the fall of 2018 are expected to struggle. The February cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of February 1, 2018 totaled million head, up 7.9% compared to a year ago, with the pre-report estimate average expecting an increase of 7.2%. January placements in feedlots totaled 2.07 million head, up 4.4% from a year ago with the pre-report estimate average expecting steady placements. January marketing s totaled 1.86 million head up 6.1% from 2017 with prereport estimates expecting marketings up 6.1%. Placements on feed by weight: under 700 pounds no change, 700 to 799 pounds up 6.8%, and 800 pounds and over up 8.2%. FRIDAY S FUTURES MARKET CLOSING PRICES: Friday s closing prices were as follows: Live/fed cattle February $ ; April $ ; June $ ; Feeder cattle March $ ; April $ ; May $ ; August $ ; March corn closed at $3.66 down $0.01 from Thursday. ASK ANDREW, TN THINK TANK: Due to a focus on forage risk management programming, several questions have been asked concerning the use of warm season grasses in a forage system and what percentage of pasture should be established in warm season grasses. The percentage of pasture that should be in warm season grasses depends on the type of operation, calving season timing, and if the pasture is intended for grazing or hay production. Based on experiences and expectations, most people would recommend 20 to 30 percent of pasture to be in a warm season grass for producers in the fescue belt. However, there is really no direct research to support this recommendation. It does seem apparent that a warm season grass can benefit producers in the fescue belt. Thus, producers could start by adding a few acres and see how that changes the operation. If there is an improvement for the operation then producers may desire to add a few more acres. Please send questions and comments to agriff14@utk.edu or send a letter to Andrew P. Griffith, University of Tennessee, Milk Futures Thursday February 22, 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) 110, ,500 Last week (4 days) 115, ,500 Year ago (4 days) 111, ,500 This week as percentage of Week ago (%) 96% 97% Year ago (%) 99% 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 and wheat were down; soybeans and cotton were up for the week. On Thursday and Friday, the USDA held its 94th annual Outlook Conference. The conference provides USDA s initial estimates for the forth coming marketing year (2018/19). The USDA currently projects corn acres planted at 90.0 million acres and harvested acres at 82.7 million acres. Yield is a trend line estimate of 174 bu/acre. Total production is projected at billion bushels, down 1.5% from Total use is projected at billion bushels resulting in a decrease in ending stocks from to billion bushels. Soybean acres planted are projected at 90.0 million acres and harvested acres at 89.1 million acres. Yield is a trend line estimate of 48.5 bu/acre. Total production is projected at 4.32 billion bushels, down 1.7% from Total use is projected at billion bushels resulting in a decrease in ending stocks from 530 to 460 million bushels. Cotton acres planted are projected at 13.3 million acres and harvested acres at 11.3 million acres. Yield is a trend line estimate of 828 lbs/acre. Total production is projected at 19.5 million bales, down 8.3% from Total use is projected at 19.4 million bales leaving ending stocks unchanged from the previous year. Wheat acres planted are projected at 46.5 million acres and harvested acres at 38.8 million acres. Yield is a trend line estimate of 47.4 bu/acre. Total production is projected at billion bushels, down 5.6% from Total use is projected at billion bushels resulting in a decrease in ending stocks from billion to 931 million bushels. The projections provided are estimates and will be revised each month as we move through the marketing year and new information is made available. Corn Across Tennessee, average corn basis (cash price-nearby futures price) strengthened or remained unchanged at Northwest Barge Points, Memphis, Northwest, and Upper-middle, and weakened at Lower-middle Tennessee. Overall, basis for the week ranged from 11 under to 30 over the March futures contract with an average of 10 over at the end of the week. March 2018 corn futures closed at $3.66, down 1 cent since last Friday. For the week, March 2018 corn futures traded between $3.64 and $3.70. Corn net sales reported by exporters from February 9-15 were above expectations with net sales of 61.2 million bushels for the 2017/18 marketing year and 2.6 million bushels for the 2018/19 marketing year. Exports for the same time period were down from last week at 33.5 million bushels. Corn export sales and commitments were 72% 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 72%. Ethanol production for the week ending February 16 was million barrels per day, up 52,000 from the previous week. Ethanol stocks were million barrels, down 132,000 barrels. Mar/May and Mar/Dec future spreads were 8 and 31 cents, respectively. May 2018 corn futures closed at $3.74, down 1 cent since last Friday. In Tennessee, September 2018 corn cash forward contracts averaged $3.77 with a range of $3.68 to $3.99. December 2018 corn futures closed at $3.97, unchanged 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 Northwest Barge Points, Memphis, Northwest, Upper-middle, and Lower-middle Tennessee. Basis ranged from 40 under to 6 over the March futures contract at elevators and barge points. Average (Continued on page 4) 3

4 Crop Comments by Dr. Aaron Smith basis at the end of the week was 12 under the March futures contract. March 2018 soybean futures closed at $10.36, up 15 cents since last Friday. For the week, March 2018 soybean futures traded between $10.19 and $ Net sales reported by exporters were below expectations with net sales of 4.0 million bushels for the 2017/18 marketing year and 8.2 million bushels for the 2018/19 marketing year. Exports for the same period were down from last week at 32.8 million bushels. Soybean export sales and commitments were 78% 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 91%. March soybean-to-corn price ratio was 2.83 at the end of the week. Mar/May and Mar/Nov future spreads were 11 and 8 cents, respectively. May 2018 soybean futures closed at $10.47, up 15 cents since last Friday. In Tennessee, Oct/Nov 2018 soybean cash contracts average $10.09 with a range of $9.85 to $ November 2018 soybean futures closed at $10.28, up 6 cents since last Friday. Downside price protection could be achieved by purchasing a $10.40 November 2018 Put Option which would cost 64 cents and set a $9.76 futures floor. November/December 2018 soybean-to -corn price ratio was 2.59 at the end of the week. Cotton Delta upland cotton spot price quotes for February 22 were cents/lb ( ) and cents/lb ( ). Adjusted world price (AWP) increased 0.54 cents to cents per pound. March 2018 cotton futures closed at cents, up 5.73 cents since last Friday. For the week, March 2018 cotton futures traded between and 81.5 cents. Net sales reported by exporters were down from last week with net sales of 399,100 bales for the 2017/18 marketing year and 177,200 bales for the 2018/19 marketing year. Exports for the same period were down from last week at 333,500 bales. Upland cotton export sales were 96% 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 83%. Mar/ May and Mar/Dec cotton futures spreads were cents and cents, respectively. May 2018 cotton futures closed at 81.34, up 4.18 cents since last Friday. December 2018 cotton futures closed at 76.6, up 0.98 cents since last Friday. Downside price protection could be obtained by purchasing a 77 cent December 2018 Put Option costing 4.56 cents establishing a cent futures floor. Wheat In Memphis, old crop cash wheat ranged from $4.62 to $4.66. March 2018 wheat futures closed at $4.52, down 5 cents since last Friday. March 2018 wheat futures traded between $4.44 and $4.63 this week. March wheat-to-corn price ratio was Wheat net sales reported by exporters were within expectations with net sales of 12.1 million bushels for the 2017/18 marketing year and 4 (Continued on page 5)

5 Crop Comments by Dr. Aaron Smith 2.0 million bushels for the 2018/19 marketing year. Exports for the week were down from last week at 15.3 million bushels. Wheat export sales were 83% 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 91%. Mar/May and Mar/Jul future spreads were 12 cents and 27 cents, respectively. May 2018 wheat futures closed at $4.64, down 7 cents since last Friday. In Tennessee, June/July 2018 cash forward contracts ranged from $4.55 to $5.04 for the week. July 2018 wheat futures closed at $4.79, down 7 cents since last Friday. Downside price protection could be obtained by purchasing a $4.80 July 2018 Put Option costing 25 cents establishing a $4.55 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 16, 2018 Thursday, February 22, 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 Prices on Tennessee Reported Livestock Auctions for the week ending February 23, 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: 6,989 (9) Week ago: 5,851 (10) Year ago: 5,880 (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 16, 2018 Thursday, February 22, 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 - February 21, load of 59 Steers; M&L 1-2s; est. wt. 825 lbs.; $ East Tennessee Livestock Center - February 21, load of 61 steers; M&L 1-2s; est. wt. 820 lbs.; $ load of 54 steers; M&L 1-2s; est. wt. 925 lbs.; $ Self-Reported and Self-Graded Livestock Markets Bulls: lbs lbs lbs Hardin County Stockyard - February 21, load of 60 steers; M&L 1s; mixed colored; est. wt. 805 lbs.; $ Mid-South Livestock Center - February 19, load of 79 Steers; M&L 1-2s; est. wt. 601 lbs.; $ Graded and Video Board Sales East Tennessee Livestock Center, Sweetwater, TN Graded Holstein Feeder Report for Friday Feb 16, 2018 Cattle Receipts: 656 For complete report: Self-Reported and Self-Graded Livestock Markets 2/20/18 TN Livestock Producers Fayetteville Receipts: 446 (174 graded & grouped) Steers: Med & Lg 1-2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Bulls: Med & Lg lbs lbs lbs /19/18 Morris Brothers Stockyard, Pikeville, TN Receipts: 104 Last Week: 82 Last Year: 122 Steers: Heifers: lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs

10 Beef Industry News Featured Article from Oklahoma Farm Report Cull Market Weaker than Anticipated, Yet Small Uptick Gives Producers Short Window to Sell Higher February 22, 2018 According to market watcher Jim Robb of the Livestock Market Information Center, several factors are currently at play which have driven cull cow prices lower. He explained the situation to Radio Oklahoma Ag Network Farm Director Ron Hays. We ve seen a cull cow market that s been weaker than anticipated, he said, pointing out that January prices were even more depressed than those seen the month before in December across the Southern Plains. What we think has happened here is we have an increased number of beef cows coming to slaughter and that s been up year to date 12 percent year-overyear. Robb says it is obvious that producers had intended to probably keep those cows a little longer this year on wheat pasture to add some more pounds before taking them to market. However, drought has choked the progress of wheat pasture and forages have become scarce and rather expensive - making producers initial plans less attractive. Adding to this pressure, dairy cow slaughter is also up by about three percent due to low milk prices. Overall, cow slaughter is up year to date seven percent. Robb says that rate may slow down marginally over the next few weeks and perhaps give producers a limited opportunity to see slightly higher prices for the cows. But he says that increase is from a very low base. This uptick that is starting to form could be part of a seasonal pattern driven by strengthening fed cattle markets that help pull up that cull cow price. In the long-term, though, he says it is likely the cull cow slaughter rate will stay above a year ago. You probably have to put a sharp pencil to that, and especially given our forage supplies, looking at selling those animals early rather than later, Robb advised. So, we re going to get an opportunity here in the next few weeks to see these cull cow prices maybe work a little bit higher, but again not much higher as we often do; due to the larger supplies coming into the marketing system. Department of Agricultural and Resource Economics 314 Morgan Hall 2621 Morgan Circle arec.tennessee.edu USDA / Tennessee Department of Agriculture Market News Service