December 22, 2017 Tennessee Market Highlights Number: 51 FED CATTLE: Fed cale traded steady on a live basis compared to last week. Prices on a live basis were mainly $119 to $120 while prices on a dressed basis were mainly $190. The 5-area weighted average prices thru Thursday were $119.94 live, up $2.86 from last week and $190.32 dressed, up $5.93 from a week ago. A year ago prices were $115.14 live and $179.79 dressed. The past two weeks have been kind to cale feeders as they were able to hold out for higher prices last week and then keep them steady this week. The steady to stronger finished cale prices come in the midst of lower beef cutout prices which are thinning packer margins. Alternavely, cale feeders have been able to strengthen margins the past two weeks as they pre- pare for two consecuve shortened mar- keng weeks with Christmas and New Year’s Day on the horizon. The key for cale feeders will be to connue moving cale through the system as being current in markengs has been a friend to the cale feeder throughout 2017. This could become a struggle as pens are carrying more cale than a year ago and have been doing so for several months. BEEF CUTOUT: At midday Friday, the Choice cutout was $199.10 up $0.98 from Thursday and down $2.69 from last Friday. The Select cutout was $187.84 up $0.97 from Thursday and up $4.23 from last Fri- day. The Choice Select spread was $11.26 compared to $18.18 a week ago. The Choice cutout and Select cutout are heading in opposite direcons which are resulng in a Choice Select spread that is quickly narrowing. The Choice cutout could have one trick leſt up its sleeve as some shelves will have to be restocked following the Christmas and New Year holidays. How- ever, it is doubul packers are counng on a price resurgence from the restocking of meat counters. Middle meats have been in strong demand leading up to Christmas but somemes price cannot keep up with the sheer volume of producon. The focus will connue to turn towards end meats. This focus by the consumer will connue nar- rowing the spread as there will be an acve compeon for the limited amount of Se- lect beef. The hope for the packer is that the Choice Select spread narrows due to the Select cutout moving higher and the Choice cutout holding its ground. Choice prices will likely move a lile lower in com- ing weeks, but beef prices should be well supported which means the Select beef price will likely move to the upside. OUTLOOK: There was limited calf and feeder cale movement this week in Ten- nessee as the market heads for a break between the Christmas and New Year holi- days. However, the limited receipts result- ed in higher calf and feeder cale prices compared to last week’s Tennessee weekly weighted aucon averages. The higher cash prices were set despite soſter feeder cale futures which connue their downward slide. It is either becoming increasingly diffi- cult or rather obvious to the reason for divergence between feeder cale futures and cash prices for feeder cale. It would appear the obvious reason is that technical trading has taken over the futures market while cale feeders connue to purchase cale based on fundamentals and what they are seeing in the country. Since Janu- ary 1st 2012, the basis between the CME Feeder Cale Index and the nearby feeder cale futures contract (Index – Futures = Basis) has ranged from nearly a negave $14 to a posive $15 with the average basis being a posive $0.69. The basis between the Feeder Cale Index and January feeder cale futures has averaged a lile over a posive $7.50 the past couple of weeks. The market has seen a similar posive basis being sustained in the late November and December me periods of 2014 and 2015. However, the following acon differed by (Connued on page 2) Livestock Comments by Dr. Andrew P. Griffith Trends for the Week Compared to a Week Ago Slaughter Cows $4 to $6 higher Slaughter Bulls $6 higher Feeder Steers $2 to $6 higher Feeder Heifers Steady to $6 higher Feeder Cale Index Tuesday’s index: 152.47 Fed Cale The 5-area live price of $119.94 is up $2.86. The dressed price is up $5.93 at $190.32. Corn March closed at $3.52 a bushel, up 5 cents since last Friday. Soybeans January closed at $9.49 a bushel, down 18 cents since last Friday. Wheat March closed at $4.24 a bushel, up 6 cents since last Friday. Coon March closed at 77.87 cents per lb, up 1.95 cents since last Friday.
Transcript
December 22, 2017 Tennessee Market Highlights Number: 51
FED CATTLE: Fed cattle traded steady on a live basis compared to last week. Prices on a live basis were mainly $119 to $120 while prices on a dressed basis were mainly $190.
The 5-area weighted average prices thru Thursday were $119.94 live, up $2.86 from last week and $190.32 dressed, up $5.93 from a week ago. A year ago prices were $115.14 live and $179.79 dressed.
The past two weeks have been kind to cattle feeders as they were able to hold out for higher prices last week and then keep them steady this week. The steady to stronger finished cattle prices come in the midst of lower beef cutout prices which are thinning packer margins. Alternatively, cattle feeders have been able to strengthen margins the past two weeks as they pre-pare for two consecutive shortened mar-keting weeks with Christmas and New Year’s Day on the horizon. The key for cattle feeders will be to continue moving cattle through the system as being current in marketings has been a friend to the cattle feeder throughout 2017. This could become a struggle as pens are carrying more cattle than a year ago and have been doing so for several months.
BEEF CUTOUT: At midday Friday, the Choice cutout was $199.10 up $0.98 from Thursday and down $2.69 from last Friday. The Select cutout was $187.84 up $0.97 from Thursday and up $4.23 from last Fri-day. The Choice Select spread was $11.26 compared to $18.18 a week ago.
The Choice cutout and Select cutout are heading in opposite directions which are resulting in a Choice Select spread that is quickly narrowing. The Choice cutout could have one trick left up its sleeve as some shelves will have to be restocked following the Christmas and New Year holidays. How-ever, it is doubtful packers are counting on a price resurgence from the restocking of meat counters. Middle meats have been in strong demand leading up to Christmas but
sometimes price cannot keep up with the sheer volume of production. The focus will continue to turn towards end meats. This focus by the consumer will continue nar-rowing the spread as there will be an active competition for the limited amount of Se-lect beef. The hope for the packer is that the Choice Select spread narrows due to the Select cutout moving higher and the Choice cutout holding its ground. Choice prices will likely move a little lower in com-ing weeks, but beef prices should be well supported which means the Select beef price will likely move to the upside.
OUTLOOK: There was limited calf and feeder cattle movement this week in Ten-nessee as the market heads for a break between the Christmas and New Year holi-days. However, the limited receipts result-ed in higher calf and feeder cattle prices compared to last week’s Tennessee weekly weighted auction averages. The higher cash prices were set despite softer feeder cattle futures which continue their downward slide. It is either becoming increasingly diffi-cult or rather obvious to the reason for divergence between feeder cattle futures and cash prices for feeder cattle. It would appear the obvious reason is that technical trading has taken over the futures market while cattle feeders continue to purchase cattle based on fundamentals and what they are seeing in the country. Since Janu-ary 1st 2012, the basis between the CME Feeder Cattle Index and the nearby feeder cattle futures contract (Index – Futures = Basis) has ranged from nearly a negative $14 to a positive $15 with the average basis being a positive $0.69. The basis between the Feeder Cattle Index and January feeder cattle futures has averaged a little over a positive $7.50 the past couple of weeks. The market has seen a similar positive basis being sustained in the late November and December time periods of 2014 and 2015. However, the following action differed by
(Continued on page 2)
Livestock Comments by Dr. Andrew P. Griffith Trends for the Week Compared to a Week Ago
Slaughter Cows
$4 to $6 higher
Slaughter Bulls
$6 higher
Feeder Steers
$2 to $6 higher
Feeder Heifers
Steady to $6 higher
Feeder Cattle Index
Tuesday’s index: 152.47
Fed Cattle
The 5-area live price of $119.94 is up $2.86. The dressed price is up $5.93 at $190.32.
Corn
March closed at $3.52 a bushel, up 5 cents since last Friday.
Soybeans
January closed at $9.49 a bushel, down 18 cents since last Friday.
Wheat
March closed at $4.24 a bushel, up 6 cents since last Friday.
Cotton
March closed at 77.87 cents per lb, up 1.95 cents since last Friday.
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the year. Following strong basis values at the end of 2014, basis values continued to be strong into January 2015. Alternatively, following strong basis in late 2015, the basis turned severely negative and then moved more towards the average basis in early 2016. The key though is that futures prices moved higher in each case. Thus, the expectation moving into January is for the basis on feeder cattle to soften but the softening is ex-pected to come from firming feeder cattle futures and steady cash prices in the country. What this means is that sellers should be cautious using the futures market to hedge mar-ketings in the next month. Alternatively, buyers might benefit from gains in the futures while the cash price sits steady.
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, 2017 totaled 11.52 million head, up 8.1% com-pared to a year ago, with the pre-report estimate average ex-pecting an increase of 6.6%. November placements in feedlots totaled 2.10 million head, up 13.9% from a year ago with the pre-report estimate average expecting placements up 5.1%. November marketing’s totaled 1.84 million head up 3.2% from 2016 with pre-report estimates expecting marketings up 3.2%. Placements on feed by weight: under 600 pounds up 29.8%, 600 to 899 pounds up 8.7%, 900 to 999 pounds down 25.0%, and 1,000 pounds and over up 44.6%.
ASK ANDREW, TN THINK TANK: A call came in this week relat-ed to a producer evaluating starting a dairy operation or actual-ly renting an existing dairy operation. However, there have been some struggles on the front end identifying an entity to purchase the milk. The great news in this story is that the pro-ducer is beginning with the end in mind. However, there has been little success in establishing a market for the anticipated milk production. Additionally, this producer is going to work with a farm management specialist to evaluate the potential returns to the operation before he dives into production. It is beneficial to share this story because this is the route produc-ers should go when analyzing and evaluating new and current enterprises. University of Tennessee Extension has resources in each of the 95 counties and one of those resources is area farm management specialists who can help answer farm financial questions.
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Livestock Comments by Dr. Andrew Griffith
Please send questions and comments to [email protected] or send a letter to Andrew P. Griffith, University of Tennessee, 314B Morgan Hall, 2621 Morgan Circle, Knoxville, TN 37996.
FRIDAY’S FUTURES MARKET CLOSING PRICES: Friday’s closing prices were as follows: Live/fed cattle –December $119.83 +0.20; February $118.58 -1.10; April $119.28 -1.30; Feeder cattle –January $141.55 -1.38; March $138.55 -1.85; April $139.45 -1.65; May $139.35 -1.68; December corn closed at $3.52 up $0.01 from Thursday.
Thursday December 21, 2017
Month Class III Close Class IV Close
Dec 15.44 13.60
Jan 13.97 13.21
Feb 13.70 13.19
Mar 13.75 13.40
Apr 14.00 13.67
Milk Futures
Cattle Hogs
———— Number of head ————
This week (4 days) 117,750 467,000
Last week (4 days) 118,750 466,500
Year ago (4 days) 114,250 435,500
This week as percentage of
Week ago (%) 99% 100%
Year ago (%) 103% 107%
Average Daily Slaughter USDA Box Beef Cutout Value
Overview Corn, cotton, and wheat were up; and soybeans were down for the week. The nearby corn futures contract has traded between $3.01 (8/29/16) and $4.43 ¼ (7/13/15) since July 2014. 1,270 calendar days when the nearby con-tract has traded in a $1.42 range. As of the market close today, the nearby contract was $3.52, in the middle-to-lower end of the long-term range. Look-
ing towards 2018 it is very unlikely that nearby corn futures will exit this long term trading range. Large global and domestic stocks of corn and other grains will limit rallies in the nearby futures contract. As such, producers may want to evaluate opportunities in deferred futures contracts and/or improvements in local basis as a path to higher prices. Given record corn yields in Tennessee a few extra cents per bushel can greatly assist producer profitability. December has been a brutal month for soybean futures as prices continue to decline after post-harvest highs above $10.00. Janu-ary soybean futures have closed down three consecutive weeks, resulting in a 65 cent price decrease. Soybeans have been much more volatile than corn in the recent past. Since July 2014, nearby soybean futures have traded between $8.44 ¼ (11/23/15) and 12.08 ½ (6/6/16) – a $3.64 cent range. Expect continued volatility in soybeans with South American weather being a key factor in early 2018. Cotton futures have continued its remarkable run – appreciating over 10 cents in the past two months. The run has been fueled by increased export sales as a result of strong global demand. Export shipments will need to catch up with outstanding export sales to maintain this rally in 2018. Currently export shipments are 15% lower than last year, whereas outstanding export sales (unshipped) are 67% higher. Cash wheat offers in Memphis have jumped from $3.62 ¾ on December 11 to $4.32 on December 21, a 69 ¼ cent increase in re-ported cash price in 10 days. Corn In Tennessee, January 2018 corn cash forward contracts averaged $3.52 with a range of $3.30 to $3.60. March 2018 corn futures closed at $3.52 up 5 cents since last Friday. For the week, March 2018 corn futures traded between $3.46 and $3.52. Across Ten-nessee, average basis (cash price-nearby futures price) strengthened or remained unchanged at Northwest Barge Points, Lower-middle, and Upper-middle Tennessee and weakened at Memphis and Northwest Tennessee. Overall, basis for the week ranged from 26 under to 5 over the March futures contract with an average of 8 under at the end of the week. Corn net sales reported by exporters from December 8-14 were above expectations with net sales of 61.3 million bushels for the 2017/18 marketing year and 0.09 million bushels for the 2018/19 marketing year. Exports for the same time period were up from last week at 27.6 million bush-els. Corn export sales and commitments were 52% of the USDA estimated total annual exports for the 2017/18 marketing year (September 1 to August 31) compared to a 5-year average of 55%. Ethanol production for the week ending December 15 was 1.077 million barrels per day down 12,000 from the previous week. Ethanol stocks were 22.32 million barrels, down 54,000 barrels. Mar/May and Mar/Dec future spreads were 8 and 32 cents, respectively.
May 2018 corn futures closed at $3.60 up 5 cents since last Friday. December 2018 corn futures closed at $3.84 up 4 cents since last Friday. Downside price protection could be obtained by purchasing a $3.90 December 2018 Put Option costing 28 cents estab-lishing a $3.62 futures floor.
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Crop Comments by Dr. Aaron Smith
Soybeans In Tennessee, January 2018 soybean cash contracts average $9.60 with a range of $9.32 to $9.83. January 2018 soybean futures closed at $9.49 down 18 cents since last Friday. For the week, January 2018 soybean futures traded between $9.46 and $9.70. Av-erage soybean basis strengthened or remained unchanged at Memphis, Northwest Barge Points, Lower-middle, and Upper-middle Tennessee and weakened at Northwest Tennessee. Basis ranged from 40 under to 9 over the January futures contract at elevators and barge points. Average basis at the end of the week was 12 under the January futures contract. Net sales reported by exporters were within expectations with net sales of 64 million bushels for the 2017/18 marketing year and 0.7 million bushels for the 2018/19 marketing year. Exports for the same period were up from last week at 56.6 million bushels. Soybean export sales and commitments were 65% of the USDA estimated total annual exports for the 2017/18 marketing year (September 1 to August 31), compared to a 5-year average of 81%. January/March soybean-to-corn price ratio was 2.70 at the end of the week.
Jan/Mar and Jan/Nov future spreads were 11 and 24 cents, respectively. March 2018 soybean futures closed at $9.60 down 18 cents since last Friday. November 2018 soybean futures closed at $9.73 down 14 cents since last Friday. Downside price protection could be achieved by purchasing a $9.80 November 2018 Put Option which would cost 57 cents and set a $9.23 futures floor. No-vember/December 2018 soybean-to-corn price ratio was 2.53 at the end of the week. Cotton Delta upland cotton spot price quotes for December 21 were 77.19 cents/lb (41-4-34) and 78.94 cents/lb (31-3-35). Adjusted world price (AWP) increased 2.05 cents to 68 cents per pound. March 2018 cotton futures closed at 77.87 cents up 1.95 cents since last Friday. For the week, March 2018 cotton futures traded between 74.93 and 78.07 cents. Net sales reported by exporters were up from last week with net sales of 326,500 bales for the 2017/18 marketing year and 31,900 bales for the 2018/19 marketing year. Exports for the same period were down from last week at 148,200 bales. Upland cotton export sales were 76% of the USDA esti-mated total annual exports for the 2017/18 marketing year (August 1 to July 31), compared to a 5-year average of 63%. Mar/May and Mar/Dec cotton futures spreads were 0.17 cents and -3.87 cents, respectively.
May 2018 cotton futures closed at 78.04 up 1.72 cents since last Friday. December 2018 cotton futures closed at 74 up 1.12 cents since last Friday. Downside price protection could be obtained by purchasing a 74 cent December 2018 Put Option costing 4.37 cents establishing a 69.63 cent futures floor.
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Crop Comments by Dr. Aaron Smith
Wheat In Memphis, old crop cash wheat ranged from $4.24 to $4.32. March 2018 wheat futures closed at $4.24 up 6 cents since last Fri-day. March 2018 wheat futures traded between $4.16 and $4.29 this week. March wheat-to-corn price ratio was 1.20. Wheat net sales reported by exporters were above expectations with net sales of 29.3 million bushels for the 2017/18 marketing year and 1.4 million bushels for the 2018/19 marketing year. Exports for the week were up from last week at 21.2 million bushels. Wheat export sales were 72% 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 76%. Mar/May and Mar/Jul future spreads were 12 cents and 26 cents, respectively.
May 2018 wheat futures closed at $4.37 up 6 cents from last Friday. In Tennessee, June/July 2018 cash forward contracts ranged from $4.25 to $4.69 for the week. July 2018 wheat futures closed at $4.50 up 6 cents since last Friday. Downside price protection could be obtained by purchasing a $4.50 July 2018 Put Option costing 26 cents establishing a $4.24 futures floor. Additional Information: Links for data presented:
U.S. Export Sales - https://apps.fas.usda.gov/export-sales/esrd1.html
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 email list please contact me at [email protected].
Self-Reported and Self-Graded Livestock Markets Graded Sheep and Goat Auctions
Columbia Graded Sheep and Goat Sale Weighted Average Report for 12/18/2017 Receipts: 903 (634 goats; 269 sheep) Last Sale: 961 For complete report: https://www.ams.usda.gov/mnreports/nv_ls320.txt
Cheap Feed, Good Calf-price Outlook Support Adding Weight Post-weaning
Duane Dailey, University Of Missouri Extension Dec 21, 2017
Cow-calf herd owners can send more pounds of beef to market by feeding calves after weaning. It’s called backgrounding to prepare calves for the feedlot.
Speaking at the Missouri Livestock Symposium in Kirksville, Dec. 2, Eric Bailey asked producers to think bigger.
Adding more pounds to calves makes sense in Missouri with plentiful feed and forage. Bailey, a new University of Missouri Extension beef nutritionist, gives farmers a fresh view of what they have.
Growing up on a ranch in New Mexico allows Bailey to marvel at Missouri beef cattle resources. Quality cattle plus good feed make a money-making combination.
Bailey wasn’t the only one at the symposium offering the idea. Other speakers on the beef track came from states to the southwest. They urged herd owners to plan and manage more.
Bailey said current markets seek bigger calves. The futures mar-kets indicate good prices ahead.
There’s another reason to hold calves. Most weaned calves go to market in September, October and November. A seasonal price drop happens every year.
“Buyers get picky when lots of calves are available,” Bailey said. Becoming a feeder-calf producer beats that market trend. Feeding after weaning adds more pounds, which buyers want.
Later in the program, beef panelists urged herd owners to be-come marketers, not just sellers. A management plan can be flexible. It’s not doing the same thing at the same time each year. Owners can react to the market outlooks that can change each year.
In his talk, Bailey told tips for feeder calf operators.
First, think basic animal husbandry, he said. Weaning can be traumatic as calves go from mama’s milk and eating forage to
Beef Industry News Featured Article from DROVERS CattleNetwork
learning to eat feed from a bunk. They must learn a lot. Don’t stack stresses at weaning time.
One low-stress transition is to not move the calves. Reverse the usual weaning method. Move cows, not calves, out of the pas-ture. Or move cows-calf pairs into the dry lot. Cows lead their calves to the feed bunks.
Take care of basic care first, Bailey said. Don’t try to microman-age supplements or each mineral. Leave that for later. First priority is getting water and feed intake.
Late-weaned calves on fall stockpile eat more grass and get less milk from their cow. The cows don’t mind leaving when calves are weaning themselves.
Good care can get calves on feed and eating sooner. Research shows about half the calves weaned and penned don’t learn to eat, or drink, for three days. Some don’t learn in eight days. That leads to losses.
Calves that drink from a pond take time to learn to drink from a waterer. Give the calves an open water source, he said. Or let waterers run over to show the source of water.
Forage and feed should provide nutrients for gains of 2 to 3 pounds per day. Gaining less than 2 pounds leaves dollars on the table. Too much gain adds fleshiness (fat) and waste.
In reducing stress at weaning, Bailey assumes vaccinations and castrations were done earlier. Doing all at once stacks stress.
After weaning is done and calves are calm, other technology can be added. That includes implants and other gain enhanc-ers.
Department of Agricultural and Resource Economics 314 Morgan Hall • 2621 Morgan Circle
arec.tennessee.edu USDA / Tennessee Department of Agriculture Market News Service http://www.tennessee.gov/agriculture/article/ag-farms-market-news 1-800-342-8206
