Tennessee Market Highlights

Transcription

1 Tennessee Market Highlights July 14, 2017 Number: 28 Trends for the Week Compared to a Week Ago Slaughter Cows Compared to week ending June 30, $3 to $5 higher Slaughter Bulls Compared to week ending June 30, $1 to $2 higher Feeder Steers Compared to week ending June 30, $3 to $7 lower Feeder Heifers Compared to week ending June 30, $1 to $6 lower Feeder Cattle Index Wednesday s index: Fed Cattle The 5-area live price of $ is up $1.96. The dressed price is up $2.21 at $ Corn September closed at $3.76 a bushel, down 16 cents since last Friday. Soybeans August closed at $9.89 a bushel, down 12 cents since last Friday. Wheat September closed at $5.10 a bushel, down 25 cents since last Friday. Cotton December closed at cents per lb, down 2.01 cents since last Friday. Livestock Comments by Dr. Andrew P. Griffith FED CATTLE: Fed cattle traded $2 higher on a live basis compared to last week. Prices on a live basis were mainly $119 to $121 while dressed trade was mainly $189 to $191. The 5-area weighted average prices thru Thursday were $ live, up $1.96 from last week and $ dressed, down $2.21 from a week ago. A year ago prices were $ live and $ dressed. With a shock of good fortune feedlot managers were able to get a few more dollars out of cattle this week. It would be an overstatement to say the price increase this week was a surprise, but a steady price compared to last week was the more likely expectation. The dog days of summer generally result in fed cattle prices softening during late summer, but the market may be indicating the rapid decline in prices the past few weeks was a little overzealous. Traders in the futures market have no clue where prices are going as most contracts from August through April have been trading within a dollar of each other. Live cattle prices could see further softening, but downside risk is minimal. Prices will firm in late fall and heading into winter. BEEF CUTOUT: At midday Friday, the Choice cutout was $ down $0.60 from Thursday and down $8.73 from last Friday. The Select cutout was $ down $1.86 from Thursday and down $8.16 from last Friday. The Choice Select spread was $13.85 compared to $15.42 a week ago. The softening of wholesale beef prices continued this week as middle meats continue to collapse following the major summer grilling holidays. Wholesale middle meat prices have declined 25 to 30 percent since their summer peak price. The seasonal trend is for middle meat prices to continue losing ground through the summer and early fall months. Alternatively, end meats have been less of a detriment to wholesale beef prices. Most end meat cuts have lost ground relative to early summer prices, but they are a primary source of support for wholesale prices. The Choice cutout price has declined $40 in four weeks while the Select cutout price has declined $24 over the same time period. This seems like a huge price decline that would negatively impact packer margins. Such a downturn has negatively impacted packer margins, but packers are now paying $23 less per hundredweight on a dressed basis for live cattle than they did four weeks ago. The decline in finished cattle prices has provided significant cushion for packers. OUTLOOK: Weekly auction market report information was back in play this week for Tennessee livestock markets. Steers were $3 to $7 lower than prices two weeks ago while heifer prices were $1 to $6 lower than the last week of June. The price decline on weekly auction markets over the past two weeks seem to have come during a transition time period as feeder cattle futures have gained more than $9 this week. The market appears to be readying itself for seasonal strength through the back half of July and the early part of August. The market is offering producers a favorable opportunity to market animals in the near term. Even if cattle are not ready to leave the farm, producers should consider selling them for a future delivery date as the upside potential may be small for cattle that will be marketed between now and the end of November. From a stocker and backgrounding standpoint, the value of gain on recently purchased animals reaches as high as $1.23 per pound for cattle that will leave the farm in November. Such a high value of gain provides significant room for error on (Continued on page 2)

2 Livestock Comments by Dr. Andrew Griffith (Continued from page 1) the sale price and achieving profits. This same value demonstrates great potential for backgrounding home raised animals. Looking a little farther into the future, producers should already be considering the marketing and purchasing of this year s spring born calf crop. For cow-calf producers, the market continues to look favorable to growing those animals through the first of the year. Similarly, from a stocker standpoint, the value of gain is currently just shy of $1.20 for animals purchased in November and carried through April. It is difficult to look this far into the future and guarantee a value of gain. However, the market looks to currently be offering a favorable opportunity for adding weight at home. Producers should stay tuned to the current situation and stay apprised of market changes. Shifts in value of gain can occur quickly, and producers need to be prepared to pull the trigger when expected profit margins are strong. 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 $ ; July corn closed at $3.65 up $0.04 from Thursday. ASK ANDREW, TN THINK TANK: A couple of really good questions were asked this week. The first question was in relation to shrink (weight loss) while cattle are being transported from the farm to an auction market while the second question (will be answered next week) was in relation to market reports and not all cattle and prices being reported. In relation to shrink, it is normal for cattle to lose weight when being gathered, sorted, hauled, and stressed in any way. Shrink increases as the amount of time off feed and water increases and as stress increases. Freshly weaned cattle tend to have greater shrink than preconditioned cattle. Preconditioned cattle can easily shrink 4 to 8 percent on a short 30 to 60 minute haul while freshly weaned calves may shrink 10 to 12 percent before crossing the scales. Shrink is also impacted by temperature. Higher temperatures generally result in increased shrink. Producers should attempt to manage and reduce shrink during marketing. Shrink is inevitable during sorting and hauling but there are methods to reduce shrink. 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 Milk Futures Thursday July 13, 2017 Month Class III Close Class IV Close Jul Aug Sep Oct Nov Average Daily Slaughter Cattle Hogs Number of head This week (4 days) 118, ,500 Last week (3 days) 116, ,000 Year ago (4 days) 112, ,000 This week as percentage of Week ago (%) 102% 106% Year ago (%) 106% 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 Overview Corn, soybeans, cotton, and wheat were down for the week. Grain and oilseed market s turned bearish this week, due in part to the USDA s July 12 WASDE report (details of the report for corn, soybeans, cotton, and wheat can be found online at: Pages/MonthlyCropComments.aspx). The report projected 2017/18 marketing year domestic ending stocks of: corn at billion bushels (up 215 million bushels from last month); cotton at 5.3 million bales (down 0.2 million bales from last month); soybeans at 460 million bushels (down 35 million bushels from last month); and wheat at 938 million bushels up 14 million bushels from last month). Foreign stocks (and change from the previous marketing year) were projected at: 5.58 billion bushels of corn (down billion bushels); million bales of cotton (down 3.64 million bales); billion bushels of soybeans (down 96 million bushels); and billion bushels of wheat (up 340 million bushels). Overall, the WASDE report showed large domestic and foreign reserves for all four commodities. The other major market mover this past week has been the continued drought in the northern plains (forecasts have some relief or at least indicate rain may limit the spread for the next 7 days). This week, 54.98% (last week 46.99%) of North Dakota was classified as being D2-D4 (severe to exceptional drought - as indicated form the US Drought Monitor) and 41.58% (last week 34.14%) of South Dakota was classified as being D2-D4. The drought in the Dakota s has substantially impacted Spring Wheat prices. On June 12th December Spring Wheat futures closed at $6.05 ¼, on Friday, July 14th, the contract closed at $7.60 ¼, a 27% gain in one month. Over the past month, all wheat futures contracts have been pulled higher due to the drought. However, if the drought continues to intensify (particularly in the eastern parts of North and South Dakota and or the drought moves south and east) corn and soybean markets will be pulled higher as well. For reference, North Dakota was estimated to plant 3.7 million acres of corn (4% of U.S. acres) and 7.2 million acres of soybeans (8% of U.S. acres) and South Dakota 5.2 million acres of corn (6% of U.S. acres) and 5.4 million acres of soybeans (6% of U.S. acres). Combined the Dakota s represent 10% and 14% of U.S. planted acres of corn and soybeans, respectively. This is a significant amount of acreage that could impact price direction if the drought intensifies and substantial yield loss occurs. Corn September 2017 corn futures closed at $3.76 down 16 cents since last Friday. For the week, September 2017 corn futures traded between $3.68 and $4.04. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Northwest Barge Points, Northwest, and Upper-middle Tennessee and weakened at Memphis and Lower-middle Tennessee. Overall, basis for the week ranged from 21 under to 31 over the September futures contract with an average of 5 under the September futures contract at the end of the week. Corn net sales reported by exporters from June 30-July 6 were within expectations with net sales of 6.3 million bushels for the 2016/17 marketing year and 11.7 million bushels for the 2017/18 marketing year. Exports for the same time period were down from last week at 34.7 million bushels. Corn export sales and commitments were 99% of the USDA estimated total annual exports for the 2016/17 marketing year (September 1 to August 31) compared to a 5-year average of 102%. Ethanol production for the week ending July 7 was million barrels per day down 7,000 from last week. Ethanol stocks were million barrels, down 390,000 barrels. Sep/Dec and Sep/Mar future spreads were 13 and 24 cents, respectively. (Continued on page 4) 3

4 Crop Comments by Dr. Aaron Smith Nationally, the Crop Progress report estimated corn silking at 19% compared to 10% last week, 30% last year, and a 5-year average of 27%; and corn condition at 65% good-to-excellent and 10% poor-to-very poor. In Tennessee, the Crop Progress report estimated corn condition at 91% good-to-excellent 2% poor-to-very poor; corn silking at 81% compared to 61% last week, 77% last year, and a 5-year average of 74%; and corn dough or beyond at 13% compared to 9% last year and a 5-year average of 11%. In Tennessee, September 2017 cash forward contracts averaged $3.76 with a range of $3.49 to $4.12. December 2017 corn futures closed at $3.89 down 15 cents since last Friday. Downside price protection could be obtained by purchasing a $3.90 December 2017 Put Option costing 23 cents establishing a $3.67 futures floor. March 2018 corn futures closed at $4.00 down 13 cents since last Friday. Soybeans August 2017 soybean futures closed at $9.89 down 12 cents since last Friday. For the week, August 2017 soybean futures traded between $9.72 and $ Average soybean basis strengthened or remained unchanged at Memphis, Lower-middle, and Uppermiddle Tennessee and weakened at Northwest Barge Points and Northwest Tennessee. Basis ranged from 41 under to 7 over the August futures contract at elevators and barge points. Average basis at the end of the week was 12 under the August futures contract. Net sales reported by exporters were above expectations with net sales of 8.4 million bushels for the 2016/17 marketing year and 16.7 million bushels for the 2017/18 marketing year. Exports for the same period were up from last week at 15.0 million bushels. Soybean export sales and commitments were 105% of the USDA estimated total annual exports for the 2016/17 marketing year (September 1 to August 31), compared to a 5-year average of 102%. September soybean-to-corn futures price ratio was 2.64 at the end of the week. Aug/Sep and Aug/Nov future spreads were 3 cents and 12 cents, respectively. September 2017 soybean futures closed at $9.92 down 14 cents since last Friday. Nationally, the Crop Progress report estimated soybeans blooming at 34% compared to 18% last week, 37% last year, and a 5-year average of 32%; soybeans setting pods at 7% compared to 6% last year and a 5-year average of 5%; and soybean condition at 62% good-to-excellent and 11% poor-to-very poor. In Tennessee, the Crop Progress report estimated soybean condition at 81% good-to -excellent and 7% poor-to-very poor; soybeans emerged at 95% compared to 87% last week, 95% last year, and a 5-year average of 90%; soybeans blooming at 40% compared to 20% last week, 32% last year, and a 5-year average of 26%; and soybeans setting pods at 6% compared to 9% last year and a 5-year average of 7%. In Tennessee, October / November 2017 soybean cash contracts average $10.11 with a range of $9.48 to $ November/December 2017 soybean-to-corn price ratio was 2.57 at the end of the week. November 2017 soybean futures closed at $10.01 down 14 cents since last Friday. Downside price protection could be achieved by purchasing a $10.20 November 2017 Put Option which would cost 56 cents and set a $9.64 futures floor. Cotton Delta upland cotton spot price quotes for July 13 were cents/lb ( ) and cents/lb ( ). Adjusted world price (AWP) increased 0.14 cents to cents per pound. Net sales reported by exporters were down from last week with net sales of 13,000 bales for the 2016/17 marketing year and 152,600 bales for the 2017/18 marketing year. Exports for the same period were down from last week at 195,300 bales. Upland cotton export sales were 108% of the USDA estimated total annual exports for the 2016/17 marketing year (August 1 to July 31), compared to a 5-year average of 106%. October 2017 cotton futures closed at down 2.57 cents since last Friday. Oct/Dec and Dec/Mar cotton futures spreads were -0.6 cents and cents, respectively. Nationally, the Crop Progress report estimated cotton squaring at 61% compared to 45% last week, 55% last year, and a 5-year average of 60%; cotton setting bolls at 19% compared to 13% last week, 18% last year, and a 5-year average 17%; and cotton condition at 61% good-to-excellent and 12% poor-to-very poor. In Tennessee, cotton condition was estimated at 89% good-to-excellent and 4% poor-to-very poor; cotton squaring at 76% compared to 54% last week, 71% last year, and a 5-year average of 63%; and cotton setting bolls at 11% compared to 9% last week, 15% last year, and a 5-year average of 11%. December 2017 cotton futures 4 (Continued on page 5)

5 Crop Comments by Dr. Aaron Smith closed at cents down 2.01 cents since last Friday. For the week, December 2017 cotton futures traded between and cents. Downside price protection could be obtained by purchasing a 67 cent December 2017 Put Option costing 3.11 cents establishing a cent futures floor. March 2018 cotton futures closed at down 2.27 cents since last Friday. Wheat In Tennessee, June/July 2017 cash wheat ranged from $5.01 to $5.68. Wheat net sales reported by exporters were within expectations with net sales of 13.1 million bushels for the 2017/18 marketing year. Exports for the week were down from last week at 17.5 million bushels. Wheat export sales were 33% 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 33%. Sep/Dec and Sep/Jul future spreads were 24 cents and 59 cents, respectively. September 2017 wheat futures closed at $5.10 down 25 cents since last Friday. September 2017 wheat futures traded between $5.07 and $5.59 this week. September wheat-to-corn price ratio was Nationally, the Crop Progress report estimated winter wheat harvested at 67% compared to 53% last week, 65% last year, and a 5-year average of 65%; spring wheat headed at 79% compared to 59% last week, 89%last year, and a 5-year average of 74%; and spring wheat condition at 35% good-to-excellent and 39% poor-to-very poor. December 2017 wheat futures closed at $5.34 down 23 cents from last Friday. July 2018 wheat futures closed at $5.69 down 17 cents since last Friday. Downside price protection could be obtained by purchasing a $5.70 July 2018 Put Option costing 49 cents establishing a $5.21 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, July 7, 2017 Thursday, July 13, 2017 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 Aug ($/cwt) Oct Dec Feb Apr Feeder Cattle Aug ($/cwt) Sep Oct Nov Jan Mar Market Hogs Jul ($/cwt) Aug Oct Dec Feb

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 July 14, lbs lbs lbs lbs Heifers: Medium/Large Frame # lbs lbs lbs lbs Cattle Receipts: This week: 7,264 (9) Week ago: ( ) Year ago: 9,469 (11) 7

8 Tennessee lbs. M-1 Steer Prices 2016, 2017 and 5-year average Tennessee lbs. M-1 Steer Prices 2016, 2017 and 5-year average /2015 Avg /2015 Avg Area Finished Cattle Prices 2015, 2016 and 5-year average Tennessee Slaughter Cow Prices Breaker s 75-80% 2015, 2016 and 5-year average 2011/2015 Avg / Prices Paid to Farmers by Elevators Friday, July 7, 2017 Thursday, July 13, 2017 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 Athens Stockyard July 12, lb Mixed Steers- $ lb Mixed Steers- $ lb Mixed Heifers- $ Mixed Load 685 lb Steers/ 615 lb Heifers- $ heifers 10 cents back 800 Blk/Chx Steers- $ Mixed Load- 675 lb Blk/Chx- $ heifers 10 cents back 785 lb Mixed Heifers- $ lb Mixed Steers- $ lb Mixed Steers- $ Video Board Sale and Graded Sales 7/12/17 Warren County Livestock Receipts: 1420 (Prices for Blk, BWF, CharX) Steers: Med & Lg 1 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Steers: Med & Lg 2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Self-Reported and Self-Graded Livestock Markets 7/11/17 TN Livestock Producers Fayetteville Receipts: 810 (414 graded & grouped) Steers: Med & Lg 1-2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Bulls: Med & Lg lbs lbs lbs lbs Graded Sheep and Goat Sale Columbia Graded Sheep and Goat Sale Weighted Average Report for 07/10/2017 Receipts: 555 (441 goats; 114 sheep) Last Sale 1041 For complete report: Bulls: Med & Lg lbs lbs lbs lbs lbs

10 Beef Industry News Featured Article from DROVERS CattleNetwork USMEF: EU Pork, Beef Gain Advantage in New Trade Agreement with Japan By USMEF July 11, 2017 The European Union and Japan have completed negotiations on an economic partnership agreement that will significantly lower tariffs on Japan s imports of EU pork and beef. U.S. Meat Export Federation (USMEF) economist Erin Borror explains the red meat trade terms included in the Japan-EU agreement mirror those the U.S. had previously negotiated with Japan under the Trans-Pacific Partnership (TPP). For EU pork, the biggest market access gains are for processed products, where tariffs on items such as ground seasoned pork and canned hams (currently 20%) will be phased out over five years. Tariffs on bacon and cured hams (now 8.5%) will be phased to zero over 10 years and Japan s gate price, which sets a minimum value on these items that has greatly limited trade, will be eliminated by year 12. The EU is currently Japan s second-largest pork supplier, following the U.S. Japan s 38.5% tariff on EU beef will drop initially to 27.5%, then will be phased down to 9% over 15 years. While the EU is not currently a large player in the Japanese beef market, European exporters may be well-positioned to capitalize on expanded opportunities for beef variety meat items such as tongues and skirts. Japan s tariff rate on these items will drop from 12.8% to 6.4% initially, then will be phased to zero by year 11 for tongues, and by year 13 for skirts. Department of Agricultural and Resource Economics 314 Morgan Hall 2621 Morgan Circle USDA / Tennessee Department of Agriculture Market News Service