Farmers Report

CROP COMMENTS

by Aaron Smith, Crops Marketing
Specialist
July 7, 2023
Overview
Corn, cotton, soybeans, and
wheat were up for the week.
The July WASDE report was
released this week. The national
average corn yield was decreased
from 181.5 bu/acre to
177.5 bu/acre. The reduction
was due to drier conditions
across a wide area of the Corn
Belt in May, June, and early
July that will likely limit yields
in many regions. In spite of the
reduction in yield, production
was only increased 55 million
bushels from last month due to
the incorporation of the June
planted acre estimate of 94.1
million acres. There remains a
great deal of uncertainty in the
US corn crop but the current estimated
carryover of 2.26 billion
bushel, if realized, will provide
downward pressure on prices.
Soybean acres planted were
adjusted in the July WASDE report,
but USDA chose to leave
national average soybean yield
at 52 bushels per acre. It is likely
that USDA will revise the
yield number when their August
estimate is released. One
of the key numbers to watch
moving forward for soybeans is
the export estimate – currently,
1.85 billion bushels, down 125
million from last month. The
June Acreage report surprise
of 83.5 million acres planted
will limit supplies, particularly
if yields are decreased from
the current estimate. Additionally,
as US prices climb export
business will shift to Brazil and
potentially lend support to record
soybean plantings in South
America this fall.
For cotton, harvested acres
and national average yield were
increased. Cotton planted and
harvested acres were estimated
at 11.09 and 9.53 million acres,
a 14% abandonment rate, down
substantially from last year’s
47%. Additional, harvested
acres, mostly in Texas, contributed
to the national average
yield declining from last month
by 10 lbs/acre to 831 lbs/acre.
Cotton markets are likely to
remain in the well-established
range of 77-85 cents into August
when additional production
information will be known.
The USD index achieved its
lowest level since April 2022.
The index closed at 99.605,
down 4.5% from the start of the
year. A lower USD dollar increases
the competitiveness of
US agricultural exports to global
markets.

LIVESTOCK COMMENTS

by Andrew Griffith,
Livestock Marketing
Specialist
FED CATTLE
Fed cattle trade was
not well established at the
time of this writing. Asking
prices in the South
were $180 to $182 while
bid prices were mainly
$175 to $176.
The 5-area weighted
average prices thru
Thursday were $182.99
live, up $2.29 compared
to last week and $291.25
dressed, up $1.44 from
a week ago. A year ago,
prices were $142.09 live
and $229.46 dressed.
Finished cattle trade
was slow to develop this
week as packers are feeling
pressure from both
fronts. Wholesale beef
prices are toppling from
their lofty highs and finished
cattle prices have
been holding close to their
record highs. This margin
squeeze has resulted in
packers being less willing
to pay higher prices.
At the same time, cattle
feeders are holding out
for higher prices, because
they are in fierce competition
to purchase cattle to
place on feed. The cattle
feeder maintains leverage
over the packer given today’s
fundamentals, but
their profit margin may
already be on the path to
erosion. The dynamics of
cattle markets are changing
the risk profile in the
industry, and it could be
detrimental to many participants.
BEEF CUTOUT
At midday Friday,
the Choice cutout was
$306.14 down $0.77
from Thursday and down
$11.66 from a week ago.
The Select cutout was
$277.80 down $2.38
from Thursday and down
$10.37 from last week.
The Choice Select spread
was $28.34 compared to
$29.63 a week ago.
The wholesale beef
market is about as confusing
as the names used for
meat. For instance, why
is a hamburger called a
“ham” burger? It does not
seem logical to use the
name of a pork cut for a
beef product. What about
chicken fried steak? Why
would a person relate a
beef steak product with
chicken? It removes logic
from the equation. Another
example is hotdog.
I guess for years many of
us have been eating man’s
best… Moving back to the
wholesale beef price, the
Choice cutout price has
declined nearly $37 per
hundredweight the past
four weeks while the Select
cutout price has declined
about $32 per hundredweight
over the same
time period. The price decline
is not an unexpected
action. The unexpected
action was the strong prices
in the middle of June.
The major consequence
of lower wholesale beef
prices is the squeezing
of packer margins. This
means packers will work
harder to push finished
cattle prices lower. Another
key takeaway is that
these prices will not receive
much support until
Labor Day holiday purchases
begin.
OUTLOOK
There are no trends to
report compared to last
week with most auction
markets being closed last
week in observance of
Independence Day. However,
the price of steers
and heifers this week
compared to two weeks
ago were steady to slightly
higher while slaughter
cow and bull prices were
steady compared to two
weeks ago. The term for
cattle prices that comes
to mind most often now
is “silly”. The prices for
nearly every weight class
of calves and feeder cattle
are simply silly. The
buyers of these cattle recognize
that the sudden
ascension of cattle prices
is not a good thing. They
know they cannot make
any money if they do not
own cattle, but they also
know prices at this level
means they can lose
a lot of money in a short
time. Newton’s third law
states that for every action
there is an equal and
opposite reaction. The
sudden increase in prices
will eventually be met
with a decline in prices.
The unfortunate part of
that statement is that in
the cattle price world that
could result in prices declining
more quickly than
they increased. It could
also result in cattle prices
staying lower for a longer
period of time than when
prices increased, which is
exactly what was experienced
in the last price
cycle. This should not be
met with fear but with
the thought that managing
price risk has become
more important today
than the past few years
as it relates to the feeder
cattle market. At the
same time, slaughter cow
and bull prices are also
holding pace with other
classes of cattle. Slaughter
cow prices are averaging
between $100 and $110
per hundredweight while
slaughter bull prices are in
the $125 to $135 per hundredweight
range. These
are extraordinary salvage
values for cows and bulls
that are no longer useful
in the breeding herd. Market
prices will continue
to evolve the next several
weeks and months, but
prices moderating a little
bit would not be a bad
thing for the industry.
ASK ANDREW, TN
THINK TANK
While attending a cattle
auction this week, I
was reminded of the physical
characteristics and
quality differences influencing
the price of cattle.
There were cattle of
nearly every color. Some
of them had little to no
gut fill while others could
be called full. There were
cattle carrying mud on
their hide and cattle that
were as slick and sharp as
they come. Every frame
and muscle score was represented.
There were some
cattle with dairy influence
and there were cattle that
were at least three-quarter
Brahman. There was
an animal for everyone at
the sale, which seems to
be representative of many
cow herds. Anyone who
has ever thought the sale
barn did them wrong because
they did not receive
the price they think their
cattle deserved should sit
at the sale barn and pay attention.
A cattle producer
can learn a lot about why
a certain animal or group
of animals received a certain
price. Prices are discounted
for full, muddy,
injured, sick, small frame,
light muscled, and cattle
that do not match well
with cattle in a region.
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 $180.18
+3.28; October $182.63
+2.53; June $185.78
+2.40; Feeder cattle –August
$246.65 +1.65; September
$249.23 +1.90;
October $250.48 +1.90;
November $250.40 +1.98;
July corn closed at $6.00
up 6 cents from Thursday.