Farmer’s Report
CROP COMMENTS
Marketing Specialist
June 23, 2023
Overview
Corn and cotton were down; soybeans were mixed; and wheat was up for the week. Weather provided wild swings in commodity markets this week. December corn had daily movements of unchanged, +31 ¼, -8, and -32 ¾ cents; November soybeans moved +½, +34 ¼, -37 ½, and -29 ½ cents; July wheat moved +7 ¾, +38 ¾, +4 ½, and -5 ¾ cents; and December cotton moved +0.60, -0.18, -0.37, and -1.48 cents. Precipitation forecasts continue to be the dominant factor in markets with changes met with large price swings. The volatility in markets can be unnerving for even the most seasoned commodity marketer. What should producers do? The current market is tricky to navigate but it is supportive of two considerations. First, producers need to know their cost of production and formulate a yield expectation based on the best available information for their farms. This will allow them to determine the futures market and basis prices they are making or losing money. Second, the current market highlights the benefit of incremental sales. Making incremental sales will avoid price lows and spread risk throughout the marketing year. Producers will have varying comfort levels with the amount of production that they want to price at various times of the year. This will
be influenced by yield / production estimates, past pricing experiences, and access to storage. In a strong weather market, like the current one, being overly aggressive with pricing has potential downfalls. For most producers in Tennessee, if APH yield is achieved, new crop harvest futures of $5.88 for corn, $13.10 for soybeans, and $7.33 for wheat – plus basis – will result in profitable outcomes. Getting some price risk off the table may be warranted. Outof- the money options are a worthwhile consideration to remove downside price risk without fixing a final price should drought
persist and markets rally. Current market prices for cotton are far more challenging. Sub-80 cent cotton will not be
attractive to establish a price for almost every Tennessee cotton producer. Thus, it is likely more advantageous to see if prices will improve later in the year.
LIVESTOCK COMMENTS
by Andrew Griffith, Livestock
Marketing Specialist
June 23, 2023
FED CATTLE
Fed cattle traded $4 lower compared to last week on a live basis. Prices in the South were mainly $180 while dressed prices were mainly $289 to $290. The 5-area weighted average prices thru Thursday were $182.67 live, down $4.11 compared to last week and $289.85 dressed, down $6.23 from a week ago. A year ago, prices were $144.50 live and $234.91 dressed. As packers and cattle feeders negotiate lower prices week-over-week, it brings some concern to cattle feeders as they have recently purchased some high-priced feeder cattle. Despite the fact that feeder cattle purchased today fall under live cattle prices six months in the future, today’s finished cattle price still influences the decision of what to pay for cattle being placed in the feedlot now. There is no doubt finished cattle prices exceeded most market participants expectations, but high prices have a way of curing high prices. Observers and participants of the market
should likely expect further softening of finished cattle prices moving through the heat of summer.
BEEF CUTOUT
At midday Friday, the Choice cutout was $334.46 down $0.01 from Thursday and down $8.49 from a week ago. The Select cutout was $300.90 down $2.90 from Thursday and down $9.04 from last week. The Choice Select spread was $33.56 compared to $33.01 a week ago. The monthly retail price of beef for May was reported by USDA last week. The Choice beef price topped $8.08 per pound while the all fresh beef retail price exceeded $7.50 per pound. The Choice beef price is a historic high and represents a $0.23 per pound increase from April. The all fresh beef retail price for May
was $0.18 per pound higher than April and the third highest monthly price on record and the highest it has been since November 2021. This is the reason so many in the beef and cattle industry ask the question of how high can prices go
before consumers stop purchasing beef. It is unlikely consumers stop purchasing beef all together. A similar question for the cattle producer is, how high do feed prices have to go before they stop purchasing feed? Or, at what price does a producer stop purchasing fertilizer. In many instances, most people continue to purchase feed and fertilizer, but not as much as they would if prices were lower. The main difference is that cattle producers are making a business decision and consumers are making a personal decision.
OUTLOOK
Based on Tennessee weekly auction price averages, steer prices were steady to $5 higher this week compared to last week while heifer prices were steady to $4 higher compared to the previous week. Slaughter cow prices were $3 to $5 lower compared to last week while slaughter bull prices were $1 to $2 lower compared to a week ago. August feeder cattle futures traded over $245 on June 7th, but it finished that day lower than the previous day. The contract has essentially traded lower since then and found itself trading below $227 during part of Wednesday’s trade. The driver of lower feeder cattle futures has been the increasing corn prices that finally took a breather on Thursday. There are sure to be some cattle producers who are beginning to worry that the bottom is going to fall out of the calf and feeder cattle market. This will be a lot of worry for nothing as these are still strong prices for feeder cattle. As it relates to the futures market, there is going to be considerable volatility in the market the next several months and this includes livestock, grain, and oilseed. This volatility will provide opportunities to hedge a good price on cattle through late summer and fall using the futures market or LRP insurance. The question is who will invest in protecting a value in the market and who will be at the mercy of the market. The best attribute of LRP insurance is leaving the top side open to capitalize on an increasing market at a relatively inexpensive cost. The worst attribute of being at the mercy of the market is a producer could be caught with his pants down when the market turns south. As has been said several times in this column, the futures market was pricing cattle higher than where this market observer thought it should be. That does not mean it will not turn back and move higher, but producers should not count on such an event. There is good reason to take advantage of high prices when they are available. The June cattle on feed report for feedlots with a 1000 head or more capacity indicated cattle and calves on feed as of June 1, 2023 totaled 11.55 million head, down 2.9% compared to a year ago, with the pre-report estimate average expecting a 3.2% decline. May placements in feedlots totaled 1.96 million head, up 4.6% from a year ago with the pre-report estimate average expecting p l a c e m e n t s up 1.7%. May marketing’s totaled 1.95 million head up 1.7% from 2022 with pre-report estimates expecting a 1.6% increase in marketing. Placements on feed by weight: under 700 pounds up 6.3%, 700 to 899 pounds up 4.9%, 900 pounds and over steady.
ASK ANDREW, THINK TANK
M a r k e t s this and markets that!
What are cattle prices going to do now and later? There have been a couple of questions on what the cattle market is going to do in the near term and the longer term. Most everyone in the cattle industry knows and understands the supply side of cattle and beef, which should support prices. However, most agricultural markets depend heavily on weather, which appears to be a major market influencer at this time. Several regions of the United States are suffering from drought. These regions are being influenced differently in that grain producing areas are experiencing crop stress and that stress is sending grain and oilseed prices higher. Cattle producing regions suffering from drought are experiencing higher feed prices, less than ideal hay and pasture production, and a cattle market that has decided to decline the past couple of weeks. These conditions and this situation have provided a reminder of who is in control, and it is not those who put the seed in the ground or care for the livestock. Please send questions and comments to agriff14@ utk.edu. FRIDAY’S FUTURES MARKET CLOSING PRICES Friday’s closing prices were as follows: Live/fed cattle –June $177.50 -0.15; August $170.78 -0.38; October $174.50 -0.18; Feeder cattle –August $233.95 +3.28; September $237.70 +3.18; October $240.15 +2.98; November $241.18 +2.73; July corn closed at $6.31 down 30 cents from Thursday.
