Farmers Report

Almanac’s Best Days for the Week

CROP COMMENTS

by Aaron Smith, Crops Marketing Specialist
July 7, 2023

Overview
Corn was mixed; cotton was up; and soybeans and wheat were down for the week.
After last week’s dramatic decline, from $5.94 to $4.94 ¾, December corn futures moved mostly sideways trading between $4.85 ½ and $5.09 ½. The dramatic increase in corn planted acreage (94 million acres planted nationally) limits the upside in corn markets and opens the potential for further declines. National average yield and the potential for weather induced acreage losses will provide the direction. The US drought monitor continues to indicate drought concerns in a large portion of the Corn Belt, however recent rain events have partially mitigated the impact on crops and the 5–7-day precipitation forecast has 1 to 5 inches of projected rainfall over a large area. If widespread rainfall is realized markets could easily move 25 to 50 cents lower.
November soybeans started the week with additional gains based on the bullish soybean acreage estimate – 83.5 million acres planted – in last Fridays June Acreage report but pulled back 50 cents on Thursday and Friday. Soybean acreage provides support for domestic prices however with Brazil’s record crop dominating international markets, prices are unlikely to move substantially higher in the next few weeks.
December cotton continues to be range bound between 77 and 84. The extreme heat in the southern plains could create production concerns but for now the trading range is likely to hold into August when updated acreage and production estimates will be provided by USDA. Demand continues to remain elusive for global markets. Demand will hold the key for price direction for the 2023/24 cotton marketing year.

LIVESTOCK COMMENTS

FED CATTLE
Fed cattle traded steady compared to last week on a live basis. Prices in the South were mainly $178 to $179 while dressed prices were mainly $288 to $290.
The 5-area weighted average prices thru Thursday were $180.70 live, up $0.29 compared to last week and $289.81 dressed, up $1.23 from a week ago. A year ago, prices were $144.37 live and $232.30 dressed.
The cattle feeder’s ability to keep prices steady demonstrates some of the leverage they continue to yield over the packer in the market. It is typical for finished cattle prices to begin to wane during the heat of summer, but the cattle supply picture has resulted in packers remaining as active bidders. Packers are not in a situation where they can afford to let cattle pass and go to another packer. Rail space is going to be abundant the next couple of years relative to the quantity of cattle to hang on them. Thus, packers will compete as fixed costs and labor has to be paid. The cattle feeder will benefit on the selling end, but they will be squeezing their profit margins from the other end as they pay a handsome price for feeder cattle.

BEEF CUTOUT
At midday Friday, the Choice cutout was $317.80 down $2.07 from Thursday and down $10.09 from a week ago. The Select cutout was $288.17 down $1.80 from Thursday and down $7.37 from last week. The Choice Select spread was $29.63 compared to $32.35 a week ago.
The Choice cutout is beginning to come under a little pressure. Summer prices peaked in the middle of June just prior to the official start of summer by calendar standards. The high price realized in the middle of June was the highest Choice cutout price dating back to the end of August 2021. Thus, it was essentially the highest price in two years. However, prices are being seasonally pressured during the heat of summer as the next grilling holiday is two months down the road. Thus, there will be a shift to hamburgers and beef hotdogs, and there is never a bad time for those two delicacies. These items will certainly garner more attention the next few weeks compared to higher valued grilling cuts. Thus, this is a contributing factor to the softer Choice cutout. Another factor to consider is increased dairy cow slaughter, which will put more lean grinding beef on the market. As milk prices continue declining, dairies will cull more cows. This will keep a sufficient supply of ground product even as beef cow slaughter rates decline.

OUTLOOK
There are no trends to report this week as most auctions were closed and not reported due to the Independence Day holiday on Tuesday. Despite the holiday on Tuesday, it did not stop traders from jockeying around futures prices most of the week. Most all cattle and grain futures have been interesting to watch the past several weeks. The corn and feeder cattle dynamics are working with some bit of logic as corn prices decline then feeder cattle prices increase and vice-a-versa. The big market shock was last week’s acreage report, which had more corn acres and fewer soybean acres. This pushed corn prices drastically lower, which allowed feeder cattle futures to move higher. It is not just futures prices that are increasing but the cash price has as well. The CME feeder cattle index as of July 6th was over $230 per hundredweight. This price represents an 800 pound steer in 12-states in the central part of the country. At the same time, one video sale in Tennessee saw 50,000 pound load lots of steers with average weights between 835 and 930 pounds bring between $218 and $224 per hundredweight, which meant some of the cattle exceeded $2,000 per head. The single load of heifers on this sale were $10 per hundredweight back of the same weight steers. These are certainly exciting times in the cattle industry, but exciting does not necessarily mean good or bad. The higher prices simply increase the financial risk in the business. Considering the 50,000 pound load of heifers, they were just shy of $1,800 per head. What does this mean for bred heifer prices, or the cost of retaining a heifer to put back in the breeding herd? What it means is there are going to be some extremely expensive females entering the cow herd the next 12 to 18 months if prices persist. Two more things this means is that bred cow prices will push higher and several sorry heifers will be retained as cows.

ASK ANDREW, TN THINK TANK
Should I be expanding my cow herd, or should I just sell out? These questions raise other questions. If a person is thinking about selling out then the next question is what is the plan with the land and resources that are still on the farm? Is buying replacement animals on the table, or will the land and equipment be leased or sold to someone else? What will the producer selling out do with his or her time since there are no cattle to take care of? There needs to be a plan for the land, equipment and the producer himself before selling out an entire herd. Now to the question of expanding the herd. What is the motive of expanding the herd? Is it to capitalize on higher calf prices? If so, then someone better get to putting pen to paper to see if they can make money the next several years and determine what happens when prices decline. If the expansion is due to picking up additional ground or a planned expansion dating back a couple of years then some of the pen to paper work has been done. However, it is going to cost more to expand, because cattle prices are higher.
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 –August $177.00 +2.43; October $179.38 +1.95; June $183.18 +1.55; Feeder cattle –August $245.43 +3.15; September $248.60 +3.28; October $250.23 +3.10; November $250.60 +2.80; July corn closed at $5.61 down 6 cents from Thursday.