Agricultural Economics

Month: July 2016

Cattle Market Notes: Week Ending July 29, 2016

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Cash Cattle:

Cash traded fed cattle were mixed this week. The five-area fed steer price for the week of July 21-July 28 averaged $118.00 for live sales, and $184.09 for dressed; respectively, up $3.35 and down $0.74. Total volume sold was down 14,000 head from a week ago and up 49,000 head from last year.

Feeder steer cattle and calves were mixed across the U.S. this week. Oklahoma City 500-550 pound steers were $3.00 lower while heavier 750-800 pound steers were steady to $1.00 higher. Mississippi pasture conditions were steady this week with 53% rated good or excellent, unchanged from a week ago.  In Mississippi auctions, lighter weight feeders weighing 450-500 pounds were averaging $135.00, up $3.50 from a week ago, while heavy steers were averaging $118.00, up $3.00 from last week.

[ … For Livestock Prices and Production data and trends CLICK HERE … ]

Futures:

Live cattle futures and feeder futures were higher this week. August live cattle were up $3.23 on the week and $32.50 lower than a year ago at $113.20, while December live cattle were up $3.05 from last week and down $35.15 from a year ago. Feeder cattle were higher this week with August futures up $3.27 from last Friday and down $70.53 from a year ago at $140.20 while October futures are up $3.00 on the week. Nearby corn futures are down $0.03 from a week ago at $3.33 while December futures are also down $0.01.

Beef:                                                                                           

Wholesale boxed beef prices are lower compared to a week ago. Choice boxes averaged $198.79, down $2.60 from a week ago and $33.94 lower than a year ago. Select boxes ended the week with an average of $189.92, down $0.85 from last week. The choice-select spread narrowed from $10.62 a week ago to $8.87 this week.

Note: all cattle and beef prices are quoted in dollars per hundredweight and corn prices are quoted in dollars per bushel, unless stated otherwise.

Crop Market Update: July 26, 2016

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Corn is down this week with Greenville cash corn currently trading $0.17 lower than a week ago and $0.58 lower than a year ago at $3.45/bu on Friday. September futures contracts are $0.17 lower on the week at $3.35/bu. Mississippi producers have 60% of the state’s corn crop denting, ahead of last year’s pace and right at the 5-year average of 60%. Mississippi’s corn crop condition remains steady with 61% of the state’s crop rated in good or excellent condition. Nationally, about 13% of the U.S. corn crop is in the dough state, right on pace with a year ago as well as the five year average. Favorable growing conditions have the U.S. corn crop looking good with 76% of the crop rated in good or excellent condition.

Soybean markets are trading lower this week, with Greenville soybeans trading $0.66 lower at $10.07/bu on Friday. A year ago, Greenville soybeans were trading for $10.06/bu. Nearby August soybean futures are trading $0.66 lower than a week ago. Mississippi’s soybean crop development is slightly ahead of the 5-year average as well as ahead of a year ago with 65% of the crop setting pods compared to 59% a year ago and a five year average of 60%. Mississippi’s soybean crop condition is steady with 65% of the state’s crop rated in good or excellent condition. The U.S. soybean crop is ahead of schedule with 35% of the crop setting pods compared to a 5-year average of 26%. Nationally, the soybean crop looks good overall with 71% of the nation’s soybean crop rated in good or excellent condition.

September wheat futures are up $0.01 from a week ago at $4.25 while Greenville wheat prices are unchanged on the week at $4.05/bu on Friday. The U.S. winter wheat harvest is slightly ahead of schedule with 83% of the U.S. wheat crop harvested compared to a 5-year average of 79%. The U.S. spring wheat crop is rated 73% good or excellent condition, slightly better than last year when the crop was rated 69% good or excellent.

Cotton prices finished the week lower with South Delta cash prices trading $1.34/cwt lower than a week ago at $72.02/cwt and $8.43/cwt higher than a year ago. Nearby cotton futures are lower with October cotton futures closing at $72.52, down $1.34/cwt from last week. Mississippi producers currently have about 72% of the state’s cotton crop setting bolls, ahead of a year ago and ahead of the 5-year average of 64%. This week 55% of Mississippi’s cotton crop is rated in good or excellent condition while 52% of the U.S. crop is in good or excellent condition. Nationally, 46% of the cotton crop is setting bolls, slightly ahead of the 5-year average of 43%.

For more detail on crop futures and Mississippi local cash prices click here.

Cattle Market Notes: Week Ending July 22, 2016

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Cash Cattle:

Cash traded fed cattle were lower this week. The five-area fed steer price for the week of July 14-July 21 averaged $114.65 for live sales, and $184.83 for dressed; respectively, down $2.35 and $2.59. Total volume sold was up 1,000 head from a week ago and up 56,000 head from last year.

Feeder steer cattle and calves were lower across the U.S. this week. Oklahoma City 500-550 pound steers were $5.00 lower while heavier 750-800 pound steers were steady to $1.00 lower. Mississippi pasture worsened slightly this week with 53% rated good or excellent, down 1% from a week ago.  In Mississippi auctions, lighter weight feeders weighing 450-500 pounds were averaging $131.50, down $3.50 from a week ago, while heavy steers were averaging $115.00, up $1.00 from last week.

[ … For Livestock Prices and Production data and trends CLICK HERE … ]

Futures:

Live cattle futures and feeder futures were lower this week. August live cattle were down $0.95 on the week and $33.00 lower than a year ago at $109.98, while December live cattle were down $2.18 from last week and down $38.43 from a year ago. Feeder cattle were higher this week with August futures down $2.45 from last Friday and down $73.43 from a year ago at $136.93 while October futures are down $2.50 on the week. Nearby corn futures are down $0.16 from a week ago at $3.36 while December futures are also down $0.15.

Beef:

Wholesale boxed beef prices are lower compared to a week ago. Choice boxes averaged $201.39, down $4.61 from a week ago and $31.28 lower than a year ago. Select boxes ended the week with an average of $190.77, down $3.71 from last week. The choice-select spread narrowed from $11.52 a week ago to $10.62 this week.

July Cattle on Feed

The United States Department of Agriculture’s National Agricultural Statistics Service (USDA, NASS) released their monthly Cattle on Feed report Friday afternoon (July 22, 2016).  The report revealed that 10.356 million head of cattle were in U.S. feedlots with a capacity of 1,000 head or larger on July 1, 2016, up 1.17% from a year ago. Placements into feedlots during the month of June totaled 1.525 million head while marketings during the same month totaled 1.912 million head, up 2.97% and 9.44% from a year ago, respectively. Placements were well below expectations while marketings and total number of cattle on feed were close to expectations.

Note: all cattle and beef prices are quoted in dollars per hundredweight and corn prices are quoted in dollars per bushel, unless stated otherwise.

July Cattle on Feed Report Recap

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The United States Department of Agriculture’s National Agricultural Statistics Service (USDA, NASS) released their monthly Cattle on Feed report Friday afternoon (July 22, 2016). The report revealed that 10.356 million head of cattle were in U.S. feedlots with a capacity of 1,000 head or larger on July 1, 2016. Placements into feedlots during the month of June totaled 1.525 million head while marketings during the same month totaled 1.912 million head.

[ … For detailed numbers and charts CLICK HERE … ]

Placements totaled 1.525 million head, an increase of 2.97% from June 2015 and a 2.98% decrease from the five-year average from 2011 to 2015. Market analyst expected placements to be up 6.1%, so the reported value came in well below expectations. This month’s numbers continue the trend of increasing heavy placements, with cattle larger than 800 pounds seeing a 17.4% year-over-year increase while cattle less than 600 pounds saw a 17.1% year-over-year decrease in placements.

Cattle marketed in June totaled 1.912 million head, up 9.44% versus last year and up 0.30% compared to the average from 2011 to 2015. Pre-report expectations called for marketings to be 9.7% higher than the same period last year, so they came in very close to where analysts anticipated they would be.

The total number of cattle in feedlots with 1,000 head or larger capacity totaled 10.356 million head, up 1.17% versus July 1, 2015 and 0.19% lower than the five-year average.  Market analysts expected a 1.6% year-over-year increase in cattle inventories, so the reported value came in slightly below expected but still well within the range of analysts’ expectations.

Cattle Market Notes: Week Ending July 15, 2016

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Cash Cattle:

Cash traded fed cattle were lower this week. The five-area fed steer price for the week of July 7-July 14 averaged $117.00 for live sales, and $187.42 for dressed; respectively, down $3.38 and $3.24. Total volume sold was up 81,000 head from a week ago and up 56,000 head from last year.

Feeder steer cattle and calves were lower across the U.S. this week. Oklahoma City 500-550 pound steers were averaging $162.65 while heavier 750-800 pound steers were averaging $143.27. Mississippi pasture worsened slightly this week with 54% rated good or excellent.  In Mississippi auctions, lighter weight feeders weighing 450-500 pounds were averaging $135.00, while heavy steers were averaging $114.00.

[ … For Livestock Prices and Production data and trends CLICK HERE … ]

Futures:

Live cattle futures and feeder futures were lower this week. August live cattle were down $1.30 on the week and $35.73 lower than a year ago at $110.93, while December live cattle were down $2.36 from last week and down $39.80 from a year ago. Feeder cattle were higher this week with August futures down $4.07 from last Friday and down $75.83 from a year ago at $139.38 while October futures are down $4.38 on the week. Nearby corn futures are down $0.03 from a week ago at $3.52 while December futures are also down $0.04.

Beef:                                                                                           

Wholesale boxed beef prices are lower compared to a week ago. Choice boxes averaged $206.00, down $3.33 from a week ago and $28.85 lower than a year ago. Select boxes ended the week with an average of $194.48, down $1.77 from last week. The choice-select spread narrowed from $13.08 a week ago to $11.52 this week.

Note: all cattle and beef prices are quoted in dollars per hundredweight and corn prices are quoted in dollars per bushel, unless stated otherwise.

Will farm programs be cut even before the next farm bill starts?

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I had the privilege of serving as a chief economist for the U.S. Senate Committee on Agriculture, Nutrition, and Forestry during the last farm bill debate.  The cost of legislation was paramount with the mandated goal of reducing the Congressional Budget Office (CBO) score of the bill.  Roughly speaking all the program crops were asked to take about a 30% reduction in the CBO estimate of farm program spending.  Note that CBO looks forward 10 years and compares the cost of new legislation to a continuation of existing legislation.  One must also understand that the CBO agricultural baseline changes from year to year as market conditions change.  One should understand predicting program costs that far into the future is a highly imprecise process.

Many groups have turned their attention to the expiration of this bill.  So it is fair to ask where will the baseline for the big three farm support programs (ARC, PLC, crop Insurance) be at when CBO is asked to score a new farm bill.  Figure 1 shows the March 2016 CBO baselines for County ARC, PLC, and crop insurance.  Examining this chart, one can see that from 2018 on:

  • CBO assumes that at expiration of this bill producers will be allowed a ‘do over’ on the ARC vs PLC choice. Some switch from ARC to PLC is expected.
  • Crop insurance is projected to increase slowly and average around $9 billion/year.
  • PLC a program widely adopted by rice, peanuts and a substantial amount of wheat is projected to remain at around $3 billion/year in out years.
  • County ARC annual cost is expected to slide 85% from a peak of $6 billion to around $1 billion. This especially affects corn, soybeans and some wheat producers. This is primarily due to the fact that the 5-year Olympic average price used in ARC will fall dramatically as the high prices of a few years ago are dropped.
  • The baseline is likely to shrink in the next 24 months primarily due to dropping the recent high ARC payment levels and replacing them with out-years with lower payment levels. For example, the $6,099 Billion for ARC in 2017 will likely be replaced with a value near one billion. This reduces money available for the next farm bill.

 

CBO Baseline 2016

 

So what does this mean?

  • Crop insurance will likely remain a focal point for policy because it is the biggest pot of funds. That also means it will be attached as a source of funds for other programs.
  • Three commodities are facing dramatic declines in baseline funding – corn, soybeans, and to a lesser degree wheat.
  • Participation rates affect these outcomes. For example, the fact that actual STAX participation has been below what CBO expected, means expected increases in cotton crop insurance program cost in the last farm bill did not materialize.

 

Cattle Market Notes: Week Ending July 1, 2016

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Cash Cattle:

Cash traded fed cattle were higher this week. The five-area fed steer price for the week of June 23-June 30 averaged $122.48 for live sales, and $195.94 for dressed; respectively, up $6.39 and $8.12. Total volume sold was down 10,000 head from a week ago and up 77,000 head from last year.

Feeder steer cattle and calves were higher across the U.S. this week. Oklahoma City 500-550 pound steers were up $8.00 while heavier 750-800 pound steers were up $3.00. Mississippi pasture worsened slightly this week with 60% rated good or excellent, down 3% from a week ago.  In Mississippi auctions, lighter weight feeders weighing 450-500 pounds were up $2.50 from a week ago, averaging $137.50, while heavy steers were averaging $116.50, up $4.00 from last week.

[ … For Livestock Prices and Production data and trends CLICK HERE … ]

Futures:

Live cattle futures and feeder futures were higher this week. August live cattle were up $2.13 on the week and $41.00 lower than a year ago at $112.98, while December live cattle were up $1.68 from last week and down $41.15 from a year ago. Feeder cattle were higher this week with August futures up $2.60 from last Friday and down $75.20 from a year ago at $142.25 while October futures are up $3.47 on the week. Nearby corn futures are down $0.30 from a week ago at $3.60 while December futures are also down $0.28.

Beef:

Wholesale boxed beef prices are lower compared to a week ago. Choice boxes averaged $208.88, down $7.94 from a week ago and $43.21 lower than a year ago. Select boxes ended the week with an average of $195.69, down $2.73 from last week. The choice-select spread narrowed from $18.40 a week ago to $13.19 this week.

Note: all cattle and beef prices are quoted in dollars per hundredweight and corn prices are quoted in dollars per bushel, unless stated otherwise.