Tennessee Market Highlights

Transcription

1 Tennessee Market Highlights April 29, 2016 Number: 18 Trends for the Week Compared to a Week Ago Slaughter Cows Steady to $2 lower Slaughter Bulls Steady Feeder Steers $8 to $11 lower Feeder Heifers $4 to $6 lower Feeder Cattle Index Wednesday s index: Fed Cattle The 5-area live price of $ is down $1.71. The dressed price is down $10.86 at $ Corn May closed at $3.90 a bushel, up 19 cents since last Friday. Soybeans May closed at $10.21 a bushel, up 34 cents since last Friday. Wheat May closed at $4.78 a bushel, up 11 cents since last Friday. Cotton May closed at cents per lb, up 0.68 cents per lb since last Friday. Livestock Comments by Dr. Andrew P. Griffith FED CATTLE: Fed cattle trade was $2 to $3 lower than a week ago on a live basis. Live prices were mainly $124 to $126 while dressed trade was primarily $193 to $196. The 5-area weighted average prices thru Thursday were $ live, down $1.71 from last week and $ dressed, down $10.86 from a week ago. A year ago prices were $ live and $ dressed. After struggling through the week, live cattle futures found support on Friday. However, the damage had already been done. The April contract is now off the board and June is the leading month. The June contract is trading around a $10 discount to the close of the April contract which means market participants are anticipating more weakness in the market. The futures price says there is incentive to pull cattle forward with the large positive basis relative to the June contract. Thus, feedlot operators are likely trying to push cattle out of the pens and replace them with some low priced feeder cattle. The cash price and futures price will have to converge and it will just take time to figure out which one is more wrong! BEEF CUTOUT: At midday Friday, the Choice cutout was $ down $0.45 from Thursday and down $8.45 from last Friday. The Select cutout was $ up $0.08 from Thursday and down $8.39 from last Friday. The Choice Select spread was $8.88 compared to $8.94 a week ago. Packers are struggling to keep support for beef cutout prices, but maybe this is to be expected given the expected meat production and supply as released in the World Agricultural Supply and Demand Estimates (WASDE). Projected United States beef production for 2016 is 4.8 percent (1.14 billion pounds) higher than one year ago while pork production is projected to be 1.9 percent higher (471 million pounds) than Similarly, poultry production is projected to increase 3.1 percent (1.45 billion pounds) in The increased production means the product has to be absorbed either domestically or abroad. The increased production will certainly soften domestic retail meat prices which will result in an increased per capita consumption. However, the key to price strength and packer profitability will likely lie in the hands of the international market. The ability of processors to move beef through international channels will be key to supporting beef prices and thus cattle prices. The trade market can sometimes be fickle. OUTLOOK: The complete collapse of feeder cattle futures has led to complete doom and gloom in the sale ring at local auction markets. Auctioneers have been forced to pull out distant memories to even begin figuring out how to start bids this low. Steers on Tennessee auctions were down $8 to $11 compared to one week ago while heifers were down $4 to $6. Considering Tennessee weekly auction data, 500 to 600 pound steers averaged $ per hundredweight which is the lowest price for this class of cattle since September of The lower prices are good for those purchasing cattle because the total investment is declining which reduces financial risk tremendously. However, the declining prices are a complete drag for margin operators ready to market cattle. For seasonal buyers and sellers, the market volatility could have very well resulted in large losses the past month or so. However, for those who are continuously buying and selling, the action of being continuously in the market is somewhat of a natural hedge as cattle are sold and bought on either a high or low market. The one aspect of the natural hedge that could work against producers is the seasonal price slide for different weight cattle. Since the spring price peak in the middle of March, 500 to 600 pound steer prices have declined $30 per hundredweight. Similarly, 700 to 800 pound steer prices have declined $22 per hundred- (Continued on page 2)

2 Livestock Comments by Dr. Andrew Griffith (Continued from page 1) weight during the same time period. It is hard to imagine a continuation of this downward price movement in the near term, but there has been little indication of the price deterioration slowing down. Is it possible in 2016 to fall below the lows experienced in 2013? It is certainly possible considering 500 to 600 pound steers are only $16 per hundredweight higher than the weekly low experienced in 2013 and 700 to 800 pound steers are only $10 per hundredweight higher than the 2013 price trough. This is not to say prices are at unprofitable levels, but poor managers may find themselves losing money this year if managing costs does not become a top priority in the near future. Cost management will be the key to profitability for most producers if cattle prices do not become reinvigorated. ASK ANDREW, TN THINK TANK: This week a question came in from Midland, South Dakota. This particular producer was searching for information related to forward pricing cattle. He was looking for a way to analyze different forward pricing mechanisms which in turn was in relation to price risk management. There are several decision aid tools available through land grant universities such as the one from Texas A&M University ( -economics-for-the-texas-coastal-bend/budgets-and-tools/cowcalf-decision-support-aids/marketing/). These decision aids are built to help producers evaluate decisions and improve profitability. If you have a question and do not know where to start, trying to find a decision aid tool is a good starting point. Tools and calculators available through the UT Department of Agricultural and Resource Economics can be found at the following website 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 FRIDAY S FUTURES MARKET CLOSING PRICES: Friday s closing prices were as follows: Live/fed cattle June $ ; August $ ; October $ ; Feeder cattle - May $ ; August $ ; September $ ; October $ ; May corn closed at $3.90 up $0.03 from Thursday. Milk Futures Thursday April 28, 2016 Month Class III Close Class IV Close Apr May Jun Jul Aug Average Daily Slaughter Cattle Hogs Number of head This week (4 days) 111, ,000 Last week (4 days) 111, ,000 Year ago (4 days) 112, ,000 This week as percentage of Week ago (%) 101% 97% Year ago (%) 99% 99% 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 up for the week. Corn net sales for export were almost double pre-report estimates at 85.1 million bushels for the week of April Immediately following the export sales report on Thursday, July corn futures increased 5 cents. Currently, total export commitments (outstanding sales + exports) total billion bushels (540 million bushels of outstanding sales plus 919 million bushels of accumulated exports), 191 million bushels short of the USDA s 2015/16 marketing year projection of 1.65 billion bushels, with 19 weeks remaining in the marketing year. To achieve the USDA projection, net sales would need to average just over 10 million bushels per week. This does not assume a net sales carryover from the 2015/16 marketing year into the 2016/17 marketing year (last year 56 million bushels were carried over from the 2014/15 to the 2015/16 marketing year) or account for any net sales cancellations. As such, due to the recent increase in export sales we may see the USDA raise corn exports million bushels on future WASDE reports. Driving U.S. export sales are concerns that dry weather in Brazil could reduce production of second crop corn and the further weakening of the USD in recent weeks. This week the USD index reached an 8 month low and the Brazilian Real a 9 month high (relative the USD). A weaker USD is beneficial for all US agricultural exports. Like corn, soybeans have benefited from a weaker USD resulting in improved export prospects. Currently, soybean export commitments are billion bushels (1.55 billion bushels of accumulated exports plus 126 million bushels of outstanding sales), 34 million bushels less than the USDA s 2015/16 marketing year projection of billion bushels. Weekly sales for the remainder of the marketing year would need to be 1.8 million bushels per week to meet the export target (again assuming no sales cancellations or carry over into the 2016/17 marketing year). For both corn and soybeans the increase in exports has been positive for prices; however even if the USDA increases exports 100 million bushels for both commodities carryover into the next marketing year would still be 1,762 and 345 million bushels, respectively. As such, further price improvements will be driven mostly by changes in new crop production as a result of weather. CME has released the following daily limits effective May1st: corn 25 cents (unchanged); wheat 35 cents (unchanged); soybeans 65 cents (up 5 cents); soybean meal $20/ton (unchanged); and soybean oil 2cents/lb (unchanged) Corn May 2016 corn futures closed at $3.90 up 19 cents since last Friday. May 2016 corn futures traded between $3.68 and $3.92 for the week. Across Tennessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Memphis, Northwest Barge Points, Upper-middle, and Lower-middle Tennessee and weakened in Northwest Tennessee. Overall, basis for the week ranged from 6 under to 45 over the May futures contract with an average of 13 over at the end of the week. Ethanol production for the week ending April 22 was 927,000 barrels per day down 12,000 from last week. Ending ethanol stocks were million barrels down 417,000 barrels from last week. Corn net sales reported by exporters from April were above expectations with net sales of 85.1 million bushels for the 2015/16 marketing year and 17.3 million bushels for the 2016/17 marketing year. Exports for the same time period were down from last week at 42.9 million bushels. Corn export sales and commitments were 88% 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 91%. July 2016 corn futures closed at $3.91 up 16 cents since last Friday. May/Jul and May/Sep future spreads were both 1 cent. This week s Crop Progress report estimated corn planted at 30% compared to 13% last week, 16% last year, and a 5-year average of 16%; and corn emerged at 5% compared to 2% last year and a 5-year average of 4%. In Tennessee, this week s Crop Progress report indicated corn planting at 65% compared to 35% last week, 14% last year, and a 5-year average of 43%; and corn emerged at 15% compared to 2% last year and a 5-year average of 20%. In Tennessee, September 2016 cash forward contracts averaged $3.77 with 3 (Continued on page 4)

4 Crop Comments by Dr. Aaron Smith a range of $3.57 to $4.05. September 2016 corn futures closed at $3.91 up 16 cents since last Friday. Downside price protection could be obtained by purchasing a $4.00 December 2016 Put Option costing 33 cents establishing a $3.67 futures floor. Soybeans May 2016 soybean futures closed at $10.21 up 34 cents since last Friday. May 2016 soybean futures traded between $9.77 and $ For the week, average soybean basis weakened or remained unchanged at Memphis, Northwest Barge Points, Northwest, and Lower-middle Tennessee and strengthened at Upper-middle Tennessee. Basis ranged from 31 under to 9 over the May futures contract at elevators and barge points. Average basis at the end of the week was 6 under the May futures contract. Net sales reported by exporters were within expectations with net sales of 8.3 million bushels for the 2015/16 marketing year and net sales of 26.5 million bushels for the 2016/17 marketing year. Exports for the same period were down from last week at 10.2 million bushels. Soybean export sales and commitments were 98% 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 99%. May soybean-to-corn price ratio was 2.62 at the end of the week. July 2016 soybean futures closed at $10.29 up 33 cents since last Friday. May/Jul and May/Nov future spreads were 8 cents and - 14 cents, respectively. This week s Crop Progress report estimated soybeans planted at 3% compared to 2% last year and a 5-year average of 2%. In Tennessee, this week s Crop Progress report indicated soybean planting at 2% compared to 1% last year and a 5- year average of 1%. November/September 2016 soybean-to-corn price ratio was 2.58 at the end of the week. In Tennessee, October/November 2016 cash forward contracts averaged $9.94with a range of $9.63 to $10.21 at elevators and barge points. November 2016 soybean futures closed at $10.07 up 24 cents since last Friday. Downside price protection could be achieved by purchasing a $10.20 November 2016 Put Option which would cost 61 cents and set a $9.59 futures floor. Cotton May 2016 cotton futures closed at up 0.68 cents since last Friday. May 2016 cotton futures traded between and cents this week. Adjusted world price (AWP) increased 1.8 cents to cents per pound. Delta upland cotton spot price quotes for April 28th were cents/lb ( ) and cents/lb ( ). Net sales reported by exporters were down from last week with net sales of 48,700 bales for the 2015/16 marketing year and 4,700 bales for the 2016/17 marketing year. Exports for the same period were up from last week at 244,300 bales. Upland cotton export sales were 87% of the USDA estimated total annual exports for the 2015/16 marketing year (August 1 to July 31), compared to a 5-year average of 101%. 4 (Continued on page 5)

5 Crop Comments by Dr. Aaron Smith July 2016 cotton futures closed at up 0.08 cents since last Friday. May/Jul and May/Dec cotton futures spreads were 0.01 cents and cents, respectively. December 2016 cotton futures closed at up 0.2 cents since last Friday. This week s Crop Progress report estimated cotton planted at 10% compared to 7% last week, 9% last year, and a 5-year average of 13%. In Tennessee, this week s Crop Progress report indicated cotton planting at 1% compared to 0% last week, 2% last year, and a 5-year average of 1%. Downside price protection could be obtained by purchasing a 63 cent December 2016 Put Option costing 3.45 cents establishing a cent futures floor. Wheat May 2016 wheat futures closed at $4.78 up 11 cents since last Friday. May 2016 wheat futures traded between $4.62 and $4.86 this week. May wheat-to-corn price ratio was Net sales reported by exporters were above expectations with net sales of 12.9 million bushels for the 2015/16 marketing year and net sales of 16.7 million bushels for the 2016/17 marketing year. Exports for the same period were up from last week at 16.2 million bushels. Wheat export sales were 95% of the USDA estimated total annual exports for the 2015/16 marketing year (June 1 to May 31), compared to a 5-year average of 102%. In Memphis, old crop cash wheat traded between $4.66 and $4.74 for the week. May/Jul and May/Sept future spreads were 10 cents and 20 cents, respectively. July 2016 wheat futures closed at $4.88 up 14 cents since last Friday. In Tennessee, June/July cash forward contracts averaged $4.77 with a range of $4.38 to $5.07. Nationally, winter wheat condition was estimated at 59% good-to-excellent and 8% poor-tovery poor; winter wheat headed at 26% compared to 12% last week, 25% last year, and a 5-year average of 24%; spring wheat planted at 42% compared to 27% last week, 50% last year, and a 5-year average of 28%; and spring wheat emerged at 8% compared to 8% last year and a 5-year average of 7%. In Tennessee, winter wheat condition was reported as 83% good-to-excellent and 2% poor-to-very poor; winter wheat jointing at 89% compared to 70% last week, 77% last year, and a 5-year average of 84%; and winter wheat headed 10% compared to 2% last week, 25% last year, and a 5-year average of 32%. Downside price protection could be obtained by purchasing a $4.90 July 2016 Put Option costing 21 cents establishing a $4.69 futures floor. September 2016 wheat futures closed at $4.98 up 15 cents since last Friday. 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, April 22, 2016 Thursday, April 28, 2016 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 Apr ($/cwt) Jun Aug Oct Dec Feeder Cattle Apr ($/cwt) May Aug Sep Oct Nov 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 April 29, lbs lbs lbs lbs Heifers: Medium/Large Frame # lbs lbs lbs lbs Cattle Receipts: This week: 7,274 (11) Week ago: 8,544 (11) Year ago: 7,181 (10) 7

8 Tennessee lbs. M-1 Steer Prices 2015, 2016 and 5-year average Tennessee lbs. M-1 Steer Prices 201 5, 2016 and 5-year average /2014 Avg /2014 Avg Area Finished Cattle Prices 2015, 2016 and 5-year average Tennessee Slaughter Cow Prices Breakers 75-80% 2015, 2016 and 5-year average 2010/2014 Avg / Prices Paid to Farmers by Elevators Friday, April 22, 2016 Thursday, April 28, 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 1 load out of 110 steers; BQA certified producer; est. wt. 850 lbs., wt. range 800 to 900 lbs.; Slide: $0.05 on first 50 lbs., over 51 lbs. $0.07 back to first lb. over 851 lbs.; 95% L&M-1s, 5% L&M-2s; 85% Black/BWF, 10% ChaX/Smoky, 5% Red/RWF; Feed: pasture plus corn silage/corn gluten based ration; vaccinated twice; dewormed; gathered early a.m., hauled 8 miles, weighed on grounds after sort; 2% shrink $ load out of 100 steers; BQA certified producer; est. wt. 850 lbs., wt. range 800 to 925 lbs.; Slide: $0.05 on first 50 lbs., over 51 lbs. $0.07 back to first lb. over 851 lbs.; 95% L&M-1s, 5% L&M-2s; 85% Black/BWF, 10% ChaX/Smoky, 5% Red/RWF; Feed: pasture plus corn silage/corn gluten mix; vaccinated twice; dewormed; implanted; sorted on farm, loaded on goosenecks, weighed on goosenecks on certified scales, hauled 5 miles; 2% shrink $ load out of 110 Holstein steers; BQA certified producer; est. wt. 930 lbs., wt. range 880 to 980 lbs.; Slide: $0.05 on first 50 lbs., over 51 lbs. $0.07 back to first lb. over 931 lbs.; 100% 1s; medium flesh; Feed: pasture plus ground hay/corn gluten/ crushed corn mix; vaccinated twice; dewormed twice; gathered early a.m., hauled 25 miles, weighed on grounds after sort; 1% shrink $ Self-Reported and Self-Graded Livestock Markets 4/26/16 Woodbury Livestock Market, LLC Receipts: 84 (*Weaned/Vaccinated) 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 /26/16 TN Livestock Producers Fayetteville Receipts: 406 (177 graded & grouped) Steers: Med & Lg 1-2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs Bulls: Med & Lg lbs lbs lbs lbs lbs Self-Reported and Self-Graded Livestock Markets 4/26/16 Somerville Livestock Sales Receipts: 150 Steers/Bulls: Med & Lg 1-2 Heifers: Med & Lg lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs /25/16 Morris Brothers Stockyard, Pikeville, TN Receipts: 49 Steers: Heifers: lbs lbs lbs lbs lbs lbs lbs lbs lbs Bulls: lbs lbs lbs lbs lbs lbs lbs Tennessee Sheep and Goat Auction 4/25/16 Tennessee Livestock Producers Graded Goat and Sheep Sale, Columbia, TN Receipts: 544 (269 Goats; 275 Sheep) Last Sale: 428 Next Sale May 9, (2nd and 4th Monday of each month) Goats sold per hundred weight (cwt) unless otherwise noted, weights, actual or estimated. Slaughter Classes: Kids Selection 1 Selection lbs lbs lbs lbs lbs lbs lbs lbs lbs lbs Selection lbs lbs lbs lbs lbs Yearlings Selection 2-3: lbs lbs Slaughter Bucks/Billies: lbs lbs (Continued on page 10)

10 Beef Industry News Featured Article from DROVERS CattleNetwork Work smarter, not harder: Reduce input, increase output By Laura Mushrush, Assistant Editor, Drovers CattleNetwork April 25, 2016 From the May 2016 issue of Farm Journal. Part one of three. Forty head that s the size of the average cowherd in the U.S., according to the National Cattlemen s Beef Association. Usually a small cow-calf herd means a diversified operation, says Rick Rasby, Extension beef specialist, University of Nebraska Lincoln (UNL). This means the majority of producers have several irons in the fire, making it essential to maximize resources to keep the herd profitable. cattle diets and result in greater performance. You don t have to spend a lot of money on a nutritionist, Farney says. Use your local livestock professionals and state Extension specialist. Use available feedstuffs. Low input cost is key, Rasby says. Take advantage of corn residue if it s available. Research shows grazing residues has no impact on corn yield if cattle are stocked at a recommended to rate, he adds. The Cornstalk Grazing Cow-Q-Lator from UNL can help you determine stocking rate and cost. The cattle have to complement the rest of the enterprises, and the enterprises have to complement the cattle, Rasby adds. Whether they re juggling an off farm job or a diversified operation, cow-calf producers with a few dozen head have to play a smart game with limited resources. According to Rasby and Jaymelynn Farney, Kansas State University Extension beef specialist, there are a few steps producers can take to increase their herd s potential: 1. Reduce input, increase output. Ionophores. These feed additives are designed to alter the rumen to increase feed efficiency and weight gain. Ionophores allow cattle to perform similarly on 10% less hay, Farney adds. They can also be fed in a dry or liquid form to any age group of cattle. Implant calves. Implants are an old technology but still a great technology, Farney says, adding there are different kinds of implants for different age groups of cattle. For your dollar, you can hardly find a larger return on your investment than with implants. According to Oklahoma State University research, steers implanted in the nursing phase will net a 0.10-lb. increase in average daily gain compared with non-implanted steers. Tennessee Sheep and Goat Auction Slaughter Nannies/Does: lbs lbs lbs and up Kids Feeders Selection 3: lbs SHEEP: Slaughter Lambs-Includes all breeds, sold per hundred weight (cwt). Choice and Prime lbs Good Choice and Prime lbs Choice and Prime lbs Choice and Prime lbs Good Slaughter Ewes Utility and Good: lbs lbs lbs and up Slaughter Rams: 150 lbs and up Appropriate supplementation. First, I would test the forage, Rasby says. This allows you to figure out where you need to supplement. Feeding a supplement when needed will balance Department of Agricultural and Resource Economics 314 Morgan Hall 2621 Morgan Circle USDA / Tennessee Department of Agriculture Market News Service