Written with: David Anderson
Corn: The shortened week following Memorial day saw continued growth in grains and cotton with declines in the nearby live and feeder contracts. In the last three weeks DEC Corn ($4.326/bu) has climbed almost 20.0% on significant planting delays, particularly in the Midwest. As of May 26 the Crop Progress report has Texas at 93.0% complete in corn plantings, although I’ve heard of some delays in our northeastern counties. The Texas A&M AgriLife Extension budgets for District 1 estimate a break even price for irrigated corn of $4.01. Given the increasingly uncertain trade environment (more on the newly proposed tariffs on Mexican products later), and the stage of production for the year, this might be a good opportunity to protect production with some puts or another form of risk management.
Cotton: Cotton is one crop that is on track or ahead of schedule in planting progress. The previous 5-year average amount planted was 58.0% and 44.0% for the U.S. and Texas, respectively. As of May 26 we are 57.0% planted for the U.S. and 48.0% planted in Texas. Old crop is continuing slow, mostly sideways movement, while July ’20 crop is up over $0.70/lb as of close on Thursday.
Cattle: AUG Live and AUG Feeder contracts declined over the week. Cattle on Feed, released last Friday reported the highest May 1 inventory since 1996, when the series began. The inventory for feedlots with capacity of 1,000 head+ totaled 11.8 million, 2.2% over the previous year. These numbers were below the average pre-report estimates, however markets continued to decline over the week. Part of these declines could be driven by the increase in corn price we discussed earlier, which typically leads to declines in cattle and calf prices.
Placements of cattle below 700 lbs (605,000 head) were on par with the previous year (540,000 head). Placements of cattle from 700-899 lbs were up 9.5% YOY from 860,000 head to 942,000 head. This increase is expected from the previous year’s increased calf crop, but it does have implications for timing of marketings in late summer. These heavier placements will likely start being marketed in August.
Next Week:
Watch for continued news on President Trump’s newly announced tariffs on Mexican goods. (See how tariffs work in our earlier post in ‘It Depends‘) The tariff structure will reportedly consist of a 5.0% tariff with gradual increases over time, beginning June 10. The tariffs would eventually be capped indefinitely at 25.0%. Mexico is one of the U.S. three largest trading partners and is particularly significant for Texas. The office of the U.S. Trade Representative reports $109.7 billion in goods exported from Texas to Mexico in 2018. They are the states largest export market. The news won’t have time to impact weekly export sales, out today, but we’ll be watching the report on June 6 to see if there has been a change week-over-week. Complicating matters further, China’s retaliatory tariffs against $60 billion in U.S. exports go into effect tonight.
Important Dates:
6/3/2019 – Crop Progress, NASS
6/3/2019 – Continuous CRP Signup opens
6/6/2019 – Weekly Export Sales, FAS
In the News:
NY Times – Trump Says U.S. Will Hit Mexico With 5% Tariffs on All Goods
Farm Progress – Carryover hay supplies tight
Feedstuffs – Beef production project to achieve new record in 2020
Feedstuffs – North Korea reports first case of ASF