May 10, 2019 Tennessee Market Highlights Number: 19

FED CATTLE: Fed cattle traded $2 to $3 lower on a live basis compared to last week. Live prices were mainly $120 to $121 while dressed prices were mainly $191 to $193. The 5-area weighted average prices thru Thursday were $120.40 live, down $3.30 from last week and $192.42 dressed, down $6.54 from a week ago. A year ago prices were $121.21 live and $191.75 dressed. If the past two weeks are any indication of what to expect from the finished cattle market moving through the next few months then it is clear that it is going to be a tough few months. A $6 loss in two weeks adds to about $84 per head on an animal finishing at 1,400 pounds. There is good reason cattle feeders have been willing sellers at lower prices. That reason is the June live cattle futures price which is trad-ing at a $7 to $8 discount relative to this week’s cash price. Cattle feeders are likely wanting to push even more cattle out of pens to keep from being forced to market those cattle on an even lower market than this week. It will take a couple of months for the market to reach their summer lows so the next few weeks should be inter-esting. BEEF CUTOUT: At midday Friday, the Choice cutout was $220.94 down $1.53 from Thursday and down $7.06 from last Friday. The Select cutout was $207.84 up $0.76 from Thursday and down $5.68 from last Friday. The Choice Select spread was $13.10 compared to $14.48 a week ago. Per capita domestic meat consumption is only a portion of the meat demand equa-tion. Thus, by itself it does not address any demand questions. However, per capita meat consumption does help one under-stand the direction of prices if demand does not change. Considering beef, pork, chicken, and turkey, domestic meat con-sumption is expected to exceed 217 pounds per person in 2019 which is relatively un-

changed from the previous year. In the past 25 years, per capita meat consumption has ranged from 200 to 220 pounds per person. Though there has been little change in per capita meat consumption, there have been changes in the type of meat being con-sumed. Over the past 25 years, per capita beef consumption has declined about 10 pounds to 57 pounds per year while chick-en consumption has increased 15 to 20 pounds per person to approximately 93 pounds per person. Pork and turkey have seen little to no change in per capita con-sumption and are near 51 and 15 pounds respectively. Will the trend of consuming less red meat continue? OUTLOOK: Based on Tennessee weekly auction market averages, steer and heifer prices were steady to $4 lower compared to last week. Similarly, slaughter cow prices were steady to $1 lower compared to a week ago while slaughter bull prices were $1 to $2 lower. The changes in the cash feeder cattle mar-ket the past three weeks have been small and probably of little concern to most pur-veyors while the changes in feeder cattle futures are sure to have brought a little more excitement into the cattle trading game. Looking back to November of 2018 and moving to today, the cash price of feeder cattle has traded in a narrow range as is evident by the CME feeder cattle in-dex. Alternatively, feeder cattle futures contracts have spent the past three weeks on a downhill slide that appears to have stabilized at prices $14 to $17 per hundred-weight lower than the closing price the Thursday prior to Easter. This simply means that sellers and buyers of feeder cattle are now expecting much lower feeder cattle prices moving through the summer and fall than they were expecting just three weeks ago. The expectation of feeder cattle prices not making the run that was expected just a few weeks ago likely has stocker and back-grounding operations sweating a little as

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Livestock Comments by Dr. Andrew P. Griffith Trends for the Week Compared to a Week Ago

Slaughter Cows

Steady to $1 lower

Slaughter Bulls

$1 to $2 lower

Feeder Steers

Steady to $4 lower

Feeder Heifers

Steady to $4 lower

Feeder Cattle Index

Wednesday’s index: 135.84

Fed Cattle

The 5-area live price on Thursday of $120.40 was down $3.30. The dressed price of $192.42 was down $6.54

Corn

July closed at $3.51 a bushel, down 19 cents since last Friday

Soybeans

July closed at $8.09 a bushel, down 33 cents since last Friday

Wheat

July closed at $4.24 a bushel, down 14 cents since last Friday

Cotton

July closed at 68.45 cents per lb., down 7.23 cents since last Friday

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they may have paid strong prices for lightweight calves that may not realize the sale price that supported such a strong pur-chase price. At the end of the day, feeder cattle prices in the cash market moving through summer and fall are now on course to remain steady with the previous six months given the expectations of feeder cattle futures. Though the past three weeks of futures trading have not been advantageous for folks marketing feeder cattle, there is still time for the market to recover some of its losses. One can never predict prices with 100 percent certainty, but there may be an opportunity that summer and fall feeder cattle futures prices move back to the low $150s which will present a marketing opportunity. ASK ANDREW, TN THINK TANK: Questions concerning price risk management are fairly regular in this line of business. It is prudent to inform producers that changes have been made to the Livestock Risk Protection insurance program. The change that will likely have the most impact is the increased subsidy. LRP will now be subsidized 20 to 35 percent depending on the coverage level which is up from the original 13 percent subsidy. In other words, the cost of purchasing price insurance will be lower. The second most useful change with be the increased number of insurance options that are made available each day. The original setup of LRP limited the number of alternatives in that there were few useful alternatives on a given day and sometimes all the insurance alternatives were of little use. A less useful change to the program is increasing the maximum number of head a producer can insure in a year. The maximum

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Livestock Comments by Dr. Andrew Griffith

number of head increased from 2,000 head to 6,000 head. This change may be of concern to a few people, but not many peo-ple. 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 37996. FRIDAY’S FUTURES MARKET CLOSING PRICES: Friday’s closing prices were as follows: Live/fed cattle –June $112.45 +0.50; August $108.90 +1.30; October $109.03 +1.38; Feeder cattle –May $137.63 +1.38; August $146.83 +2.35; Sep-tember $147.78 +2.50; October $148.75 +2.78; May corn closed at $3.33 down $0.02 from Thursday.

Overview Corn, soybeans, cotton, and wheat were down for the week. Commodity prices took a nose dive this week as trade negotiations between the U.S. and China appeared to back track substantially. For the week, cotton was down triple digits, while corn and wheat were down 13-19 cents and soybeans were down over 30 cents. Trade disruptions and large global supplies have prices headed for new crop harvest contract lows. Since April 10th, 2019 harvest soybean, wheat, and cotton futures have dropped $1.01 ¼ (11%), 39.75 cents (11%), and 7.62 cents (10%). The 10% drop in the futures value of the commodities can be attributed to several factors – large global supplies, a large South American crop, good weather conditions in the U.S. and other key global production regions, and concerns over a reduction in feed demand due to African Swine Flu, to name a few. However, trade is undoubtedly a large driver in price declines. Consider that 47% of U.S. soybean production, 47% of U.S. wheat production, and 77% of U.S. cotton production is projected for export for the 2019 crop. By comparison, corn exports are projected at 15% of the crop and harvest futures have dropped 18 ¾ cents (5%). This is an over simplification of very complex global market dynamics, however, in general, commodities that have a larger share of production exported will be disproportionately affected (good or bad) by global (or individual county) trade dis-putes. Hopefully, U.S. trade negotiations with China can get back on track, allowing global trade to resume in a less encumbered environment.

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Crop Comments by Dr. Aaron Smith

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Crop Comments by Dr. Aaron Smith

Today the USDA released the May WASDE report. The MAY WASDE report provides the initial estimates for the 2019/20 marketing year. A detailed analysis of the report for corn, soybeans, cotton, and wheat will be emailed and available Monday at: https://ag.tennessee.edu/arec/Pages/MonthlyCropComments.aspx Corn Ethanol production for the week ending May 3 was 1.036 million barrels per day, up 12,000 from the previous week. Ethanol stocks were 22.468 million barrels, down 227,000 barrels. Corn net sales reported by exporters from April 26-May 2 were down from last week at 11.3 million bushels for the 2018/19 marketing year and 0.3 million bushels for the 2019/20 marketing year. Exports for the same time period were down 16% from last week at 45.4 million bushels. Corn export sales and commitments were 79% of the USDA estimated total annual exports for the 2018/19 marketing year (September 1 to August 31) compared to a 5-year average of 90%. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened at Memphis, Northwest Barge Points, and Upper-middle Tennessee and weakened at Northwest Tennessee. Overall, basis for the week ranged from 10 under to 32 over with an average of 4 over the July futures at elevators and barge points at the end of the week. July 2019 corn futures closed at $3.51, down 19 cents since last Friday. For the week, July 2019 corn futures traded between $3.45 and $3.68. Jul/Sep and Jul/Dec future spreads were 10 and 21 cents.

Nationally, the Crop Progress report estimated corn planted at 23% compared to 15% last week, 36% last year, and a 5-year aver-age of 46%; and corn emerged at 6% compared to 3% last week, 7% last year, and a 5-year average of 13%. In Tennessee, the Crop Progress report estimated corn planted at 65% compared to 41% last week, 61% last year, and a 5-year average of 70%; and corn emerged at 36% compared to 19% last week, 20% last year, and a 5-year average of 38%. In Tennessee, September 2019 corn cash forward contracts averaged $3.55 with a range of $3.32 to $3.71. September 2019 corn futures closed at $3.61, down 16 cents since last Friday. December 2019 corn futures closed at $3.72, down 15 cents since last Friday. Downside price protection could be obtained by purchasing a $3.80 December 2019 Put Option costing 28 cents establishing a $3.52 futures floor.

Soybeans

Net sales reported by exporters were down compared to last week with net sales cancelations of 5.5 million bushels for the 2018/19 marketing year and net sales of 10.9 million bushels for the 2019/20 marketing year. Exports for the same period were up 7% compared to last week at 22.3 million bushels. Soybean export sales and commitments were 88% of the USDA estimated total annual exports for the 2018/19 marketing year (September 1 to August 31), compared to a 5-year average of 97%. Average soy-bean basis strengthened at Memphis, Northwest, and Upper-middle Tennessee and weakened at Northwest Barge Points. Basis ranged from 53 under to 3 over the July futures contract at elevators and barge points. Average basis at the end of the week was 22 under the July futures contract. July 2019 soybean futures closed at $8.09, down 33 cents since last Friday. For the week, July 2019 soybean futures traded between $8.06 and $8.36. July soybean-to-corn price ratio was 2.30 at the end of the week. August 2019 soybean futures closed at $8.15, down 33 cents since last Friday. Jul/Aug and Jul/Nov future spreads were 6 and 24 cents.

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Crop Comments by Dr. Aaron Smith

Nationally, the Crop Progress report estimated soybeans planted at 6% compared to 3% last week, 14% last year, and a 5-year av-erage of 14%. In Tennessee, the Crop Progress report estimated soybeans planted at 9% compared to 3% last week, 6% last year, and a 5-year average of 9%. In Tennessee, October/November 2019 soybean cash contracts average $8.06 with a range of $7.70 to $8.33. November 2019 soybean futures closed at $8.33, down 31 cents since last Friday. Downside price protection could be achieved by purchasing an $8.40 November 2019 Put Option which would cost 43 cents and set a $7.97 futures floor. Nov/Dec 2019 soybean-to-corn price ratio was 2.24 at the end of the week.

Cotton

Net sales reported by exporters were up compared to last week at 235,800 bales for the 2018/19 marketing year and 56,500 bales for the 2019/20 marketing year. Exports for the same time period were up 32% compared to last week at 387,100 bales. Upland cotton export sales were 101% of the USDA estimated total annual exports for the 2018/19 marketing year (August 1 to July 31), compared to a 5-year average of 99%. Delta upland cotton spot price quotes for May 10 were 63.95 cents/lb (41-4-34) and 66.20 cents/lb (31-3-35). Adjusted World Price (AWP) decreased 3.62 cents to 64.65 cents. July 2019 cotton futures closed at 68.45, down 7.23 cents since last Friday. For the week, July 2019 cotton futures traded between 68.35 and 75.02 cents. Jul/Oct and Jul/Dec cotton futures spreads were 1.2 cents and 0.95 cents. October 2019 cotton futures closed at 69.65, down 4.63 cents since last Fri-day.

Nationally, the Crop Progress report estimated cotton planted at 18% compared to 11% last week, 19% last year, and a 5-year aver-age of 19%. In Tennessee, the Crop Progress report estimated cotton planted at 12% compared to 1% last week, 9% last year, and a 5-year average of 11%. December 2019 cotton futures closed at 69.4, down 5.08 cents since last Friday. Downside price protection could be obtained by purchasing a 70 cent December 2019 Put Option costing 4.0 cents establishing a 66 cent futures floor.

Wheat

Wheat net sales reported by exporters were up compared to last week at 3.3 million bushels for the 2018/19 marketing year and 15.1 million bushels for the 2019/20 marketing year. Exports for the same time period were up 20% from last week at 24.4 million bushels. Wheat export sales were 100% of the USDA estimated total annual exports for the 2018/19 marketing year (June 1 to May 31), compared to a 5-year average of 105%. Nationally, the Crop Progress report estimated winter wheat condition at 64% good-to-excellent and 8% poor-to-very-poor; winter wheat headed at 29% compared to 19% last week, 31% last year, and a 5-year average of 41%; spring wheat planted at 22% compared to 13% last week, 27% last year, and a 5-year average of 49%; and spring wheat emerged at 4% compared to 4% last year and a 5-year average of 19%. In Tennes-see, winter wheat condition was estimated at 59% good-to-excellent and 9% poor-to-very poor; winter wheat jointing at 97% compared to 94%

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Crop Comments by Dr. Aaron Smith

last week, 94% last year, and a 5-year average of 94%; and winter wheat headed at 78% compared to 42% last week, 62% last year, and a 5-year average of 65%. In Tennessee, June/July 2019 wheat cash contracts ranged from $4.14 to $4.65 for the week. July 2019 wheat futures closed at $4.24, down 14 cents since last Friday. July 2019 wheat futures traded between $4.21 and $4.43 this week. Downside price protection could be obtained by purchasing a $4.25 July 2019 Put Option costing 14 cents establishing a $4.11 futures floor. July wheat-to-corn price ratio was 1.21. Jul/Sep and Jul/Jul future spreads were 9 and 50 cents.

September 2019 wheat futures closed at $4.33, down 13 cents since last Friday. July 2020 wheat futures closed at $4.740, down 16 cents since last Friday.

Additional Information: Links for data presented: U.S. Export Sales - https://apps.fas.usda.gov/export-sales/esrd1.html USDA FAS: Weekly Export Performance Indicator – https://apps.fas.usda.gov/esrquery/esrpi.aspx EIA: Weekly ethanol Plant Production - https://www.eia.gov/dnav/pet/pet_pnp_wprode_s1_w.htm EIA: Weekly Supply Estimates - https://www.eia.gov/dnav/pet/pet_sum_sndw_a_EPOOXE_sae_mbbl_w.htm Upland Cotton Reports - https://www.fsa.usda.gov/FSA/epasReports?area=home&subject=ecpa&topic=fta-uc Tennessee Crop Progress - https://www.nass.usda.gov/Statistics_by_State/Tennessee/Publications/Crop_Progress_&_Condition/ U.S. Crop Progress - http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1048 USDA AMS: Market News - https://www.ams.usda.gov/market-news/search-market-news

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 aaron.smith@utk.edu.

Friday, May 03, 2019 — Thursday, May 09, 2019

Friday Monday Tuesday Wednesday Thursday

Low High- Low High Low High Low High Low High

No. 2 Yellow Soybeans ———————–——————————————— $/bushel ———————————————————

Memphis 8.32-8.35 8.20-8.23 8.21-8.28 8.17-8.24 8.03-8.10

N.W. B.P. 8.33-8.44 ——— ——— 8.21-8.24 8.08-8.10

N.W. TN 7.89-8.03 ——— ——— 7.75-7.90 7.60-7.87

-Upper Md. 8.11-8.22 ——— ——— 8.08-8.09 7.95-8.00

Yellow Corn

Memphis 3.81-3.96 3.74-3.84 3.77-3.92 3.72-3.94 3.61-3.83

N.W. B.P. 3.80-3.80 ——— ——— 3.76-3.83 3.48-3.75

N.W. TN 3.65-3.77 ——— ——— 3.60-3.66 3.51-3.64

Upper Md. 3.67-3.78 ——— ——— 3.65-3.73 3.65-3.65

Wheat

Memphis ——— ——— ——— ——— ———

Cotton

Memphis 71.18-73.43 69.05-71.30 68.68-70.93 67.81-70.06 65.73-67.98

Prices Paid to Farmers by Elevators

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Cattle Receipts: This week: 7, 049 (8) Week ago: 9,986 (9) Year ago: 8,115 (10)

This Week Last Week Year Ago

Low High Weighted Average Weighted Average Weighted Average

—————————————————————— $/cwt ——————————————————————

Steers: Medium/Large Frame #1-2

300-400 lbs 155.00 190.00 170.11 171.33 175.32

400-500 lbs 149.00 173.50 161.77 165.56 164.49

500-600 lbs 140.00 166.00 154.47 157.14 157.06

600-700 lbs 133.00 153.00 142.63 143.60 143.15

700-800 lbs 119.00 140.00 128.62 132.67 129.84

Steers: Small Frame #1-2

300-400 lbs 145.00 167.50 154.43 154.78 158.40

400-500 lbs 131.00 154.00 145.85 140.43 144.95

500-600 lbs ——— ——— ——— 135.06 135.00

600-700 lbs ——— ——— ——— ——— 129.62

Steers: Medium/Large Frame #2-3

300-400 lbs 137.50 172.00 158.10 163.29 166.78

400-500 lbs 136.00 165.00 148.54 152.81 157.95

500-600 lbs 130.00 155.00 143.84 146.24 140.93

600-700 lbs 122.00 144.00 132.77 133.04 130.47

700-800 lbs 120.00 122.00 121.34 125.99 114.15

Holstein Steers

300-400 lbs 96.00 107.00 100.24 ——— ———

500-600 lbs ——— ——— ——— 95.85 81.41

700-800 lbs ——— ——— ——— 84.29 —s——

Slaughter Cows & Bulls

Breakers 75-80% 47.00 54.50 55.58 54.41 62.00

Boners 80-85% 56.66 55.67 56.49 45.00 64.00

Lean 85-90% 41.00 54.00 47.53 47.63 50.68

Bulls YG 1 68.00 94.00 78.17 79.49 79.89

Heifers: Medium/Large Frame #1-2

300-400 lbs 130.00 165.00 142.37 145.48 152.54

400-500 lbs 120.00 150.00 138.35 140.32 142.36

500-600 lbs 114.00 140.00 130.27 134.39 135.12

600-700 lbs 107.00 134.00 122.36 124.25 124.40

Heifers: Small Frame #1-2

300-400 lbs ——— ——— ——— ——— ———

400-500 lbs ——— ——— ——— 126.86 ———

500-600 lbs 115.00 123.00 119.02 118.77 ———

600-700 lbs ——— ——— ——— 109.63 ———

Heifers: Medium/Large Frame #2-3

300-400 lbs 121.00 147.50 135.20 139.31 140.35

400-500 lbs 120.00 141.00 129.93 132.39 137.28

500-600 lbs 111.00 135.00 122.45 127.84 126.78

600-700 lbs 105.00 123.00 113.80 118.51 118.67

Prices on Tennessee Reported Livestock Auctions for the week ending May 10, 2019

7

85

105

125

145

165

185

Tennessee 700-800 lbs. M-1 Steers Prices2018, 2019 and 5-year average

2013/2017 Avg 2018 2019

8595

105115125135145155

5-Area Finished Cattle Prices2018, 2019 and 5-year average

201 3/20 17 Avg 201 8 201 9

35455565758595

105

Tennessee Slaughter Cow PricesBreakers 75-80%

2018, 2019 and 5-year average

2013/2017 Avg 2018 2019

100120140160180200220

Tennessee 500-600 lbs. M-1 Steer Prices

2018, 2019 and 5-year average

2013/2017 Avg 2018 2019

Futures Settlement Prices: Crops & Livestock

Corn: https://www.cmegroup.com/trading/agricultural/grain-and-oilseed/corn.html

Soybeans: https://www.cmegroup.com/trading/agricultural/grain-and-oilseed/soybean.html

Wheat: https://www.cmegroup.com/trading/agricultural/grain-and-oilseed/wheat.html

Soybean Meal: https://www.cmegroup.com/trading/agricultural/grain-and-oilseed/soybean-meal.html

Cotton: https://www.theice.com/products/254/Cotton-No-2-Futures/data?marketId=5352193

Live Cattle: https://www.cmegroup.com/trading/agricultural/livestock/live-cattle.html

Feeder Cattle: https://www.cmegroup.com/trading/agricultural/livestock/feeder-cattle.html

Lean Hogs: https://www.cmegroup.com/trading/agricultural/livestock/lean-hogs.html

Class III Milk: https://www.cmegroup.com/trading/agricultural/dairy/class-iii-milk.html

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East Tennessee Livestock Center, Sweetwater, TN Graded Feeder Sale Weighted Average Report for May 3, 2019 Cattle Receipts: 563 For complete report: https://www.ams.usda.gov/mnreports/nv_ls183.txt

Graded Sales, Video Board Sales, Video Sales & Loads

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

Self-Reported and Self-Graded Livestock Markets