January 11, 2019 Tennessee Market Highlights Number: 2

FED CATTLE: Fed cattle trade was not es-tablished at press. Asking prices on a live basis were $125 to $126 while bid prices were primarily $122. The 5-area weighted average prices thru Thursday were $121.94 live, down $0.90 from last week and $195.00 dressed, up $0.82 from a week ago. A year ago prices were $120.07 live and $191.92 dressed. Cattle feeding margins are well into the black in early January and cattle feeders are setting asking prices at levels that will only improve margins which brings contentment to cattle feeders. At the same time, cattle feeders are not in any mood to bid up feed-er cattle due to the severe discounts in de-ferred live cattle futures. The feeder and fed cattle spread is certainly the dichotomy present in today’s market. The feeder-fed cattle spread is not at a record level by any stretch of the imagination but it has nar-rowed tremendously since the end of Octo-ber. Part of this narrowing is due to supply and demand fundamentals while the other part is likely due to expectations. If profits continue in the feedlot then some of those dollars will eventually be passed down. BEEF CUTOUT: At midday Friday, the Choice cutout was $212.82 down $1.14 from Thursday and down $2.03 from last Friday. The Select cutout was $207.14 down $0.63 from Thursday and down $0.68 from last Friday. The Choice Select spread was $5.68 compared to $7.03 a week ago. Beef is generally considered a commodity product because of its lack of differentia-tion. Innovative producers however have attempted to produce a differentiated product or produce beef with certain attrib-utes such as grass fed, non-hormone treat-ed, or some other attribute such as a re-gional component to add value to the prod-uct. This practice has been met with suc-cess by some in the industry while others have failed to reach similar success levels.

At the same time, innovative marketers have attempted to create beef brands that elicit some type of brand loyalty by pro-moting certain qualities or attributes of the beef product. Many times these brands have a minimum quality grade component or guarantees of production practices used or not used. Is there a next level to this segment of the industry? As cattle quality grades continue to improve, the changes could influence returns from these differen-tiation strategies. Will there be a time when a higher quality grade than Prime is institut-ed into the U.S. grading system? The inno-vators will let the industry know. OUTLOOK: Since very few cattle were mar-keted through reported auctions in Tennes-see the first week of January, it may be use-ful to know the trend this week compared to the last full week of trade in December. With that understanding, steer prices were $4 to $6 higher this week than the last full marketing week of December while heifer prices were $1 to $5 higher. Slaughter cow prices continue to struggle as they were steady to $2 lower while slaughter bull pric-es were $2 lower. This week brought some strong signs of winter and it proved to be in full force with cold nights and cool days. Harsh winter temperatures can sometimes weigh on producers as cattle feed needs generally increase with lower temperatures which results in increased hay usage and sometimes energy supplementation. As feed usage increases so do winter feed costs which will negatively influence re-turns to the cattle operation. Producers have to work diligently and delicately when balancing the winter feed costs and produc-tion measures. Overfeeding cattle will re-sult in increased feed costs with little to no improvement in production parameters while underfeeding animals could negative-ly influence growth and reproduction. Though winter has reared its ugly head, the turning of the calendar to a new year is generally a welcome sign as calf prices tend

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

Slaughter Cows

Steady to $2 lower

Slaughter Bulls

Steady

Feeder Steers

$4 to $6 higher

Feeder Heifers

$1 to $5 higher

Feeder Cattle Index

Wednesday’s index: 145.55

Fed Cattle

The 5-area live price of $121.94 was down $0.90. The dressed price of $195.00 was up $0.82.

Corn

March closed at $3.78 a bushel, down 5 cents since last Friday.

Soybeans

March closed at $9.10 a bushel, down 11 cents since last Friday.

Wheat

March closed at $5.19 a bushel, up 2 cents since last Friday.

Cotton

March closed at 72.49 cents per lb, down 0.03 cents since last Friday.

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to start slowly increasing. Calf prices should slowly and steadily increase moving through March and into early April. The expec-tation is for 500 pound steer prices to peak near $160 per hun-dredweight with a first quarter average price of $155. The $160 price is a couple of dollars lower than the 2018 apex, but the calf and feeder cattle markets may be under pressure the next three to four months as industry participants attempt to figure out the fed cattle marketing schedule. The feeder cattle market may end up receiving a more direct blow than the calf market in the near term as calf buyers continue to bet on the come. However, the calf market will not be immune to the pressure. ASK ANDREW, TN THINK TANK: Turbulent times in politics require cattle producers to be attentive, active, and flexible marketers. This statement stems from a question from a pro-ducer in North Carolina who was marketing his cattle the day after President Trump announced the first round of tariffs in 2018. The tariff announcement negatively impacted feeder cattle futures the following day which also negatively influ-enced the price received by the producer for his calf crop. We now live in a world where an individual can have a thought one second, post it to social media the next second, and in a matter of minutes it has reached the entire developed world. It does not matter if one deems the speed of information transfer good or bad. What matters for cattle producers is being able to re-spond to that information in a manner that can improve the situation or at a minimum fend off the negative impacts. In gen-eral, it is not possible for cattle producers to take lemons and make lemonade in a matter of seconds. Thus, educating our-selves with price risk management strategies and utilizing them when appropriate is one method of combating fickle market movements.

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Livestock Comments by Dr. Andrew Griffith

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 –February $124.98 +0.10; April $126.38 +0.45; June $117.20 -0.18; Feeder cattle –January $146.13 -0.63; March $144.90 -0.18; April $145.75 +0.08; May $146.05 +0.13; March corn closed at $3.79 up $0.03 from Thursday.

Crop Comments by Dr. Aaron Smith

Overview Corn and soybeans were down; cotton was mixed; and wheat was up for the week.

The partial government shutdown has resulted in several key reports (WASDE, Crop Production, and Grain Stocks being delayed. Reports will be released, however the USDA will determine the release schedule after the government resumes normal operations. An addition consequence of the partial shutdown is the inability for producers to complete paper work at FSA for Market Facilitation Program (MFP) payments. The payments were provided to producers to help mitigate the impact of retaliatory tariffs on commodity prices. The application dead-line was initially set as January 15, 2019, however USDA Secretary of Agriculture Sonny Perdue extended the deadline indicating: “We will therefore extend the application deadline for a period of time equal to the number of business days FSA offices were closed, once the government shutdown ends…". This should allow producers time to complete the required paper work to obtain payments for 2018 production.

Corn prices moved mostly sideways this week maintaining the well-established trading range that has prevailed since the end of September. For example, March futures have maintained a trading range of $3.70 to $3.90, with reasonable consistency, for over

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Crop Comments by Dr. Aaron Smith

three months. Continuation of this trading range seems likely in the absence of new data from the USDA and or production/weather disruptions in South America. As has been the case for almost one year, trade remains a substantial wild card.

Soybeans have been on a consistent uptrend since mid-September. March soybeans had a low of $8.39 ¾ on September 18, since then, prices have appreciated over 70 cents closing on Friday at $9.10 ¼. While prices are still substantially below last year’s levels, the price appreciation has been a positive for those that have been able to store soybeans. Additionally, MFP payments will help improve net price per bushel for soybean producers. The challenge for the 2018 soybean crop was finishing the harvest and getting a high quality soybean seed. In Tennessee, and other areas in the Mid-South, some soybean fields remain unharvested as of Janu-ary 11.

Cotton markets took it on the chin at the end of December declining from 77-79 cents to 71-74 cents. Currently, bearish concerns continue to dominate the market including, the China US trade war, reduced exports to Turkey, slowing of the Chinese economy, and the increased competiveness of man-made fibers. However, declining world cotton carryover and a relatively small cotton crop in India should help prices stabilize and possibly improve in 2019. U.S. planted acreage will be an important market consideration moving forward.

July 2019 wheat futures have been unsuccessful in attempts to maintain upward price momentum towards $5.50. However, price support has been well established near $5.20, so is seems likely that prices will move sideways to up over the next couple of months.

Corn

Ethanol production for the week ending January 4 was 1.00 million barrels per day, down 11,000 from the previous week. Ethanol stocks were 23.254 million barrels, up 92,000 barrels. Across Tennessee, average corn basis (cash price-nearby futures price) strengthened at Northwest and Upper-middle Tennessee and weakened at Northwest Barge Points and Memphis. Overall, basis for the week ranged from 16 under to 9 over the March futures contract with an average of 3 under at the end of the week. March 2019 corn futures closed at $3.78 down 5 cents since last Friday. For the week, March 2019 corn futures traded between $3.76 and $3.84. May 2019 corn futures closed at $3.86, down 5 cents since last Friday. Mar/May and Mar/Dec future spreads were 8 and 23 cents.

In Tennessee, September 2019 corn cash forward contracts averaged $3.90 with a range of $3.76 to $4.04. December 2019 corn futures closed at $4.01, down 3 cents since last Friday. Downside price protection could be obtained by purchasing a $4.10 Decem-ber 2019 Put Option costing 30 cents establishing a $3.80 futures floor.

Soybeans

Average soybean basis strengthened at Northwest and Upper-middle Tennessee and weakened at Northwest Barge Points and Memphis. Basis ranged from 56 under to 10 under the March futures contract at elevators and barge points. Average basis at the end of the week was 32 under the March futures contract. March 2019 soybean futures closed at $9.10, down 11 cents since last Friday. For the week, March 2019 soybean futures traded between $9.05 and $9.27. March soybean-to-corn price ratio was 2.41 at the end of the week. May 2019 soybean futures closed at $9.23, down 11 cents since last Friday. Mar/May and Mar/Nov future spreads were 13 and 42 cents.

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Crop Comments by Dr. Aaron Smith

In Tennessee, October/November 2019 soybean cash contracts average $9.25 with a range of $8.87 to $9.48. November 2019 soy-bean futures closed at $9.52, down 5 cents since last Friday. Downside price protection could be achieved by purchasing a $9.60 November 2019 Put Option which would cost 53 cents and set a $9.07 futures floor. Nov/Dec 2019 soybean-to-corn price ratio was 2.37 at the end of the week.

Cotton

Delta upland cotton spot price quotes for January 10 were 70.1 cents/lb (41-4-34) and 71.85 cents/lb (31-3-35). March 2019 cotton futures closed at 72.49, down 0.03 cents since last Friday. For the week, March 2019 cotton futures traded between 71.54 and 73.92 cents. Mar/May and Mar/Dec cotton futures spreads were 1.54 cents and 1.15 cents. May 2019 cotton futures closed at 74.03, up 0.09 cents since last Friday.

December 2019 cotton futures closed at 73.64, down 0.2 cents since last Friday. Downside price protection could be obtained by purchasing a 74 cent December 2019 Put Option costing 4.52 cents establishing a 69.48 cent futures floor.

Wheat

March 2019 wheat futures closed at $5.19, up 2 cents since last Friday. March 2019 wheat futures traded between $5.12 and $5.24 this week. March wheat-to-corn price ratio was 1.37. Mar/May and Mar/Jul future spreads were 6 cents and 10 cents. May 2019 wheat futures closed at $5.25, up 3 cents since last Friday.

In Tennessee, June/July 2019 wheat cash contracts ranged from $5.05 to $5.55 for the week. July 2019 wheat futures closed at $5.29, unchanged since last Friday. Downside price protection could be obtained by purchasing a $5.30 July 2019 Put Option costing 28 cents establishing a $5.02 futures floor.

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Crop Comments by Dr. Aaron Smith

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, January 4, 2019 — Thursday, January 10, 2019

Friday Monday Tuesday Wednesday Thursday

Low High Low High Low High Low High Low High

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

Memphis ——— 9.14-9.14 9.03-9.04 9.04-9.08 8.85-8.87

N.W. B.P. 8.91-9.02 8.97-9.09 8.87-8.91 8.90-8.96 8.73-8.84

N.W. TN 8.71-8.77 8.71-8.79 8.68-8.74 8.68-8.79 8.51-8.74

Upper Md. 8.87-8.91 8.88-8.94 8.82-8.83 8.89-8.89 8.72-8.83

Yellow Corn

Memphis ——— 3.86-3.89 3.84-3.85 3.82-3.87 3.76-3.81

N.W. B.P. 3.85-3.91 3.84-3.91 3.75-3.83 3.74-3.86 3.73-3.76

N.W. TN 3.68-3.83 3.68-3.83 3.66-3.82 3.66-3.80 3.62-3.82

Upper Md. 3.77-3.83 3.78-3.82 3.80-3.80 3.72-3.81 3.71-3.77

Wheat

Memphis ——— 5.17-5.17 5.18-5.18 5.20-5.20 5.14-5.14

Cotton ———————–——————————————— ₵/pound ———————————————————–———

Delta 69.77-71.52 70.00-71.75 68.92-70.67 70.38-72.13 70.10-71.85

Prices Paid to Farmers by Elevators

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Cattle Receipts: This week: 7,739 (9) Week ago: 1,229 (2) Year ago: 7,757 (11)

This Week Week Ago Year Ago

Low High Weighted Average Weighted Average Weighted Average

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

Steers: Medium/Large Frame #1-2

300-400 lbs 136.00 187.50 160.05 137.90 170.40

400-500 lbs 130.00 164.00 152.88 139.84 162.70

500-600 lbs 122.00 160.00 144.50 132.37 148.30

600-700 lbs 118.00 147.00 136.22 ——— 139.94

700-800 lbs 115.00 139.00 130.73 115.83 131.56

Steers: Small Frame #1-2

300-400 lbs 132.50 170.00 149.29 ——— 141.82

400-500 lbs 110.00 146.00 137.51 ——— 144.61

500-600 lbs 115.00 135.00 127.19 ——— 133.43

600-700 lbs 91.00 135.00 108.12 ——— 125.00

Steers: Medium/Large Frame #2-3

300-400 lbs 125.00 177.50 149.93 ——— 149.68

400-500 lbs 126.00 152.50 140.62 ——— 147.54

500-600 lbs 115.00 145.00 134.53 ——— 135.26

600-700 lbs 111.00 131.00 122.98 ——— 125.78

700-800 lbs 111.00 120.00 116.45 ——— 117.07

Holstein Steers

300-400 lbs ——— ——— ——— ——— ———

500-600 lbs ——— ——— ——— ——— 84.40

700-800 lbs ——— ——— ——— ——— ———

Slaughter Cows & Bulls

Breakers 75-80% 41.00 46.15 48.22 50.93 52.50

Boners 80-85% 47.69 48.38 54.33 40.00 54.00

Lean 85-90% 32.00 43.50 37.33 37.30 44.54

Bulls YG 1 60.00 76.00 69.20 69.15 71.80

Heifers: Medium/Large Frame #1-2

300-400 lbs 110.00 149.00 132.89 126.16 141.51

400-500 lbs 109.00 140.00 125.70 117.23 137.67

500-600 lbs 107.00 131.00 121.82 121.33 130.49

600-700 lbs 95.00 127.50 117.96 111.65 125.02

Heifers: Small Frame #1-2

300-400 lbs 111.00 134.00 124.34 ——— 125.28

400-500 lbs 109.00 125.00 118.06 ——— 124.77

500-600 lbs 102.50 120.00 112.29 ——— 115.74

600-700 lbs ——— ——— ——— ——— ———

Heifers: Medium/Large Frame #2-3

300-400 lbs 105.00 135.00 122.23 ——— 128.09

400-500 lbs 107.00 130.00 120.52 107.36 128.61

500-600 lbs 105.00 123.00 114.59 ——— 120.01

600-700 lbs 99.00 118.00 109.36 ——— 116.99

Prices on Tennessee Reported Livestock Auctions for the week ending January 11, 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

2013/2017 Av g 2018 2019

35455565758595

105

Tennessee Slaughter Cow PricesBreakers 75-80%

2018, 2019 and 5-year average

2013/2017 Avg 2018 2019

100

120

140

160

180

200

220

Tennessee 500-600 lbs. M-1 Steer Prices2018, 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 - January 9, 2019 1 load out of 95 steers; BQA certified producer; est. wt. 825 lbs.; 95% L&M-1s & 5% L&M-2s; medium flesh; 100% Black/BWF; $142.00 1 load out of 68 heifers; BQA certified producer; est. wt. 761 lbs,; 95% L&M-1s & 5 % L&M-2s; medium flesh; 85% Black/BWF , 10% ChaX/Smoky and5% Red/RWF; $135.00 1 load out of 120 Holstein steers; BQA certified producer; est. wt 815 lbs,; 95% #1s and 5% #2s; medium flesh; $88.50 Mid-South Livestock Center - January 7, 2019 1 Load of 73 Steers; M-L 1-2s; est. wt. 689 lbs.; $140.50 Hodge Livestock Network - January 10, 2019 1 load of steers; est. wt. 775 lbs. range 675-850 lbs.; Black & BWF; 90% #1, 10% # 1 1/2; M&L, medium grass flesh; $142.00 1 load of steers; est. wt. 875 lbs, range 800-950 lbs.; 80% Black & BWF, 20% CharX; 80#1s, 20% # 1 1/2s; 80% Medium, 20% Large; medium grass flesh; $138.25 1 load of steers; est. wt. 800 lbs. range 700-900 lbs.; 80% Black & BWF, 10% Char-X, and 10% Reds; 70% #1, 20% #1 1/2, and 10% good #2’s; 80% Medium, 20% Large; Light Medium to Me-dium flesh; $130.00 1 load of heifers; est. wt. 700 lbs. range 600-800 lbs.; Approx. 80% Black & BWF, 10% Char-X, and 10% Reds; 70% #1, 20% #1 1/2, and 10% good #2’s; 80% Medium, 20% Large Light Medium to Medium flesh; $126.50 1 load of heifers; est. wt. 600 lbs. range 500-650 lbs.; Approx. 80% Black & BWF, 15% Char-X, and 5% Reds; 75% #1, 15% #1 1/2, and 10% good #2’s; Medium to Large; Light Medium grass flesh; $137.75

01/08/2019 TN Livestock Producers Fayetteville Receipts: 515 (229 graded & grouped) Steers: Med & Lg 1-2 Heifers: Med & Lg 1-2 300-400 lbs 140.00-147.00 300-400 lbs 122.50-131.00 400-500 lbs 141.00-148.00 400-500 lbs 118.00-128.50 500-600 lbs 142.00-147.00 500-600 lbs 116.00-125.00 600-700 lbs 128.00-130.00 600-700 lbs 114.50-122.00 700-800 lbs 120.00-125.00 700-800 lbs 105-00-114.00 800-900 lbs 115.00-119.00 800-900 lbs 95.00 Bulls: Med & Lg 1-2 400-500 lbs 134.50-140.00 500-600 lbs 138.00-143.00 600-700 lbs 115.00-127.50 700-800 lbs 105.00-109.00 01/07/2019 Morris Brothers Stockyard, Pikeville, TN Receipts: 90 Last Week: Last Year: 71 Steers: Heifers: 350-399 lbs 150.00 350-399 lbs 130.00-140.00 400-449 lbs 146.00 400-449 lbs 120.00-133.00 450-499 lbs 129.00-142.00 450-499 lbs 123.00 500-549 lbs 115.00-145.00 500-549 lbs 109.00-127.00 550-599 lbs 100.00-137.00 550-599 lbs 118.00-124.00 600-699 lbs 117.00-137.00 600-699 lbs 103.00-124.50 700-799 lbs 131.50 700-799 lbs 115.00-120.00 Over 799 lbs 113.00 Bulls: Other: 300-349 lbs 129.00 Head Calves: $150.00-$200.00 400-449 lbs 115.00-137.00 Slaughter Cows (Over 900): 450-499 lbs 138.00-139.00 20.00-54.00 600-699 lbs 110.00 Slaughter Bulls (Over 1500): 68.50-71.50

Graded Sales, Video Board Sales, Video Sales & Loads Self-Reported and Self-Graded Livestock Markets

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