January Cattle on Feed Report Recap

The United States Department of Agriculture’s National Agricultural Statistics Service (USDA, NASS) released their monthly Cattle on Feed report Friday afternoon (January 22, 2016). The report revealed that 10.573 million head of cattle were in U.S. feedlots with a capacity of 1,000 head or larger on January 1, 2015. Placements into feedlots during the month of December totaled 1.525 million head while marketings during the same month totaled 1.674 million head.

[ … For detailed numbers and charts CLICK HERE … ]

Placements totaled 1.525 million head, a decrease of 0.78% from December 2014 and a 7.64% decrease from the five-year average from 2010 to 2014. Market analyst expected placements to be down 5.1%, so the reported value significantly higher than anticipated. The reported value was nearly 2% higher than even the highest analyst’s estimate. This month’s numbers continue the trend of increasing heavy placements, with cattle larger than 800 pounds seeing a 10% year-over-year increase.

Cattle marketed in December totaled 1.674 million head, up 1.15% versus last year and down 3.52% compared to the average from 2010 to 2014. Pre-report expectations called for marketings to be 1.9% lower than the same period last year, so they slightly lower than expected, but still well within the range of analysts’ expectations.

The total number of cattle in feedlots with 1,000 head or larger capacity totaled 10.573 million head, down 0.50% versus January 1, 2015 and 5.08% lower than the five-year average.  Market analysts expected a 1.2% year-over-year increase in cattle inventories, so the reported value slightly higher than expected but still within the range of analysts’ expectations.

2016 Crop Insurance Price Discovery

It is the time of year that RMA watches the futures market to determine an expected price (used in yield and revenue products) and the options market to estimate the price volatility used to rate revenue insurance products.  The following table shows we are currently in price discovery for the February 28 sales closing date for several crops.  These values will be updated through February 14.

Commodity State Name Sales Closing Date Projected Price Market Symbol Projected Price Date Range Projected Price Projected Price Status Price Volatility Price Volatility Status
Rice Mississippi 2/28/2016 ZRX16 01/15 – 02/14 0.117 In Discovery 0.15 In Discovery
Cotton Mississippi 2/28/2016 CTZ16 01/15 – 02/14 0.62 In Discovery 0.15 In Discovery
Corn Mississippi 2/28/2016 ZCZ16 01/15 – 02/14 3.89 In Discovery 0.17 In Discovery
Peanuts Mississippi 2/28/2016 CTZ16,ZLZ16,ZMZ16,ZWZ16 01/15 – 02/14 0.2028 In Discovery 0.10 In Discovery
Soybeans Mississippi 2/28/2016 ZSX16 01/15 – 02/14 8.87 In Discovery 0.14 In Discovery

Cattle Market Notes: Week Ending January 22, 2016

Cash Cattle:

Cash traded fed cattle finished the week lower. The five-area fed steer price ended the week averaging $126.62 for live sales, and $202.00 for dressed; respectively, down $6.90 and $7.57. Total volume sold was up 1,000 head from a week ago and down 7,000 head from last year.

Feeder steer cattle and calves were trading lower across much of the U.S. this week. Oklahoma City feeder cattle were $6 to $14 lower than a week ago for most weight classes. In Mississippi auctions, lighter weight feeders weighing 450-500 pounds were down $5.00 from a week ago, averaging $190.00, while heavy steers were averaging $127.50, down $10.00 from last week.

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

Futures:

Live cattle futures and feeder futures were higher this week. February live cattle were up $5.33 on the week and $17.45 lower than a year ago at $132.90, while April live cattle were also up $5.35 from last week and down $14.95 from a year ago. Feeder cattle were also higher with January futures up $6.00 from last Friday and down $53.33 from a year ago at $160.30 while March futures are up $9.03 on the week. Nearby corn futures are up $0.07 from a week ago while May futures are also up $0.07.

Beef:                                                                                           

Wholesale boxed beef prices are higher compared to a week ago. Choice boxes averaged $228.73, down $5.94 from a week ago and $28.12 lower than a year ago. Select boxes ended the week with an average of $223.31, down $5.15 from last week. The choice-select spread narrowed from $6.21 a week ago to $5.42 this week.

January 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 (January 22, 2016). Placements totaled 1.525 million head, a decrease of 0.78% from December 2014 and much higher than anticipated. Cattle marketed in December totaled 1.674 million head, up 1.15% versus last year, and was close to expectations. The total number of cattle in feedlots with 1,000 head or larger capacity totaled 10.573 million head, down 0.50% versus January 1, 2015 and slightly higher than analyst expectations.

Six questions for your crop insurance agent — Seven if you grow rice.

by Keith Coble and Brian Williams 

  1. What about enterprise units?

To qualify for enterprise units you must have at least two sections, section equivalents, FSA farm numbers, or units established by written unit agreement.  The requirements for enterprise units must be met for each of the irrigated and non-irrigated acreage for you to qualify for separate enterprise units by practice.

You may only elect to have separate enterprise units (EU) for both your irrigated and non-irrigated acreage and each must independently qualify as an enterprise unit.  The additional subsidy associated with enterprise units versus basic and optional units are shown for various coverage levels in Table 1.

Table 1.

Coverage Level Basic & Optional

Subsidy %

Enterprise Unit Subsidy % SCO Subsidy STAX Subsidy %
50% 67% 80% 65%
55% 64% 80% 65%
60% 64% 80% 65%
65% 59% 80% 65%
70% 59% 80% 65% 80%
75% 55% 77% 65% 80%
80% 48% 68% 65% 80%
85% 38% 53% 65% 80%

 

  1. May I qualify for trend adjusted yields?

Most crop yields reflect upward trends due to technological change.  The Trend-Adjusted (TA) APH adjusts yields in APH databases to reflect increases in yields through time. Trend adjustments are made on each eligible yield within your APH based on the county’s historical yield trend. The actuarial documents provide the historical yield trend. The approved APH yield is calculated using trend-adjusted yields and any other applicable yields within the APH database. Note TA results in a higher approved yield and greater indemnity payments, which results in higher premium rates. 

  1. May I qualify for APH yield exclusions?

The APH Yield Exclusion (YE) was created by the 2014 Farm Bill and allows for the exclusion of an actual yield for a crop year when RMA determines the county per planted acre yield for a crop year was at least 50 percent below the simple average of the per planted acre yield for the crop in the county for the previous 10 consecutive crop years. When a county triggers, contiguous counties are also eligible for YE.  YE is determined separately for irrigated and non-irrigated acres.  YE allows a producer to exclude an actual yield from the APH history for years where YE triggered.  Multiple years may be excluded if the county data indicates triggering.  YE results in a higher approved yield and greater indemnity payments which results in higher premium rates.  One may utilize YE and trend adjustment simultaneously.  Maps of the yield exclusion may be found at:

http://prodwebnlb.rma.usda.gov/apps/MapViewer/index.html

 

  1. What is the premium for different coverage levels?

Table 1 shows the subsidy percentage of different coverages, but keep in mind that the underlying rate goes up with the coverage level.  Table 2 shows an example of how base rates vary for non-irrigated soybeans in Bolivar county Mississippi.  For example the 85% coverage rate is 66% higher than 65% coverage.  This reflects much higher probability of loss as coverage increases.

Coverage Level

Rate differential

0.5

0.627

0.55

0.74

0.6

0.864

0.65

1

0.7

1.148

0.75

1.307

0.8

1.478

0.85

1.66

 

 

  1. What about topping off individual coverage with SCO or STAX for cotton?

Supplemental Coverage Option (SCO) is companion policy with you underlying individual coverage that protects a portion of the deductible with and AREA triggered crop insurance layer of protection.  The coverage starts at 86% and goes down to the individual coverage chosen by the producer. You only purchase SCO if you do not participate in the FSA Agricultural Risk Coverage (ARC) program. You may be participating in FSA Price Loss Coverage. As shown in Table 1, the Federal Government pays 65 percent of the premium cost for SCO.

Stacked Income Protection Program (STAX) for cotton functions similarly to SCO, The expected revenue and actual revenue are based on county yields as determined by RMA.  The maximum coverage is 90% and the maximum range of payments is 90-70% of expected revenue.  With STAX you do not have to purchase individual-level coverage.

  1. What about separate coverage levels by practice?

The 2014 farm bill also allowed for separate coverage for an irrigated and non-irrigated practice. If you have both practices for a crop, you may select one coverage level for all irrigated acreage and one coverage level for all non-irrigated acreage. For example, you may choose a 75% coverage level for all irrigated acreage and 65% percent coverage level for all non-irrigated acreage.

  1. If you grow rice, ask about margin insurance

Margin Protection (MP) is an area based plan that provides producers with coverage against an unexpected decrease in their operating margin. The plan provides coverage that is based on the expected area revenue minus the expected area operating costs, for each applicable crop, type and practice. The margin protection plan can be purchased by itself, or with Yield Protection or Revenue Protection policy.  MP will be available in 2016 in select counties for corn, rice, soybeans, and spring wheat. In Mississippi MP will only be available for rice in 2016.

 

Cattle Market Notes: Week Ending January 15, 2016

Cash Cattle:

Cash traded fed cattle was mixed this week. The five-area fed steer price ended the week averaging $133.52 for live sales, and $209.57 for dressed; respectively, up $1.68 and down $0.45. Total volume sold was up 18,000 head from a week ago and up 22,000 head from last year.

Feeder steer cattle and calves were trading lower across much of the U.S. this week. Oklahoma City feeder cattle were $5 to $10 lower than a week ago for most weight classes. In Mississippi auctions, lighter weight feeders weighing 450-500 pounds were unchanged from a week ago, averaging $195.00, while heavy steers were averaging $137.50, up $5.00 from last week.

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

Futures:

Live cattle futures and feeder futures were lower this week. February live cattle were down $5.25 on the week and $27.28 lower than a year ago at $127.58, while April live cattle were also down $5.25 from last week and down $24.65 from a year ago. Feeder cattle were also lower with January futures down $4.92 from last Friday and down $60.63 from a year ago at $154.30 while March futures are down $6.32 on the week. Nearby corn futures are up $0.06 from a week ago while May futures are up $0.05.

Beef:                                                                                           

Wholesale boxed beef prices are higher compared to a week ago. Choice boxes averaged $234.67, up $8.43 from a week ago and $26.84 lower than a year ago. Select boxes ended the week with an average of $228.46, up $8.63 from last week. The choice-select spread narrowed from $6.41 a week ago to $6.21 this week.

January WASDE:

The United States Department of Agriculture’s World Supply and Demand Estimates were released on Tuesday morning (January 12, 2016). Beef production for 2015 was revised up by 35 million pounds from last month’s estimate to 23.7 billion pounds. That number is up from 2014 when annual beef production was 24.25 billion pounds. Looking ahead to 2016, beef production is expected to be up nearly 900 million pounds from last year at 24.6 billion pounds. Per capita consumption is expected to be higher in 2016 than a year ago at 54.4 pounds per person. On the crop balance sheet, corn ending stocks for the 2015/16 crop were revised up by 17 million bushels primarily due to lower exports. Yields were also lowered by 0.9 bu/acre to 168.4 bu/acre, leaving total production down 53 million bushel at 13.601 billion bushels.

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

Wheat Acreage Estimates Released as well as Several Small Changes Made in Latest USDA Supply and Demand Report

The corn balance sheet for the 2015/16 crop saw several changes from the December release. Ending stocks for the 2015/16 crop were revised up by 17 million bushels as a result of lower disappearance. Yields were lowered by 0.9 bu/acre to 168.4 bu/acre, leaving total production down 53 million bushel at 13.601 billion bushels. Feed use and ethanol use were left unchanged. Exports were reduced by 50 million bushels, leaving ending stocks at 1.802 billion bushels. Overall, analysts expected ending stocks to remain unchanged, but the numbers still fell well within the range of analysts’ expectations. Global ending stocks were decreased from 211.85 million metric tons to 208.94 million metric tons with much of the decreased attributed to lower global production.

The soybean balance sheet also had several changed from the December WASDE report. Soybean harvested acres were reduced by 600,000 while yields were lowered by 0.3 bu/acre to 48.0 bu/acre. The decrease in yields and harvested acres left total production 51 million bushels lower than a month ago. Soybean crush was left unchanged, but exports were lowered by 25 million bushels from a month ago, leaving ending stocks 25 million bushels lower at 440 million bushels. This was below analysts’ expectations, as many believed that the numbers would be left unchanged from last month. Global ending stocks were reduced from 82.58 million metric tons to 79.28 million metric tons with a slight decrease in production and an increase in domestic crush numbers.

The 2015/16 wheat crop balance sheet had a few minor changes. Ending stocks for wheat came in at 941 million bushels, which is 30 million bushels higher than last month. Imports were reduced by 5 million bushel, seed use was reduced by 6 million bushel, and the biggest change was a 30 million bushel decrease in feed use. Global wheat ending stocks were increased slightly from 229.86 million metric tons to 232.04 million metric tons. Much of the difference was a result of increased global production and reduced global feed use. In other news regarding wheat, the USDA released the first estimates for winter wheat seedings. Total U.S. winter wheat acreage is down 7% from a year ago at 36.6 million acres while Mississippi acreage is down 33% to 100,000 acres. Last year, Mississippi producers planted 150,000 acres of winter wheat.

The cotton balance sheet saw several revisions this month. Harvested acres were reduced by 70,000 acres from last month while yields were increased by one pound/acre from last month’s estimates. As a result, production was lowered by 90,000 bales from a month ago. Domestic use was reduced by 100,000 bales, while exports were left unchanged, leaving ending stocks up 100,000 bales from a month ago. Global cotton ending stocks reduced by 1.53 million bales as a result of lower production from several major cotton producers.