Tennessee Market Highlights

Transcription

1 Tennessee Market Highlights May 9, 2014 Number: 19 Trends for the Week Compared to a Week Ago Slaughter Cows Steady Slaughter Bulls Steady Feeder Steers Under 500 lbs. $5 to $10 higher, over 500 lbs. steady to $2 higher Feeder Heifers Under 500 lbs. $5 to $10 higher, over 500 lbs. steady to $2 higher Feeder Cattle Index Wednesday s index: $ Fed Cattle The 5-area live price of $ is up $2.23. The dressed price is down $0.33 at $ Corn July closed at $5.07 a bushel, up 8 cents since last Friday. Soybeans July closed at $14.87 a bushel, up 17 cents a bushel since last Friday. Wheat July closed at $7.22 a bushel, up 6 cents a bushel since last Friday. Cotton July closed at cents per lb, down 1.96 cents per lb since last Friday. Livestock Comments by Dr. Andrew P. Griffith FED CATTLE: Fed cattle traded $1 to $2 higher on a live basis compared to last week. Prices on a live basis were mainly $147 to $149 while dressed trade was mainly $237 to $238. The 5-area weighted average prices thru Thursday were $ live, up $2.23 from last week and $ dressed, down $0.33 from a week ago. A year ago prices were $ live and $ dressed. Live cattle continue to maintain a strong basis as cash prices exceed the nearby June futures contract by about $10. Prices have been able to sustain themselves due to April s cattle on feed report which reiterated the tight supply of cattle on feed and that numbers will continue to tighten. It presents a balancing act for the feedlot manager to maintain such high prices when leverage is generally shifting to the packer. However, feedlot managers have been able to keep packers on the edge as many of the packers remain short bought and in need of inventory. Feedlot managers are working diligently to capture as much value as possible, because the tide will turn in favor of the packer at some point. BEEF CUTOUT: At midday Friday, the Choice cutout was $ down $1.76 from Thursday and down $5.53 from last Friday. The Select cutout was $ up $0.66 from Thursday and down $5.09 from last Friday. The Choice Select spread was $10.72 compared to $10.98 a week ago. Volatility in the beef market continues to rage, and the pork cutout price declining $16 since the last week of March which is more than a 12 percent decline does not help. The market is attempting to find stability in wholesale beef prices and potentially follow seasonal trends. However, wholesale beef prices have been anything but stable and they have been consistently inconsistent. This is especially true considering Choice beef prices tend to strengthen as grilling season approaches, but Choice beef prices have been backing up the past couple of weeks following the post Easter surge. Another seasonal tendency leading into grilling season is the widening of the Choice Select spread. The Choice Select spread began widening in earnest in March but has not been outside the $10 to $11.50 range since the beginning of April. The spread has plenty of time to follow its seasonal pattern as an increase in cattle grading select will soon hit the rail. However, if it does not start widening within the next few weeks, concerns will begin to creep into the minds of industry participants. TENNESSEE AUCTIONS: On Tennessee auctions this week compared to a week ago, steer, bull and heifer calves under 500 pounds were $5 to $10 higher. Calves over 500 pounds were steady to $3 higher. Slaughter cows and bulls were steady. Average receipts per sale were 695 head on 12 sales compared to 550 head on 12 sales last week and 536 head on 11 sales last year. OUTLOOK: Cow-calf producers have been living high on the hog in 2014 with record calf and feeder cattle prices, and prices continue to escalate for most weight classes. A common question to cross producers minds the past few months has been to market calves straight off the cow or to precondition calves and put some more weight on them. There are many factors to consider during the decision making process. Factors to consider include forage and feed resources, labor and management, risks associated with price and death loss, and a number of other factors. The decision is usually farm specific, and it is best all angles of the decision are considered to achieve the highest return to cattle production. Most cow-calf producers have been satisfied with the prices they have received the past few months, but many of them realize the return could have been larger if they grew those calves for a couple more (Continued on page 2)

2 Livestock Comments by Dr. Andrew Griffith (Continued from page 1) months. It is important producers capitalize on strong market conditions the next few years, because folks that have been around the cattle business long realize the situation can and will turn south at some point. Not to sound like a broken record or resounding gong but the tight cattle supply is the key driver behind market price strength. The low cattle inventory issue is not new information, but the effects of low cattle inventory will impact the market price of cattle this year and for many years to come. It is imperative producers evaluate current on-farm resources and current market conditions to maximize returns to the cattle enterprise. The fundamentals of the cattle industry support continued strength in the calf and feeder cattle markets. There could be disruptions to this support including drought, international trade and geopolitical issues, or a media story casting beef or cattle in a negative light. However, most of these disruptions will be shorter lived than the current position of the national cattle inventory. Therefore, it is beneficial for producers to evaluate their marketing plan on a frequent basis to improve the probability of higher profits. TECHNICALLY SPEAKING: Based on Thursday s closing prices, June closed at $ Support is at $ then $ Resistance is at $138.21, then $ The RSI is August Average Daily Slaughter Cattle Hogs Number of head This week (4 days) 119, ,250 Last week (4 days) 118, ,250 Year ago (4 days) 122, ,500 This week as percentage of Week ago (%) 101% 101% Year ago (%) 98% 98% closed at $ Support is at $137.28, then $ Resistance is at $137.93, then $ The RSI is October closed at $ Support is at $142.05, then $ Resistance is at $142.45, then $ The RSI is May feeders closed at $ Support is at $183.08, then $ Resistance is at $ then $ The RSI is August feeders closed at $ Support is at $189.82, then $ Resistance is at $191.09, then $ The RSI is November feeders closed at $ Support is at $190.35, then $ Resistance is at $ then $ The RSI is Friday s closing prices were as follows: Live/fed cattle June $ ; August $ ; October $ ;Feeder cattle - May $ ; August $ ; October $ ; November $ ; May corn closed at $5.05 down $0.08 from Thursday. Milk Futures Thursday May 8, 2014 Month Class III Close Class IV Close May Jun Jul Aug Sep 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 Crop Comments by Dr. Aaron Smith Overview Corn, soybeans, and wheat were up; cotton was down for the week. Today the USDA released the May WASDE report. The May report provides the first WASDE estimates for the 2014/15 marketing year. Highlights of the report for each commodity are: Corn: For the 2013/14 marketing year ethanol use and exports were revised up 50 and 150 million bushels, respectively. These increases resulted in a decrease in ending stocks to billion bushels. Foreign ending stocks were increased 595 million bushels more than offsetting the decrease in domestic ending stocks. Average farm price was revised up 5 cents to $4.65/bu. 2014/15 projections were 91.7 million acres planted, bu/acre average yield, 5.05 billion bushels of ethanol use, 1.7 billion bushels exported, ending stocks of billion bushels, and a mid-point average marketing year price of $4.20/bu. Soybeans: For the 2013/14 marketing year soybean imports were revised up 25 million bushels to a record 90 million. Crushing and exports were increased 10 and 20 million bushels, resulting in a decrease in domestic ending stocks of 5 million bushels to 130 million. Foreign ending stocks were decreased 85 million bushels. 2014/15 projections were 81.5 million acres planted, 45.2 bu/ acre average yield, billion bushels domestic crush, billion bushels exported, ending stocks of 330 million bushels, and a midpoint average farm price of $10.75/bu. 2

3 Crop Comments by Dr. Aaron Smith Cotton: For 2013/14 marketing year, cotton acreage harvested was revised down 120,000 acres however partially offsetting was an average yield increase of 15 lbs/acre. Exports were decreased 300,000 bales increasing ending stocks by the same amount to 2.8 million bales. Chinese and foreign cotton ending stocks were increased 750,000 and 690,000 bales, respectively. 2014/15 projections were 11.1 million acres planted, 824 lbs/acre average yield, 9.7 million bales exported, ending stocks of 3.9 million bales, and a mid-point average farm price of 73 cents. Wheat: For 2013/14 marketing year, imports were increased 10 million bushels and exports were increased the same amount leaving ending stocks unchanged at 583 million bushels. Foreign ending stocks were decreased 5 million bushels to billion bushels. 2014/15 projections were 55.8 million acres planted, average yield of 42.7 bu/acre, domestic use of billion bushels, exports of 950 million bushels, ending stocks of 540 million bushels, and a mid-point average farm price of $7.30/bu. Full analysis of the May WASDE report will be available Monday on the crop economics webpage: Corn July 2014 corn futures closed at $5.07 up 8 cents from last week with support at $5.04 and resistance at $5.22. Across Tennessee basis (cash price- nearby future price) weakened at northwest barge points and upper-middle Tennessee and strengthened at Memphis, northwest, and lower-middle Tennessee. Overall basis for the week ranged from 12 under to 20 over the July futures contract with an average of 11 over at the end of the week. Corn net sales reported by exporters from April 25th to May 1st were below expectations at 6.4 million bushels for the 2013/14 marketing year and within expectations at 4.8 million bushels for the 2014/15 marketing year. Exports for the same time period were 55.7 million bushels. Corn export sales and commitments are 99% of the USDA estimated total annual exports for the 2013/14 marketing year (September 1 to August 31) compared to a 5-year average of 90%. Ethanol production for the week ending May 2nd was 894,000 barrels per day down 4,000 barrels per day. Ending ethanol stocks were million barrels down 72,000 barrels. July/Sept and July/Dec future spreads were -6 cents and -9 cents, respectively. September 2014 corn futures closed at $5.01 up 5 cents from last week with support at $4.98 and resistance at $5.19. December futures closed at $4.98. Nationally, the May 5th Crop Progress report estimated corn planting at 29% compared to 19% last week, 11% last year, and a 5-year average of 42%; and corn emerged at 7% compared to 3% last week, 3% last year and a 5-year average of 13%. In Tennessee, corn planted was estimated at 68% compared to 53% last week, 55% last year, and a 5-year average of 70%; and corn emerged at 35% compared to 12% last week, 28% last year, and a 5-year average of 47%. This week September and December 2014 corn futures prices traded between $4.92 and $5.18. September cash forward contracts at elevators and barge points for the week averaged $4.99 with a range of $4.72 to $5.28. Downside price protection could be obtained by purchasing a $5.10 September 2014 Put Option costing 35 cents establishing a $4.75 futures floor. Soybeans July 2014 soybean futures closed at $14.87 up 17 cents for the week with support at $14.38 and resistance at $ Nearby soybean to corn price ratio was 2.93 at the end of the week. For the week, average soybean basis strengthened or remained unchanged at Memphis, northwest, northwest barge points, and upper-middle Tennessee and weakened at lower-middle Tennessee. Basis ranged from 13 under to 40 over the July futures contract at elevators and barge points. Average basis at the end of the week was 11 over the July futures contract. Net sales reported by exporters from April 25th to May 1st were within expectations with net sales of 1.5 million bushels for the 2013/14 marketing year and below expectations for the 2014/15 marketing year with net sales of 0.5 million bushels. Exports for the same period were 4.9 million bushels. Soybean export sales and commitments are 104% of the USDA estimated total annual exports for the 2013/14 marketing year (September 1 to August 31), compared to a 5-3 (Continued on page 4)

4 Crop Comments by Dr. Aaron Smith year average of 98%. August 2014 soybean futures were trading at $ July/Aug and July/Nov future spreads were -65 cents and -261 cents. November 2014 soybean futures closed at $12.26 up 4 cents from last week with support at $12.03 and resistance at $ The Crop Progress report estimated soybean planting at 5% compared to 3% last week, 2% last year, and a 5-year average of 11%. In Tennessee, soybeans planted were estimated at 5% compared to 2% last week, 1% last year, and a 5-year average of 7%. This week November 2014 soybean futures traded between $12.10 and $ Harvest soybean to corn price ratio was November cash forward contracts averaged $12.21 with a range of $11.87 to $ Downside price protection could be achieved by purchasing a $12.40 November 2014 Put Option which would cost 75 cents and set an $11.65 futures floor. Cotton July 2014 cotton futures closed at down 1.96 cents for the week with support at and resistance at Cotton adjusted world price (AWP) increased 0.66 cents to cents. Net sales reported by exporters from April 25th to May 1st were down from last week at 63,800 bales of upland cotton for the 2013/14 marketing year and 150,600 bales for the 2014/15 marketing year. Exports for the same period were up from last week at 208,300 bales. Cotton export sales and commitments are 95% of the USDA estimated total annual exports for the 2013/14 marketing year (August 1 to July 31), compared to a 5-year average of 101%. Oct 2014 cotton futures are trading at July/Oct and July/Dec future spreads were cents and cents. December 2014 cotton futures closed at down 0.23 cents for the week with support at and resistance at The Crop Progress report estimated cotton planting at 16% compared to 13% last week, 17% last year, and a 5-year average of 25%. In Tennessee, cotton planted was estimated at 6% compared to 3% last week, 1% last year, and a 5-year average of 8%. December cotton futures traded between and cents this week. Downside price protection could be obtained by purchasing an 84 cent December 2014 Put Option costing 4.77 cents establishing a cent futures floor. Wheat July 2014 wheat futures closed at $7.22 up 6 cents for the week with support at $7.10 and resistance at $7.45. Net sales reported by exporters from April 25th to May 1st were above expectations at 11.8 million bushels for the 2013/14 marketing year and below expectations at 4.6 million bushels for the 2014/15 marketing year. Exports for the same period were 19.3 million bushels. Wheat export sales are 99% of the USDA estimated total annual exports for the 2013/14 marketing year (June 1 to May 31), compared to a 5-year average of 103%. The Crop Progress report estimated winter wheat condition at 31% good to excellent and 38% poor to 4 (Continued on page 5)

5 Crop Comments by Dr. Aaron Smith very poor; and winter wheat headed was 29% compared to 19% last week, 18% last year, and a 5-year average of 35%. In Tennessee, winter wheat condition was estimated at 80% good to excellent and 2% poor to very poor; winter wheat jointed was estimated at 90% compared to 76% last week, 93% last year, and a 5-year average of 96%; and winter wheat headed was 30% compared to 21% last week, 48% last year, and a 5-year average of 68%. July wheat futures traded between $7.21and $7.44 this week. July wheat to corn price ratio was In Tennessee, June/July cash forward contracts averaged $7.20 with a range of $6.79 to $7.70 at elevators and barge points. July/Sept and July/Dec future spreads were 9 cents and 23 cents. September 2014 wheat futures closed at $7.31 up 7 cents from last week with support at $7.19 and resistance at $7.53. The Crop Progress report estimated spring wheat planted at 26% compared to 18% last week, 21% last year, and a 5-year average of 41%; and spring wheat emerged was 7% compared to 5% last week, 5% last year, and a 5-year average of 17%. September wheat to corn price ratio was July 2015 wheat futures closed at $7.54. Downside price protection could be obtained by purchasing a $7.60 July 2015 Put Option costing 77 cents establishing a $6.83 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, May 2, 2014 Thursday, May 8, 2014 Commodity Contract Month Friday Monday Tuesday Wednesday Thursday Soybeans May ($/bushel) Jul Aug Sep Nov Jan Corn May ($/bushel) Jul Sep Dec Mar May Wheat May ($/bushel) Jul Sep Dec Mar Soybean Meal May ($/ton) Jul Aug Sep Oct Dec Cotton May ( /lb) Jul Oct Dec Mar Live Cattle Jun ($/cwt) Aug Oct Dec Feb Feeder Cattle May ($/cwt) Aug Sep Oct Nov Jan Market Hogs May ($/cwt) Jun Jul Aug Oct

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 May 9, lbs lbs lbs lbs Heifers: Medium/Large Frame # lbs lbs lbs lbs Cattle Receipts (# sales): This week: 8,345 (12) Week ago: 6,600 (12) Year ago: 5,900 (11) 7

8 Tennessee lbs. M-1 Steer Prices 2013, 2014 and 5-year average Tennessee lbs. M-1 Steer Prices 2013, 2014 and 5-year average /2012 Avg /2012 Avg Area Finished Cattle Prices 2013, 2014 and 5-year average Tennessee Slaughter Cow Prices Breakers 75-80% 2013, 2014 and 5-year average 2008/2012 Avg /2012 Avg Prices Paid to Farmers by Elevators Friday, May 2, 2014 Thursday, May 8, 2014 Friday Monday Tuesday Wednesday Thursday Thursday Harvest Low High 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 EAST TENNESSEE LIVESTOCK CENTER - May 7, load out of 70 steers; est. wt. 830 lbs., wt.range lbs.; Slide: $0.04 on first 50 lbs., over 51 lbs. $0.06 back to first lb. over 831 lbs.; 95% L&M-1s, 5% L&M-2s; medium flesh; 80% Black/BWF, 20% Chax/Smoky; Feed: pasture plus hay with self-feeder receiving corn gluten/soyhull; crushed shell corn mix; vaccinated; dewormed; no implants; gathered early a.m., sorted and hauled 8 miles, weighed on goosenecks; 2% shrink $ load out of 70 heifers; est. wt. 750 lbs., wt. range lbs.; Slide: $0.04 on first 50 lbs., over 51 lbs. $0.06 back to first lb. over 751 lbs.; 95% M-1s, 5% M-2s; medium flesh; 70% Black/BWF, 20% Chax/Smoky, 10% Red/RWF; Feed: pasture plus hay receiving corn gluten/soyhull/wheat mids mix; vaccinated; dewormed; hauled 2 miles, weighed on goosenecks; 2% shrink $ load out of 80 Holstein steers; BQA certified producer; est. wt. 710 lbs., wt. range lbs.; $0.04 slide starting at 711 lbs.; 95% 1s, 5%2s; medium flesh; Feed: pasture plus hay receiving 20 lbs/hd/day corn silage/alfalfa hay/corn gluten mix; double vaccinated; dewormed twice; implanted; gathered early a.m., hauled 11 miles, two goosenecks two trips, all cattle weighed when all arrive, weighed on ground after sort; 1% shrink $ Video Board Sales and Graded Sales 5/7/14 Warren County Livestock Receipts: 1,390 (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 lbs & over Steers: Med & Lg 2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Bulls: Med & Lg lbs lbs lbs lbs lbs Video Board Sales and Graded Sales continued 5/7/14 Browning Livestock Market, Lafayette, TN Feeder Cattle Sale - Next sale May 21, 2014 Value added = Weaned, Vaccinated or both Cattle Receipts: 1,616 Total Feeders: 1,292 Steers: Med & Lg 1-2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Bulls: Med & Lg lbs lbs lbs lbs lbs lbs Value Added Value Added Steers: Med & Lg 1-2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs /6/14 Tennessee Livestock Producers - Fayetteville Receipts: 629 (312 graded and 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 lbs /5/14 KY/TN Livestock Cross Plains Receipts: 250 (204 graded) Steers: Med & Lg 1-2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs (Continued on page 10) 9

10 Beef Industry News Featured Article from BEEF Magazine The Wheels Are In Motion For Beef Industry Expansion He knows it s a broken record, but Kansas State University (KSU) livestock economist Glynn Tonsor says it s important to never lose sight of the fact that we have historically tight cattle numbers. That is one of the key, fundamental metrics underpinning another fact that s not news to anybody in the beef industry record-high cattle prices, regardless of the weight class you re talking about. Add that together and you get some mind-boggling estimates for returns over cash costs for cow-calf producers. Now consider the caveat drought. For the past several years, USDA estimates showed cow-calf producers kept heifers in an attempt to restock pastures and regrow their breeding herds. Mother Nature had other ideas, however, and most of those heifers went feedyard-bound as pastures withered under an unrelenting drought. And drought is certainly the wild card in 2014, Tonsor said during the second of four quarterly cattle market outlook webinars he hosts, co-sponsored by BEEF. But even though the current drought monitor map shows much of the Central and Southern Plains and the Southwest, particularly California, is under severe to debilitating drought, it also shows that areas that are home to about 42% of the beef cows in the nation at present are enjoying more normal moisture conditions. Which begs this question: is the projected $350/cow return over cash costs for 2014 and 2015 enough to pull the trigger on expansion? Tonsor thinks so. I think we have started that process. The exact magnitude is very much up for debate, but there are signals as we look at feedyard placements and slaughter numbers to say we probably have started the process. Take feedyard placements, for example. Looking at heifers placed on feed, Tonsor says the first quarter of 2014 registered a 34% placement percentage. That s nearly identical to 1996 and , when the industry last attempted to expand. Cow slaughter is also signaling a desire to grow the breeding herd. That s tricky, Tonsor says, because cow slaughter may well have been lower this year than last year simply because there are fewer cows. But cow slaughter so far in 2014 gives him an indication that more cows are staying home as a result of higher profit expectations. Where herd rebuilding occurs will be dictated by drought and relative production costs. But Tonsor thinks the industry is on the front end of finally being able to release some of that pentup desire to put more hooves in more pastures. In aggregate, I think we ve put the wheels in motion to try to expand the herd, he says. Video Board Sales and Graded Sales continued Bulls: Med & Lg lbs lbs lbs /2/14 East Tennessee Livestock Feeder Sale Receipts: 629 For complete report: 5/2/2014 Lower Middle TN Cattle Association Video Board Sale Columbia, TN (Delivery current thru March, 5 cent slide and 1-2% shrink) Receipts: 462 Steers Med & Lg 1 few 2 2 lds lbs $ TN 2 lds 900 lbs $ TN 2 lds lbs $ AL, TN Heifers Med & Lg 1 few 2 35 hd 800 lbs $ TN 1 ld 825 lbs $ TN University of Tennessee Extension Department of Agricultural and Resource Economics 314 Morgan Hall 2621 Morgan Circle USDA / Tennessee Department of Agriculture Market News Service