What Next? Dennis DiPietre, Ph.D. KnowledgeVentures, LLC USA. K-State Swine Day Manhattan, KS November 2014

Transcription

1 What Next? Dennis DiPietre, Ph.D. KnowledgeVentures, LLC USA K-State Swine Day Manhattan, KS November 2014

2 Our Economic Current Situation as an Industry Record Profits Strong Domestic Demand Strong and Likely Increasing Export Demand Record Animal Weights More Than Adequate (Currently) Slaughter Capacity Low Cost Feed Low Cost Fuel Low Inflation and Low Interest Rates

3 How Did We Get Here? The Inevitable Question on Every Journey!

4 PEDv A Significant Reduction of Supply

5 Slowing of New Cases is Not the Same as Recovery Source: AASV.com

6

7 Supply Impacts

8 PEDv Productivity Hit Causes P/L Declines to 2009 Levels Source: CARD, ISU and USDA

9 Price and Cost Impacts

10 $- $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00 $ Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Live Hog Price/CWT Monthly Avg

11 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Corn Price/Bu $9.00 $8.00 Drought $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 Ethanol Distillers Demand Tipping Point Record Harvest and Upward Demand Trend Collapse to Flat Line $-

12 Jan-04 Jun-04 Nov-04 Apr-05 Sep-05 Feb-06 Jul-06 Dec-06 May-07 Oct-07 Mar-08 Aug-08 Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12 Mar-13 Aug-13 Jan-14 Jun-14 $9.00 Corn Price/Bu and Live Hog Price/CWT $ $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 Corn Live Hogs $90.00 $80.00 $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $- $-

13 Estimated Net Returns/Hd Farrow to Finish (ISU) Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep Monthly Estimated Returns, Farrow to Finish (ISU) Total profit (loss), $/hd Sources: USDA AMS and Iowa State Univeristy

14 Market Weights

15 Price/CWT and Temperature (F) in Des Moines IA Update on US Weekly Average Live Weight, Carcass Price and Temperature Changes 90 Avg Week Temp F JUNE, JULY, AUGUST Week of Year Source: USDA Market News and Univ of Dayton (Temps), Pig333.com (DiPietre)

16 Price/CWT and Temperature (F) in Des Moines IA Update on US Weekly Average Live Weight, Carcass Price and Temperature Changes 290 Avg Live Weight JUNE, JULY, AUGUST Week of Year Source: USDA Market News and Univ of Dayton (Temps) Pig333.com (DiPietre)

17 Price/CWT and Temperature (F) in Des Moines IA Avg Live Weight lbs Update on US Weekly Average Live Weight, Carcass Price and Temperature Changes 140 Avg Week Temp F Producer Sold Net Carcass Price/CWT Avg Live Weight JUNE, JULY, AUGUST Week of Year Source: USDA Market News and Univ of Dayton (Temps) Pig333.com (DiPietre)

18 What s Next Reviving a 100 Year Old Metric

19 The Hog/Corn Ratio Used for 100+ Years as a Gauge of Likely Producer Action Live Weight Price of Hogs/CWT Divided by Bushel Price for Corn A Widely Used Metric in Various Forms but Lost Significance in Hogs Multiple Impacts on Corn Prices (Ethanol esp.) & Cost Structure Changes Expansion Usually Associated with Values Greater Than 18-20

20 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Value of the Hog Corn Ratio Monthly Hog Corn Ratio with Associated Live Hog Price/Cwt and Corn Price/Bu 30 Hog/Corn Ratio Sources: USDA AMS and Iowa State Univeristy

21 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Value of the Hog Corn Ratio Monthly Hog Corn Ratio with Associated Live Hog Price/Cwt and Corn Price/Bu Hog/Corn Ratio Level of Hog/Corn Ratio Traditionally Associated with an Expansion Signal Sources: USDA AMS and Iowa State University, Pig333.com

22 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Value of the Hog Corn Ratio Total Profit (Loss), $/HD Farrow to Finish, Includes Manure Credit (ISU) Monthly Hog Corn Ratio with Associated Live Hog Price/Cwt and Corn Price/Bu 30 Hog/Corn Ratio Total profit (loss), $/hd $ Level of Hog/Corn Ratio Traditionally Associated with an Expansion Signal $ $80.00 $60.00 $40.00 $20.00 $0.00 -$ $ Month and Year -$60.00 Sources: USDA AMS and Iowa State University, Pig333.com -$80.00

23 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Value of the Hog Corn Ratio Total Profit (Loss), $/HD Farrow to Finish, Includes Manure Credit (ISU) Monthly Hog Corn Ratio with Associated Live Hog Price/Cwt and Corn Price/Bu 30 Hog/Corn Ratio Total profit (loss), $/hd $ Level of Hog/Corn Ratio Traditionally Associated with an Expansion Signal $ $80.00 $60.00 $40.00 $20.00 $0.00 -$ $ Month and Year -$60.00 Sources: USDA AMS and Iowa State University, Pig333.com -$80.00

24 Hog Corn Ratio US Hogs Kept for Breeding (Dec 1 USDA, Million Head) SEPT * USDA, Hogs and Pigs Report

25 Hog Corn Ratio Hogs Keep for Breeding (USDA), 000, US Hogs Kept for Breeding (Dec 1 USDA, Million Head) and Corresponding Dec 1 Hog/Corn Ratio Value SEPT * 5.50

26 Hog Corn Ratio Hogs Keep for Breeding (USDA), 000, US Hogs Kept for Breeding (Dec 1 USDA, Million Head) and Corresponding Dec 1 Hog/Corn Ratio Value SEPT * 5.50

27 Some Thoughts Going Forward

28 We Have Re-Discovered the Critical Vulnerability of the US Opportunity to Export Stopping Diseases Increases in Global Sales and Share are 90% of the Future Opportunity in the Next 20 Years for the US Swine Industry

29

30 Where Pigs are Produced in the World

31 Where Research and Private Investment is Raising Corn Yields to Support Increased Production of Swine Rate of Change of Corn Yields Worldwide

32 World Soybean Production

33 US Has the Key Future Advantage in Global Production of Pork Conclusion

34 By Far and Away, a Prosperous Future for Pork Producers Requires Growing Net Exports Export Stopping Disease is the Ultimate Set Back for US Pork

35

36 New Outbreaks in Lithuania And along the Polish border Source: Lisa Beckton, DVM, PORK

37 DENSITY OF LOW BIO-SECURITY PIG OPERATIONS RISK Factors DENSITY OF WILD BOAR POPULATIONS Source: The PigSite.com DENSITY OF WILD BOAR POPULATIONS Source: The PigSite.com Source: The PigSite.com Source: Agroregeneration.blogspot.com

38 Let s Expand into the New Global Opportunities Armed with a New Vigilance Along a Rational Path Matching Net Export Growth