2019 IBA ANNUAL AGRICULTURAL CONFERENCE

Transcription

1 2019 IBA ANNUAL AGRICULTURAL CONFERENCE Livestock Update 2019 livestock production, prices and forecasts Lee Schulz, Dept. of Economics, Iowa State University

2 +12% +3% +11% +15% +11% Data Source: USDA-NASS, Compiled & Forecasts by LMIC Livestock Marketing Information Center M-S-03A 12/28/18

3 U.S. red meat & poultry production Calendar year Total '19-'23 Total '19-'28 %Δ '19-'23 %Δ '19-'28 (Million pounds) Beef 26,944 27,910 28,800 29, , % 6.2% Pork 26,425 27,810 29,054 30,413 1,244 2, % 9.4% Broiler 42,115 42,906 44,760 46,369 1,854 3, % 8.1% Turkey 5,899 5,985 5,979 6, % 1.5% S um 101, , , ,495 3,982 7, % 7.5% US DA November 2018 Long-term projections to Data Source: USDA-NASS, Compiled & Forecasts by LMIC Livestock Marketing Information Center M-S-03A 12/28/18

4 +8% +2% +10% +11% +5% Data Source: USDA-NASS and USDA-ERS, Compiled & Analysis by LMIC Livestock Marketing Information Center M-C-01 01/08/19

5 U.S. per-capita meat consumption Calendar year Total '19-'23 Total '19-'28 %Δ '19-'23 %Δ '19-'28 (Pounds) Beef % -0.7% Pork % 2.3% Broiler % 1.1% Turkey % -5.5% S um % 0.4% US DA November 2018 Long-term projections to Data Source: USDA-NASS and USDA-ERS, Compiled & Analysis by LMIC Livestock Marketing Information Center M-C-01 01/08/19

6 lbs per capita & -3.4% Real pork Price = -1.86% Demand Change Data Source: Bureau of Economic Analysis & USDA-ERS, Compiled by LMIC Livestock Marketing Information Center H-P-12 02/11/18

7 $ Per Pound 5.60 BEEF PRICE-QUANTITY RELATIONSHIP Annual, Retail Weight, Deflated All Fresh Retail Price lbs per capita & -1.7% Real pork Price = -1.5% Demand Change Pounds Per Capita Data Source: Bureau of Economic Analysis & USDA-ERS, Compiled by LMIC Livestock Marketing Information Center H-P-12 02/11/18

8 +6% -19% -4% +16% +23% Data Source: USDA-ERS & USDA-FAS, Compiled by LMIC Livestock Marketing Information Center I-N-06 11/27/18

9 Calendar year Total '19-'23 Total '19-'28 %Δ '19-'23 %Δ '19-'28 (Million pounds) Beef 3,164 3,245 3,329 3, % 5.1% Pork 5,989 6,200 6,450 6, % 9.7% Broiler 6,869 7,045 7,450 7, % 8.9% Turkey % 3.9% S um 16,617 17,075 17,827 18, , % 8.3% US DA November 2018 Long-term projections to U.S. red meat & poultry exports Data Source: USDA-ERS & USDA-FAS, Compiled by LMIC Livestock Marketing Information Center I-N-06 11/27/18

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12 U.S. Pork Exports, Jan-Dec 2018 (Carcass Weight Basis) Dec-18/Dec-17 Dec-18/Nov-18 Year-to-Date Country Percent Percent 1,000 lbs Percent 17 Share 18 Share Japan -7% -10% -17,184-1% 22% 21% Mexico -20% -1% -41,029-2% 32% 30% Canada 4% 0% -1,239 0% 9% 9% South Korea 31% 2% 201,770 38% 9% 12% China (Mainland) 20% 45% -44,925-12% 7% 6% Hong Kong -75% -1% -82,873-57% 3% 1% Australia 24% 29% 23,871 12% 4% 4% Colombia 108% 7% 90,999 47% 3% 5% Philippines -10% -1% 11,010 13% 2% 2% China (Taiwan) 42% -45% 11,048 36% 1% 1% Honduras 15% -10% 12,032 15% 1% 2% Dominican Republic 62% -8% 32,343 36% 2% 2% Chile 164% 24% 9,987 14% 1% 1% Guatemala 13% -17% 1,605 4% 1% 1% Panama 26% 188% 6,559 19% 1% 1% Other Countries 26% -6% 24,596 14% 3% 3% Total 2% 2% 238,570 4% Source: USDA, Economic Research Service calculations using data from U.S. Department of Commerce, Bureau of the Census.

13 2018 vs +1% -3% Source: USDA, Economic Research Service calculations using data from U.S. Department of Commerce, Bureau of the Census.

14 U.S. Beef Exports, Jan-Dec 2018 (Carcass Weight Basis) Dec-18/Dec-17 Dec-18/Nov-18 Year-to-Date Country Percent Percent 1,000 lbs Percent 17 Share 18 Share Japan 4% -14% 54,651 7% 29% 28% Mexico 4% 5% 29,441 7% 15% 14% Canada -17% -5% -9,258-3% 11% 10% South Korea 18% -5% 165,458 35% 17% 20% Hong Kong -24% 13% -28,435-8% 12% 10% China (Taiwan) 44% 36% 47,339 34% 5% 6% Vietnam 23% -30% 6,911 23% 1% 1% Netherlands -2% 233% -6,010-16% 1% 1% Philippines 109% -14% 10,661 35% 1% 1% Chile 4% 18% -4,099-13% 1% 1% United Arab Emirates -21% 9% % 1% 1% Dominican Republic 16% 18% 216 1% 1% 1% China (Mainland) -4% -16% 12, % 0% 1% Italy 76% 155% -2,440-16% 1% 0% Indonesia -12% -54% 3,441 18% 1% 1% Other Countries -19% -17% 15,380 10% 5% 5% Total 1% -2% 295,682 10% Source: USDA, Economic Research Service calculations using data from U.S. Department of Commerce, Bureau of the Census.

15 2018 vs +32% +18% Source: USDA, Economic Research Service calculations using data from U.S. Department of Commerce, Bureau of the Census.

16 +3.2% +4.3% +1.1%

17 USDA Cattle Report United States Iowa 2019 as % 2019 as % Inventories on Jan 1 * of of 2018 Cattle and calves 94, , ,000 3, Cows and heifers that calved 40, , ,170 1, Beef cows 31, , Milk cows 9, , Heifers 500 pounds and over 20, , For beef cow replacement 6, , For milk cow replacement 4, , Other heifers 9, , Steers 500 pounds and over 16, , ,390 1, Bulls 500 pounds and over 2, , Calves under 500 pounds 14, , Feeder cattle outside feedlots 26, , ,160 1, Cattle on feed 14, , ,300 1, Calf crop ** 35, , ,090 1, Urner Barry's pre-report survey * 1,000 head, ** 2017 and 2018

18 $ Per Cow 600 COW-CALF RETURNS AND CATTLE INVENTORY U.S., Annual Mil. Head Estimated Cow-Calf Returns Cattle Inventory Jan 1 Data Source: USDA-AMS & USDA-NASS, Compiled and Analysis by LMIC Livestock Marketing Information Center 80

19 PERCENT CHANGE DECEMBER 1 HAY STOCKS ( ) -4% 18% -24% 0% 11% 9% -16% -19% 15% -6% 0% -38% 23% 46% -21% 4% -34% 8% -10% -23% -4% -18% -3% -19% -2% -10% -21% -5% -29% -13% -10% -8% 55% 9% 10% 7% 8% -20% -6% -25% -32% 3% US Total -6% -30% -24% -13% 13% -5% Smallest December 1 figure since the drought stricken year of 2012 and before that % -100% to -19% -19% to -5% -5% to 8% 8% to 56% Livestock Marketing Information Center Data Source: USDA-NASS 2/13/19

20 Jan 2019 Other hay: $114 (+$12 YOY) Alfalfa: $127 (+$11 YOY) Data Source: USDA-NASS Livestock Marketing Information Center

21 2018 vs -$ $ YTD vs -$ $ $14.06 Data Source: USDA-AMS Livestock Marketing Information Center

22 2018 vs -$ $ YTD vs -$ $ $6.01 Data Source: USDA-AMS Livestock Marketing Information Center

23 2018 vs -$ $ YTD vs -$ $3.86 -$0.63 Data Source: USDA-AMS Livestock Marketing Information Center

24 Data Source: USDA-AMS Livestock Marketing Information Center

25 2015 = -$ [-$530 to +$43] 2016 = -$ [-$359 to +$113] 2017 = +$ [-$74 to +$415] 2018 = -$31.20 [-$97 to +$103] 2019 f = +$32.95 [-$75 to +$169] Jan-Jun 2020 f = -$18.08

26 Historical and Projected Iowa Finishing Yearling Steer Returns (as of 3/14/19) ( Place Closeout Net Fed Feeder Breakeven Breakeven Breakeven Mo-Yr Mo-Yr Return* FCOG** Price Price FCOG** Fed Price Feeder Price Aug-18 Jan Sep-18 Feb Oct-18 Mar Nov-18 Apr Dec-18 May Jan-19 Jun Feb-19 Jul Mar-19 Aug Apr-19 Sep May-19 Oct Jun-19 Nov Jul-19 Dec Forecast LC - Breakeven --- $/cwt --- Jan-Mar $3.06 Apr-Jun $10.98 Jul-Sep $1.31 Oct-Dec -$5.21 * Net return is $/head and all other values are $/cwt. ** FCOG = Feeding cost of gain. Projected using basis adjusted futures prices.

27 Records by Quarter United States: 1866 to Present 2018 = 74,550

28 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg Δ '19 vs '

29 2015 = +$11.33 [-$9.68 to +$28.79] 2016 = +$7.13 [-$21.15 to +$33.80] 2017 = +$18.94 [+$3.40 to +$43.47] 2018 = +$6.48 [-$17.65 to +$29.09] 2019 f = +$20.39 [-$11.44 to +$51.72] Jan-Jul 2020 f = +$18.61

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31 cutout + byproduct - hog price Estimated between $25 and $30/head to cover other costs Data Source: USDA-AMS, Compiled & Analysis by LMIC

32 Growth and/or catching up in breeding herd Changed the growth pattern From 0.8% to 3.3% to 4.5% Data Source: USDA-NASS Livestock Marketing Information Center H-N-55 12/20/18

33 Data Source: USDA-NASS Livestock Marketing Information Center H-N-55 12/20/18

34 Acceleration in expansionary pace is a new twist Why? Reduced returns in 2018 but several supply side factors: 1) Good profits still estimated on the horizon (demand side) 2) Capital investment maintains inertia Profits since 14 have fueled herd expansion and investment in new and remodeled facilities Sow units that were on the drawing boards in recent years are now in production 3) Investments in facilities boost capacity Maintain full production if prices cover variable costs and leave something for fixed costs Reduce average fixed and sunk costs per head by stocking more boost economic efficiency 4) Coordinating investment and throughput Todays integrated business model captures many stages of production Businesses with high throughput can take market share because produce more efficiently Economic theory: Keep upping production until marginal cost = expected marginal revenue

35 Breeding herd growth + Productivity gains + Feeder pig imports = Continued steep gains for market hog inventories Data Source: USDA-NASS Livestock Marketing Information Center H-N-55 12/20/18

36 +9.7% since % since 17

37 Unemployment rate in January 2019, by state, seasonally adjusted Iowa #1 Minnesota T#10 Nebraska T#6 South Dakota #9 Missouri T#14 Oklahoma T#14 Kansas T#18 Indiana T#20 North Carolina T#26 Illinois T#40 U.S. unemployment rate, seasonally adjusted February 2019 U.S. unemployment at 3.8%

38 Quarterly Price Forecasts (3/14/19) Sources: USDA/NASS; USDA/AMS Livestock Market News; Forecasts by Lee Schulz Choice Steer Feeder Steer Price Lean Hog Price Weaned Pg Price Iowa Iowa Average Iowa/So Minn Price (10-12 lb) Average lb lb Average Average ($/cwt) ($/cwt) ($/cwt) ($/cwt) ($/head) 2018:Q :Q :Q :Q :Q :Q :Q :Q

39 Thank You! Lee L. Schulz Associate Professor Extension Livestock Economist Department of Economics Iowa State University (515)