Tennessee Market Highlights

Transcription

1 Tennessee Market Highlights August 19, 2016 Number: 34 Trends for the Week Compared to a Week Ago Slaughter Cows $1 lower Slaughter Bulls Steady Feeder Steers $1 to $3 lower Feeder Heifers $1 to $3 lower Feeder Cattle Index Wednesday s index: Fed Cattle The 5-area live price of $ is up $0.63. The dressed price is down $0.80 at $ Corn September closed at $3.34 a bushel, up 12 cents since last Friday. Soybeans September closed at $10.27 a bushel, up 28 cents since last Friday. Wheat September closed at $4.27 a bushel, up 5 cents since last Friday. Cotton December closed at cents per lb, down 2.62 cents per lb since last Friday. Livestock Comments by Dr. Andrew P. Griffith FED CATTLE: Fed cattle traded $1 lower on a live basis compared to last week. Live prices were mainly $117 to $118 while prices on a dressed basis ranged from $185 to $187. The 5-area weighted average prices thru Thursday were $ live, up $0.63 from last week and $ dressed, down $0.80 from a week ago. A year ago prices were $ live and $ dressed. Cattle did not wait until the last minute to trade this week, but the early trade brought softer prices. Softer prices result in cattle feeders continuing to feel the hurt that has been ever present the past year. The market will move in the cattle feeders direction at some point but their leverage remains limited. It is difficult to have much good to say for cattle feeders right now, but the future is looking more promising every day. Cattle feeders are paying much less for feeder cattle than in the previous couple of years. These prices are expected to be even more favorable for feeders this fall. Additionally, feed costs are low and look to have strong resistance as the corn harvest continues to grow. BEEF CUTOUT: At midday Friday, the Choice cutout was $ down $0.71 from Thursday and down $1.36 from last Friday. The Select cutout was $ down $0.13 from Thursday and up $0.49 from last Friday. The Choice Select spread was $6.15 compared to $8.00 a week ago. It does not appear that Labor Day grilling prospects is doing very much to spur wholesale beef prices in today s market. Labor Day is the last major summer grilling holiday and generally marks the turning point of beef consumption patterns. Consumers will soon be switching from middle meats to more end cuts. This transition generally results in softer Choice and Select cutout prices, but Choice meats usually take a bigger hit than Select cuts. Packers have had positive margins all summer, but many of those packers would probably say that prices were underwhelming. This feeling of less than adequate prices may stem from the fact that the Choice beef cutout price declined more than $25 the past two months. It is not just one cut of beef that is pressuring prices but rather most cuts. However, if forced to point a finger towards a culprit, the finger would be pointed towards ground beef. Chuck prices have been steadily declining since the first of the year while lean manufacturing beef cannot seem to make a run or sustain a price run. OUTLOOK: After a few weeks of positive price movements in the feeder cattle business, there was a small relapse this week. Based on Tennessee weekly auction averages, steer and heifer prices witnessed declines ranging from $1 to $3 per hundredweight compared to last week. The price strength witnessed in August is a fairly common seasonal price movement. The August feeder cattle futures price increased nearly $16 from the third week of July to the second week of August which is a strong price movement. Since August 9th, August feeder cattle futures have lost about $5 per hundredweight which corresponds with the losses seen this week on Tennessee auctions. August is usually a good month to move feeder cattle because of strong prices. Prices are usually supported through September for these animals, but prices are beginning to soften. The change in price direction may make it difficult for calf and feeder cattle prices to stage another rally, and it will be even tougher for prices to rally like the price movement just witnessed. The expectation is for prices to continue being pressured as the fall cattle run approaches. With increased heifer retention and reduced cow slaughter the past couple of years, a strong run of calves is sure to begin coming to town through the months of September, October, and November. The stronger numbers of calves will further depress prices which may make it difficult for many producers to turn a (Continued on page 2)

2 Livestock Comments by Dr. Andrew Griffith (Continued from page 1) profit. Switching gears, the slaughter cow market has been uneventful and fairly steady for months. However, similar to the calf market, slaughter cow prices could take a hit this fall as increased numbers of slaughter cows make their way to the market. As producers wean calves, they tend to market old cows and cows with physical ailments. The increased number of animals coming to market is sure to stress the price. The August cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of August 1, 2016 totaled million head, up 1.6% from a year ago, with the pre-report estimate average expecting an increase of 1.3%. July placements in feedlots totaled 1.57 million head, up 1.6% from a year ago with the pre-report estimate average expecting placements down 0.4%. July marketing s totaled 1.71 million head down 0.7% from 2015 which corresponds with pre-report estimates. Placements on feed by weight: under 600 pounds down 3.6%, 600 to 699 pounds no change, 700 to 799 pounds up 10.1%, and 800 pounds and over up 0.8%. 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 $ ; September corn closed at $3.34 up $0.02 from Thursday. ASK ANDREW, TN THINK TANK: This week s question was a little different from most questions discussed in this section. The question was in relation to finding information on how many cattle are marketed at certain sale barns in the state. One way of finding this information is to contact sale management at the livestock market of interest. They may or may not have that information readily available. The alternative is to use the information reported by USDA Market News for the livestock auction markets that are reported. The aforementioned information and price information for each reported market can be found using the Market News search found at the following website To search TN markets, the user must search for report numbers ranging from nvls 140 to nvls 161. (Only 11 numbers in that range are valid.) 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 August 18, 2016 Month Class III Close Class IV Close Aug Sep Oct Nov Dec Average Daily Slaughter Cattle Hogs Number of head This week (4 days) 113, ,750 Last week (4 days) 112, ,500 Year ago (4 days) 107, ,000 This week as percentage of Week ago (%) 101% 99% Year ago (%) 105% 102% USDA Box Beef Cutout Value Choice lbs Select 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; cotton was down for the week. December corn rebounded this week, closing up 10 cents, after setting a new contract low last Friday at $3.22 ½. Strong export sales, buoyed by a 2-month low in the USD index, contributed to the price rebound. Prices have appreciated in spite of the bearish WASDE report last week which included record yield (175.1 bu/acre) and production ( billion bushels). Harvest futures will likely trade in the short-term between $3.30 and $3.50. November soybeans rallied 22 ¾ cents this week ($9.81 ¾ to $10.04 ½). Soybean price direction remains difficult to project as arguments can be made for short-term bearish and bullish price moves. The August WASDE report estimated record yield (48.9 bu/ acre) and production (4.06 billion bushels). Strong demand (exports) for soybeans, soybean meal, and soybean oil has provided a counter balance to the record domestic crop. Given the uncertainty in soybean prices as we move towards harvest, producers should evaluate price points (prices sufficient to cover cost of production plus a return to management), yield potential, storage availability, and the current amount of the crop priced to determine if additional pricing should be secured. In Tennessee, futures prices over $10.00 with average-to-above average yield will result in profit for many producers; as such it may be prudent to execute additional sales. December cotton futures had a second consecutive down week and are now almost 10 cents lower than the contract high established on August 5. Domestic production, primarily in west Texas, remains uncertain however recent and projected rains have mitigated some of the concern. December cotton futures have strong support near 64 cents and resistance near 72 cents. September wheat futures are up 28 cents from the August 2 low of $3.99 ¼. Reduced production potential in France and Germany has provided some support however Russia and Canada will likely offset these production decreases. Wheat price potential remains limited due to large estimated global supplies. Currently, it appears unlikely that July wheat futures will rally above $5.00 prior to planting this fall. Corn September 2016 corn futures closed at $3.34 up 12 cents since last Friday. September 2016 corn futures traded between $3.21 and $3.34 for the week. Across Tennessee, average basis (cash price-nearby futures price) weakened at Lower-middle and Uppermiddle Tennessee and strengthened or remained unchanged at Northwest Barge Points, Memphis, and Northwest Tennessee. Overall, basis for the week ranged from 11 under to 46 over the September futures contract with an average of 2 over at the end of the week. Ethanol production for the week ending August 12 was 1,029,000 barrels per day up 11,000 from last week. Ethanol stocks were million barrels, down 35,000 barrels. Corn net sales reported by exporters from August 5-11 were within expectations with net sales of 6.6 million bushels for the 2015/16 marketing year and 41.0 million bushels for the 2016/17 marketing year. Exports for the same time period were down from last week at 45.9 million bushels. Corn export sales and commitments were 102% of the USDA estimated total annual exports for the 2015/16 marketing year (September 1 to August 31) compared to a 5-year average of 104%. Sep/Dec and Sep/Mar future spreads were 9 and 19 cents, respectively. This week s Crop Progress report estimated corn condition at 74% good-to-excellent and 7% poor-to-very poor; corn dough or beyond at 73% compared to 53% last week, 65% last year, and a 5-year average of 60%; and corn dent or beyond at 21% compared to 9% last week, 18% last year, and a 5-year average of 21%. In Tennessee, this week s Crop Progress report indicated corn condition at 66% good-to-excellent and 8% poor-to-very poor; corn 3 (Continued on page 4)

4 Crop Comments by Dr. Aaron Smith dough or beyond at 94% compared to 88% last week, 91% last year, and a 5-year average of 91%; and corn dent or beyond at 65% compared to 50% last week, 45% last year, and a 5-year average of 58%. In Tennessee, September 2016 cash forward contracts averaged $3.28 with a range of $3.12 to $3.47. December 2016 corn futures closed at $3.43 up 10 cents since last Friday. Downside price protection could be obtained by purchasing a $3.50 December 2016 Put Option costing 20 cents establishing a $3.30 futures floor. March 2017 corn futures closed at $3.53 up 10 cents since last Friday. Soybeans September 2016 soybean futures closed at $10.27 up 28 cents since last Friday. September 2016 soybean futures traded between $9.97 and $ For the week, average soybean basis strengthened at Northwest Barge Points, Northwest, and Upper-middle Tennessee and weakened at Memphis and Lower-middle Tennessee. Basis ranged from 18 under to 44 over the September futures contract at elevators and barge points. Average basis at the end of the week was 5 over the September futures contract. Net sales reported by exporters were within expectations with net sales of 6.5 million bushels for the 2015/16 marketing year and net sales of 58.7 million bushels for the 2016/17 marketing year. Exports for the same period were down from last week at 31.8 million bushels. Soybean export sales and commitments were 103% of the USDA estimated total annual exports for the 2015/16 marketing year (September 1 to August 31), compared to a 5-year average of 104%. September soybean-to-corn price ratio was 3.07 at the end of the week. Sep/Nov and Sep/Jan future spreads were -23 cents and -22 cents, respectively. This week s Crop Progress report estimated soybean condition at 72% good-to-excellent and 7% poor-to-very-poor; soybeans blooming at 95% compared to 91% last week, 92% last year, and a 5-year average of 93%; and soybeans setting pods at 80% compared to 69% last week, 76% last year, and a 5-year average of 75%. In Tennessee, this week s Crop Progress report indicated soybean condition at 75% good-to-excellent and 5% poor -to-very poor; soybeans blooming at 94% compared to 89% last week, 87% last year, and a 5-year average of 87%; and soybeans setting pods at 80% compared to 68% last week, 68% last year, and a 5-year average of 69%. November/December 2016 soybeanto-corn price ratio was 2.93 at the end of the week. In Tennessee, October/November 2016 cash forward contracts averaged $10.15 with a range of $9.82 to $10.51 at elevators and barge points. November 2016 soybean futures closed at $10.04 up 23 cents since last Friday. Downside price protection could be achieved by purchasing a $10.10 November 2016 Put Option which would cost 33 cents and set a $9.77 futures floor. January 2017 soybean futures closed at $10.05 up 23 cents since last Friday. Cotton October 2016 cotton futures closed at down 2.31 cents since last Friday. Adjusted world price (AWP) decreased 4.46 cents to cents per pound. Delta upland cotton spot price quotes for August 18 were 68 cents/lb ( ) and cents/lb ( ). Net sales reported by exporters were up from last week with net sales of 205,000 bales for the 2016/17 marketing year and net sales of 13,200 bales for the 2016/17 marketing year. Exports for the same period were up from last week at 175,800 bales. Upland cotton export sales were 34% 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 41%. This week s Crop Progress report estimated cotton condition at 48% good-to-excellent and 18% poor-to-very poor; cotton setting bolls at 88% compared to 70% last week, 72% last year, and a 5-year average of 83%; and cotton bolls opening at 12% compared to 9% last week, 9% last year, and a 5-year average of 10%. In Tennessee, this week s Crop Progress report indicated cotton condition at 77% good-to-excellent and 4% poor-to-very poor; cotton setting bolls at 91% compared to 80% last week, 77% last year, and a 5- year average of 84%; and cotton bolls opening at 5% compared to 1% last week, 3% last year, and a 5-year average of 2%. December 2016 cotton futures closed at down 2.62 cents since last Friday. Dec/Oct and Dec/Mar cotton futures spreads were cents and 0.73 cents, respectively. December 2016 cotton futures traded between and cents this week. Downside price 4 (Continued on page 5)

5 Crop Comments by Dr. Aaron Smith protection could be obtained by purchasing a 69 cent December 2016 Put Option costing 3.4 cents establishing a 65.6 cent futures floor. March 2017 cotton futures closed at down 2.35 cents since last Friday. Wheat In Tennessee, August cash wheat prices averaged $3.96 with a range of $3.40 to $4.17 for the week. Nationally, the Crop Progress report indicated winter wheat harvested at 97% compared to 94% last week, 99% last year, and a 5-year average of 95%; spring wheat condition at 66% good-to-excellent and 9% poor-to-very poor; and spring wheat harvested at 48% compared to 30% last week, 46% last year, and a 5-year average of 30%. September 2016 wheat futures closed at $4.27 up 5 cents since last Friday. September 2016 wheat futures traded between $4.14 and $4.32 this week. September wheat-to-corn price ratio was Net sales reported by exporters were within expectations with net sales of 18.0 million bushels for the 2016/17 marketing year. Exports for the week were up from last week at 26.4 million bushels. Wheat export sales were 44% 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 44%. Sep/Dec and Sep/Jul future spreads were 17 cents and 58 cents, respectively. December 2016 wheat futures closed at $4.44 up 4 cents since last Friday. December wheat-to-corn price ratio was In Memphis, June/ July 2017 cash wheat ranged from $4.65 to $4.73. July 2017 wheat futures closed at $4.85 up 3 cents since last Friday. Downside price protection could be obtained by purchasing a $4.90 July 2017 Put Option costing 44 cents establishing a $4.46 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, August 12, 2016 Thursday, August 18, 2016 Commodity Contract Month Friday Monday Tuesday Wednesday Thursday Soybeans Aug ($/bushel) Sep Nov Jan Mar May Corn Sep ($/bushel) Dec Mar May Jul Sep Wheat Sep ($/bushel) Dec Mar May Jul Soybean Meal Aug 332 ($/ton) Sep Oct Dec Jan Mar Cotton Oct ( /lb) Dec Mar May Jul Live Cattle Aug ($/cwt) Oct Dec Feb Apr Feeder Cattle Aug ($/cwt) Sep Oct Nov Jan Mar Market Hogs Aug ($/cwt) Oct Dec Feb Apr

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 August 19, 2016 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: 8,828 (11) Week ago: 7,807 (11) Year ago: 7,298 (11) 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 Breaker s 75-80% 2015, 2016 and 5-year average 2010/2014 Avg / Prices Paid to Farmers by Elevators Friday, August 12, 2016 Thursday, August 18, 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 East Tennessee Livestock Center August 17, load out of 87 Holstein steers; BQA certified producer; est. wt. 910 lbs., wt. range 860 to 960 lbs.; Slide: $0.05 on first 50 lbs., over 51 lbs. $0.07 back to first lb. over 911 lbs.; 100% #1s; medium flesh; Feed: pasture plus receiving ground hay/corn gluten/crushed corn mix; vaccinated twice; dewormed twice; gathered early a.m., hauled 25 miles to barn, weighed on grounds after sort; 1% shrink $99.25 Video Board Sale and Graded Sales 8/12/16 East Tennessee Livestock Holstein Steer Sale Receipts: 760 Holstein Steers Lg 3 Holstein Steers Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Self-Reported and Self-Graded Livestock Markets 8/16/16 Somerville Livestock Sales Receipts: 149 Steers/Bulls: Med & Lg 1-2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs /16/16 TN Livestock Producers Fayetteville Receipts: 366 (101 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

10 Beef Industry News Featured Article from DROVERS CattleNetwork Low commodity prices pushing down farmland values By Debra Beachy, AgWeb Contributing Editor August 17, 2016 Land values are being pushed down by low commodity prices, along with farmers income, according to two recent reports by Federal Reserve Banks. Both the Federal Reserve Bank of Kansas City, Mo., and the Federal Reserve Bank of St. Louis reported lower farmland value. Lower commodity prices has weakened farm income, worsened credit conditions and pushed down the value of nonirrigated and irrigated cropland by 3% and 5% from a year ago, according to the Federal Reserve Bank of Kansas City in its August report. Irrigated cropland values have declined in each of the past six quarters, while nonirrigated cropland values have declined in four of the past six quarters, the report found. The drop in income also affected credit, with 15 percent of bankers reporting that they denied more than 10% of applications for farm operating loans. Another report by the Federal Reserve Bank of St. Louis also said farmland values had deteriorated. It reported declining value for ranch and pastureland, which fell by 7.4%. Quality farmland value declined less than 1%, making it the fourth consecutive quarter of declining value, it said. Agricultural land values are expected to decline again in the third quarter, the bank said, based on a survey of 32 agricultural banks in the Eighth Federal Reserve District. The report found that the financial condition of farmers borrowing money deteriorated during the last year and said tenant farmers with cash-rental arrangements are most exposed to a prolonged downturn in income. It was based on a survey conducted from June 15 to June 30. Department of Agricultural and Resource Economics 314 Morgan Hall 2621 Morgan Circle USDA / Tennessee Department of Agriculture Market News Service