Tennessee Market Highlights

Transcription

1 Tennessee Market Highlights December 23, 2016 Number: 52 Trends for the Week Compared to a Week Ago Slaughter Cows $1 to $2 higher Slaughter Bulls $2 higher Feeder Steers Steady to $2 higher Feeder Heifers Under 550 lbs. $3 to $6 higher, over 550 lbs. steady to $2 lower Feeder Cattle Index Wednesday s index: Fed Cattle The 5-area live price of $ is up $4.91. The dressed price is up $9.48 at $ Corn March closed at $3.45 a bushel, down 11 cents since last Friday. Soybeans January closed at $9.89 a bushel, down 47 cents since last Friday. Wheat January closed at $9.89 a bushel, down 47 cents since last Friday. Cotton March closed at cents per lb, down 1.17 cents since last Friday. Livestock Comments by Dr. Andrew P. Griffith FED CATTLE: Fed cattle traded $3 to $4 higher on a live basis compared to last week. Prices on a live basis were mainly $115 to $116 while dressed prices were mainly $180. The 5-area weighted average prices thru Thursday were $ live, up $4.91 from last week and $ dressed, up $9.48 from a week ago. A year ago prices were $ live and $ dressed. Christmas came early for cattle feeders as red ink has turned to black ink the past month. Cattle feeders have been in the money since late November and the positive price movement this week makes closeouts look even better. Feedlot managers will look to maintain this momentum next week and into the new year, but maintaining positive price movements may be difficult as winter sets in. The winter market is always hard to predict as retailers shift the focus from middle meats to end meats. On the cattle feeder side, cold wet weather is tough on cattle feed efficiency and will result in higher costs. It is better for it to get cold and stay cold or not get cold at all. Cattle will be looking for a dry spot in the pen. BEEF CUTOUT: At midday Friday, the Choice cutout was $ up $1.40 from Thursday and up $4.24 from last Friday. The Select cutout was $ up $0.90 from Thursday and up $6.37 from last Friday. The Choice Select spread was $11.94 compared to $14.07 a week ago. Wholesale beef prices have made a run the past few weeks as the Choice cutout has gained $8.76 while the Select cutout has gained $15.22 over the same time period. It is common for beef prices to strengthen during the holiday season as consumers are cooking high quality middle meats. At the same time, retailers are stocking up on end meats as consumer preference will shift to slow cooking type beef products. The shift of retailer focus to end meats is evident in the narrowing of the Choice Select spread. The spread has narrowed more than $6 in three weeks, and it will continue to narrow through February. The spread narrows during the winter because it is difficult to tell the difference between a Choice or Select grade roast that has been slow cooked. Thus, the demand for Select grade meat picks up, because it is a less expensive product. The spread will begin widening again as soon as warmer weather arrives and consumers begin grilling again. It may be difficult for beef prices to push forward much more the next few weeks. OUTLOOK: There is little to discuss in terms of price trends compared to a week ago, because a limited number of markets were reported this week. Market News will not be reporting livestock auctions between Christmas and New Year s either. Based on the six Tennessee auction markets reported, there was a firmer tone in slaughter cow, slaughter bull, and steer prices. Lightweight heifer prices were firmer while heavier heifers lost a couple of dollars. Being that auction data in the state is limited, now is a good time to look at what the futures market has done the past several months. It may also be a good time to start considering the spring marketing plan. Using the January 2017 contract for feeder cattle, it is easy to see that the market has had a peak and a valley and is now on the upswing. January feeder cattle futures were trading just shy of the $140 mark in early August. The market then spent ten weeks moving lower where it reached a low just under $111. In a matter of ten weeks, the market lost $29 per hundredweight which had cow-calf producers questioning if there was any way to make a living with cattle. Since the middle of October, the January contract has moved north of $130 in about a nine week span. Drastic price swings have been in the market place for more than three years now, but three years of studying the chaos provides very little insight as traders continue to domi- (Continued on page 2)

2 Livestock Comments by Dr. Andrew Griffith (Continued from page 1) send a letter to Andrew P. Griffith, University of Tennessee, 314B Morgan Hall, 2621 Morgan Circle, Knoxville, TN nate the market. The key for producers is to manage costs. There are no guarantees in the cattle business, but it is almost a guarantee that the average calf and feeder cattle prices will be lower in 2017 than in It is unlikely the market will make some extremely strong run in Similarly, one would think it would be difficult for cattle prices to press much lower than this fall. If history is an indicator, the market will continue to be in flux next year, but the price swings should not be as exaggerated as they have been in Producers are encouraged to look for pricing opportunities for 2017 marketing. The futures market and LRP insurance appeared to be a poor excuse for price risk management, but there is no doubt producers now wished they had used it for fall feeder cattle marketing. FRIDAY S FUTURES MARKET CLOSING PRICES: Friday s closing prices were as follows: Live/fed cattle February $ ; April $ ; June $ ; Feeder cattle January $ ; March $ ; April $ ; May $ ; March corn closed at $3.46 down $0.02 from Thursday. The December cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of December 1, 2016 totaled million head, down 1.4% from a year ago, with the pre-report estimate average expecting a decrease of 1.4%. November placements in feedlots totaled 1.84 million head, up 15.0% from a year ago with the prereport estimate average expecting placements up 13.3%. November marketing s totaled 1.79 million head up 16.6% from 2015 which corresponds closely with pre-report estimates. Placements on feed by weight: under 600 pounds no change, 600 to 799 pounds up 31.3%, and 800 pounds and over up 5.3%. ASK ANDREW, TN THINK TANK: What is the CME Feeder Cattle Index (CME FCI). The CME FCI is a seven-day weighted rolling average price of feeder steers. This index is computed using the prices of publicly reported steers in a 12 state region (Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas, Wyoming). The prices used are from Medium & Large frame #1-2 muscled steers weighing from pounds. Prices of animals that are fancy, thin, fleshy, gaunt, full, dairy, exotic, and Brahama are not included in the index. The CME commodity indices are used to determine the settlement prices of cash-settled commodities on the futures market. Thus, the CME FCI is used to determine the settlement price of feeder cattle futures. Please send questions and comments to agriff14@utk.edu or Milk Futures Thursday December 22, 2016 Month Class III Close Class IV Close Dec Jan Feb Mar Apr Average Daily Slaughter Cattle Hogs Number of head This week (4 days) 114, ,250 Last week (4 days) 114, ,750 Year ago (4 days) 99, ,500 This week as percentage of Week ago (%) 100% 98% Year ago (%) 115% 114% 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, soybeans, and wheat were down for the week. The markets played the role of the Grinch this week as all four commodities were down substantially since last Friday. Continued advantageous weather in South America and a new high in the USD Index were the primary contributors to declining prices. Many analysts are predicting a bin busting harvest for Brazil and Argentina. For the South American soybean crop, January, February, and March weather will be very important as these are the critical filling and harvesting months. Additionally, if a record crop is produced concerns may arise due to inadequate infrastructure and logistics to get the crop from the principle growing regions to port. Soybean prices are likely to remain volatile as weather in South America will continue to drive global soybean markets. For the 2016/17 marketing year the USDA projects U.S., Brazil, and Argentina will produce 82% of global soybeans. As such, any production disruption in those three countries could swing prices dramatically. For the other three commodities the top three producing nations and percent of global production are: corn (U.S., China, and Brazil) - 67% of global production; cotton (India, China, and U.S.) 62% of global production; and wheat (E.U., China, and India) 48% of global production. One of the primary differences between soybeans and the other three crops is China. China is one of the largest producers of wheat, corn, and cotton, while China s soybean production is negligible (approximately 460 million bushels). Furthermore, China is the largest consumer of agricultural commodities. Currently, China is ranked number one in soybean and cotton consumption and number two in wheat and corn consumption, behind the EU and U.S., respectively. With limited domestic soybean production China must purchase soybeans from at least one of the three primary soybean producing nations Argentina, Brazil, and the U.S. The larger the upcoming South American supply the lower the price and thus increased likelihood that China will purchase more from our South American rivals. Corn March 2017 corn futures closed at $3.45 down 11 cents since last Friday. March 2017 corn futures traded between $3.45 and $3.56 for the week. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Northwest Barge Points, Northwest, and Lower-middle Tennessee and weakened at Memphis and Upper-middle Tennessee. Overall, basis for the week ranged from 10 under to 25 over the March futures contract with an average of 7 over at the end of the week. Ethanol production for the week ending December 16 was million barrels per day down 4,000 from last week. Ethanol stocks were million barrels, down 16,000 barrels. Mar/May and Mar/Dec future spreads were 7 and 31 cents, respectively. May 2017 corn futures closed at $3.52 down 11 cents since last Friday. Corn net sales reported by exporters from December 9-15 were above expectations with net sales of 49.2 million bushels for the 2016/17 marketing year. Exports for the same time period were down from last week at 30.7 million bushels. Corn export sales and commitments were 61% 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 56%. In Tennessee, September 2017 cash forward contracts averaged $3.62 with a range of $3.52 to $3.85. December 2017 corn futures closed at $3.76 down 10 cents since last Friday. Downside price protection could be obtained by purchasing a $3.80 December 2017 Put Option costing 34 cents establishing a $3.46 futures floor. 3 (Continued on page 4)

4 Crop Comments by Dr. Aaron Smith Soybeans January 2017 soybean futures closed at $9.89 down 47 cents since last Friday. January 2017 soybean futures traded between $9.87 and $ For the week, average soybean basis strengthened in Northwest, Upper-middle, and Lower-middle Tennessee and weakened at Northwest Barge Points and Memphis. Basis ranged from 30 under to 20 over the January futures contract at elevators and barge points. Average basis at the end of the week was 1 over the January futures contract. March soybean-to-corn futures price ratio was 2.89 at the end of the week. Jan/Mar and Jan/Nov future spreads were 8 cents and -8 cents, respectively. March 2017 soybean futures closed at $9.97 down 49 cents since last Friday. Net sales reported by exporters were above expectations with net sales of 66.6 million bushels for the 2016/17 marketing year and 0.2 million bushels for the 2017/18 marketing year. Exports for the same period were down from last week at 66.2 million bushels. Soybean export sales and commitments were 84% 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 78%. In Tennessee, October / November 2017 cash contracts average $9.90 with a range of $9.52 to $ November/December 2017 soybean-to-corn price ratio was 2.61 at the end of the week. November 2017 soybean futures closed at $9.81 down 38 cents since last Friday. Downside price protection could be achieved by purchasing a $10.00 November 2017 Put Option which would cost 71 cents and set a $9.29 futures floor. Cotton March 2017 cotton futures closed at down 1.17 cents since last Friday. March 2017 cotton futures traded between and 71 cents this week. Delta upland cotton spot price quotes for December 22 were 70.7 cents/lb ( ) and cents/lb ( ). Adjusted world price (AWP) decreased 0.88 cents to cents per pound. May 2017 cotton futures closed at down 1.05 cents since last Friday. Mar/May and Mar/Dec cotton futures spreads were 0.4 cents and -0.9 cents, respectively. Net sales reported by exporters were down from last week with net sales of 276,700 bales for the 2016/17 marketing year. Exports for the same period were up from last week at 210,200 bales. Upland cotton export sales were 70% 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 72%. December 2017 cotton futures closed at down 0.53 cents since last Friday. Downside price protection could be obtained by purchasing a 69 cent December 2017 Put Option costing 4.57 cents establishing a cent futures floor. 4 (Continued on page 5)

5 Crop Comments by Dr. Aaron Smith Wheat March 2017 wheat futures closed at $3.93 down 16 cents since last Friday. March 2017 wheat futures traded between $3.92 and $4.13 this week. Wheat net sales reported by exporters were below expectations with net sales of 10.9 million bushels for the 2016/17 marketing year. Exports for the week were down from last week at 15.1 million bushels. Wheat export sales were 77% of the USDA estimated total annual exports for the 2016/17 marketing year (June 1 to May 31), compared to a 5-year average of 75%. March wheat-to-corn price ratio was In Memphis, old crop cash wheat ranged from $3.97 to $4.05. Mar/May and Mar/Jul future spreads were 13 cents and 27 cents, respectively. May 2017 wheat futures closed at $4.06 down 15 cents since last Friday. May 2017 wheat-to-corn price ratio was In Tennessee, June/July 2017 cash wheat ranged from $3.94 to $4.46. July 2017 wheat futures closed at $4.20 down 14 cents since last Friday. Downside price protection could be obtained by purchasing a $4.30 July 2017 Put Option costing 32 cents establishing a $3.98 futures floor. Additional Information: 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, December 16, 2016 Thursday, December 22, 2016 Commodity Contract Month Friday Monday Tuesday Wednesday Thursday Soybeans Jan ($/bushel) Mar May Jul Aug Sep Corn Mar ($/bushel) May Jul Sep Dec Mar Wheat Mar ($/bushel) May Jul Sep Dec Soybean Meal Jan ($/ton) Mar May Jul Aug Sep Cotton Mar ( /lb) May Jul Oct Dec 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 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: 3,689 (6) Week ago: 9,222 (10) Year ago: ( ) 7

8 Tennessee lbs. M-1 Steer Prices 2015, 2016 and 5-year average Tennessee lbs. M-1 Steer Prices 2015, 2016 and 5-year average /2014 Avg /2014 Avg Area Finished Cattle Prices 2015, 2016 and 5-year average Tennessee Slaughter Cow Prices Breakers % 2015, 2016 and 5 -year average 2010/2014 Avg / Prices Paid to Farmers by Elevators Friday, December 16, 2016 Thursday, December 22, 2016 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 Self-Reported and Self-Graded Livestock Markets Hardin County Stockyard December 14, loads steers; avg. wt. 900 lbs.; 2% shrink; $0.08 slide; $ loads steers; avg. wt. 825 lbs.; 2% shrink; $0.08 slide; $

10 Beef Industry News Featured Article from DROVERS CattleNetwork Strong Finish for 2016 Beef Markets By Derrell S. Peel, Oklahoma State University Extension December 21, 2016 The Christmas rally in wholesale beef markets continued last week as boxed beef prices headed into the last half of December at the highest levels since early September. Choice boxed beef price has risen 6.7 percent from the late October low and was only 2.3 percent below year ago levels. This is quite impressive given that beef production continues stronger than expected in the fourth quarter. Beef production for the last four weeks is 9.1 percent above the same period last year. For the year to date, Choice boxed beef prices have averaged 12.9 percent down from year earlier levels while beef production is up 5.7 percent so far this year. tive loin values in the past decade. Chuck primal values are down just over 6 percent year over year in the past four weeks with round primal values down 8 percent compared to last year. Domestic beef demand in 2017 will depend on macroeconomic factors such as income growth and unemployment as well as the impact of larger total meat supplies. Beef export and import flows not only have a quantity impact but also change the mix of beef products that make up domestic consumption and will impact overall beef demand in Retail Choice beef price in November was $5.76/lb., up slightly from October and down 7.2 percent from one year ago. The All Fresh retail beef price was $5.54/lb., down from $5.63/lb. in October and down 7.5 percent from last year. Despite larger total meat supplies and a particularly strong jump in beef production, retail beef prices have maintained strong ratios to pork and poultry but are slowly adjusting down. In November, The All Fresh beef to pork retail price ratio was 1.53, down from the peak of 1.65 in June, This ratio averaged 1.33 in the five years from and has averaged 1.5 since Jan The All Fresh beef to broiler retail price ratio was 2.93 in November, down from the peak of 3.13 in May of The average of this ratio was 2.4 but has averaged 2.98 since January, There are indications that retail beef demand has shifted somewhat back to the middle meats after several years of relatively stronger end meats. End meats have carried a relatively higher percent of carcass value since the recession that began in Mixed strength in steak demand has been countered by weak processing beef markets and lower end meat values generally in In the last four weeks, rib primal values are nearly 3 percent higher than this time last year mirroring higher Ribeye wholesale values. However, loin primal value is nearly 12 percent lower the past month year over year with Strip Loin and Short loin values down double digit percentages and Tenderloin values just about equal to one year ago. The lower loin cut values is a continuation of an apparent downward trend in rela- Department of Agricultural and Resource Economics 314 Morgan Hall 2621 Morgan Circle USDA / Tennessee Department of Agriculture Market News Service