Iowa Pork Congress Meat Sector Outlook. Steve R. Meyer, Ph.D. Paragon Economics, Inc. Paragon Economics, Inc. From information, knowledge

Transcription

1 Iowa Pork Congress 2012 Meat Sector Outlook Steve R. Meyer, Ph.D.

2 Key issues for 12 pork producer profits Exports Exchange rates, trade policy, disease status U.S. demand U.S. economy, prices of competitor goods Feed prices S. American crops, moisture situation, 2012 acreage/yields Hog/pork supplies -- Productivity (farrowings, litter size), herd health, weights Packing capacity re. hog numbers this fall

3 CROPS and COSTS

4 12 corn yield 5.8% below trend And 8.2% below biotech trend

5 Result: Continually shrinking corn crop..... higher stocks, but still 2nd lowest S/U ratio U.S. CORN SUPPLY AND UTILIZATION - JANUARY 2009/ /11 Estimate USDA December 2011/12 USDA January %Chng vs. '10-'11 Acres Planted Mil A % Acres Harvested Mil A % Yield Bu/A % Beginning Stocks Mil Bu % Production Mil Bu % Imports Mil Bu % Total Supply Mil Bu % Feed & Residual Mil Bu % Ethanol for fuel Mil Bu % Non-Ethanol FSI Mil Bu % Exports Mil Bu % Total Usage Mil Bu % Carryover Mil Bu % Stocks/Use 13.1% 8.6% 6.7% 6.7% -22.6% Nat. Wtd. Avg. Farm Price $/Bu %

6 January Grain Stocks reports GRAIN STOCKS, DECEMBER 1, 2011 January 12, 2012 Grain Stocks Report Analysts' Estimates, Dec. 1, '11 Units USDA, Dec 1 '10 USDA, Sept 1, '11 Low High Average USDA, Dec1, '11 Wheat Bil. Bu Corn Bil. Bu Soybeans Bil. Bu

7 Ethanol now uses more corn than feed/res.

8 Corn went to ethanol due to PROFITS!!!!

9 World corn stocks: Forecast is 3 rd lowest

10 Corn at bottom of range lower in Q3 & Q4

11 2011 drought grew into the Cornbelt

12 Conditions have improved but...

13 U.S. soybean crop has held up better U.S. SOYBEAN SUPPLY & UTILIZATION - JANUARY 2009/ /11 USDA December 2011/12 USDA January % Chng vs '10-11 Acres Planted Mil A % Acres Harvested Mil A % Yield Bu/A % Beginning Stocks Mil Bu % Production Mil Bu % Imports Mil Bu % Total Supply Mil Bu % Crushings Mil Bu % Exports Mil Bu % Seed Mil Bu % Residual Mil Bu % Total Usage Mil Bu % Carryover Mil Bu % Stocks/Use 4.5% 6.6% 7.6% 9.1% 39.3% Nat. Wtd. Avg. Farm Price $/Bu % Soybean Oil Price Cents/lb % Soybean Meal Price $/ton %

14 World soybean stocks/use is in good shape

15 Weekly SBM cash and futures prices

16 Still have ample wheat stocks

17 And wheat is NOT keeping up with corn More feeding is likely a long-term trend

18 DDGS may be pricing OUT of hog diets Cattle feed demand, exports

19 Hog costs were record high in Have risen from $81.12 for 12 since Dec

20 MEAT & POULTRY DEMAND

21 GDP growth: Improving again but still slow QTRLY GROSS DOMESTIC PRODUCT (GDP) Real Dollar (2005) Change from Previous Quarter Percent Change Livestock Marketing Information Center Data Source: Bureau of Economic Analysis, Compiled & Analysis by LMIC 12/29/11

22 Per cap Disposable Income = Mid And 4.3% below the peak in 2008 Dollars PER CAPITA DISPOSABLE PERSONAL INCOME Quarterly Current Dollar 2005 Dollar

23 Consumer sentiment: Highest since June Improving employment/unemployment

24 Domestic meat demand improved in For all species, last data point is Dec-Nov

25 Yr/yr monthly data have softened recently November monthly index vs. 10: Pork: -1.7% Chicken: -8.7% Beef: +1.3%

26 RPI improving highest since April...

27 PC consumption fell sharply in But demand is strong! How so?

28 What will be the impact of record prices?... NOT lower demand but lower Q demanded

29 Dollar Index futures have gained ~10%

30 Competitors: All have gained since mid Some recent flight to safety Over?

31 Customers: Same situation Impact of peso and won weakening?

32 Pork exports will be record large in Again in 2012???

33 Pork exports EXCELLENT (+23%) thru Nov China & Korea up >100%, Mexico -0.5%

34 Total frozen meat/poultry down 7.6% vs Led by chicken (-22%); pork +1% yr/yr

35 CHICKEN

36 Broiler losses Large and continuing! expansion plus higher grain prices

37 AGGRESSIVE broiler cuts since mid-summer cuts offset ALL of 2010 increases DOWN 6% YTD 2012 Placements are now -4.2% since June 1 and 3.5% since Jan 1

38 Reason: Higher weights are persisting Continuing breast meat glut, low prices

39 Broiler cutout FINALLY broke thru $ traction from cutbacks has been slow

40 And some improvement in breast meat!

41 CATTLE/BEEF

42 Lowest U.S. beef cow inventory since = 30.9 Million Head -1.6 Percent 2011 = 9.1 Million Head +0.7 Percent Livestock Marketing Information Center Data Source: USDA/NASS C-N-02 07/23/10

43 Beef: Four smallest calf crops since = 35.5 Million Head -0.5 Percent 2010 = 35.7 Million Head -0.7 Percent

44 Drought is the driver for beef industry now State Beef Cows (Thousand) TX 5025 OK 2036 KS 1478 FL 926 CO 727 AL 659 GA 502 MS 495 NM 488 LA 461 NC 351 SC 184 AZ 180 Total Share 43.8%

45 Beef cow slaughter +11.3% since June Mainly TX & OK, some growth elsewhere

46 Jan 1 COF about as expected USDA Cattle on Feed Report Summary ---January 2012 Thous. Hd as Pct. of Actual Estimateence Differ- On Feed, January 1 11,514 11, Placed on Feed in December 1,789 1, Fed Cattle Marketed, December 1,830 1,

47 COF was +3% on Jan 1 19 months up But getting closer each month

48 Jan 1 COF about as expected USDA Cattle on Feed Report Summary ---January 2012 Thous. Hd as Pct. of Actual Estimateence Differ- On Feed, January 1 11,514 11, Placed on Feed in December 1,789 1, Fed Cattle Marketed, December 1,830 1,

49 COF was +3% on Jan 1 19 months up But getting closer each month

50 Slaughter lower than 10 in 11 of last 14 wks.

51 Add in growing exports and U.S. consumption/availability: -3.8% in 12 Pounds 75 U S BEEF CONSUMPTION Per Capita, Retail Weight, Annual

52 New record high for Choice $ My $200 prediction appears safe???

53 HOGS AND PORK

54 Dec H&P Report: Continued slow growth... USDA Quarterly Hogs and Pigs Report December 23, as Category Pct of Pre- Report Actual - Estimate Inventories on December 11 All hogs and pigs 64,925 65, Kept for breeding 5,778 5, Kept for market 59,147 60, Under 50 lbs. 18,864 19, lbs. 16,519 16, lbs. 12,233 12, lbs. and over 11,531 11, Farrowings 2 Sep-Nov sows farrowed 2,874 2, Dec-Feb Intentions 2,843 2, Mar-May Intentions 2,917 2, Sep-Nov Pig Crop1 28,488 29, Sep-Nov pigs saved per litter *Thousand head **Thousand litters

55 Litter size growth 2.0% over past 4 years How high can litter size go?

56 Doing more and more with same herd!

57 Q4 11 was -2 to 3% from With Q2 and Q3 12 supplies up %

58 Weights remain large and GROWING Genetics, fixed costs, matrixes

59 Cutout value begins 12 near 11 level Match yr ago: Exports, domestic demand

60 Neg d Net prices stayed above $80 from Jan!

61 Sows very likely to remain at $60-plus in 12

62 12 profits have increased $10/hd since Dec

63 Price forecasts December 2011 Hogs & Pigs Price Forecasts Missouri ISU LMIC Paragon CME Producer-Sold Net Price, All Methods Ia-Mn Wtd. Avg. Base Lean Hog 1 National Wtd Avg. Base Price National Net Neg'd Price, Wtd. Avg. CME Lean Hog Futures 1/18/ Q ** Q ** Q ** Q ** Year ** 2011 Q ** Q ** Q ** Q ** Year ** 2010 Q Q Q Q Year Prior to Q2-11, ISU forecasts were Ia-Mn Live Price converted using a 75% yield **Average of CME Lean Hog Index *Partial USDA data

64 Monthly price forecasts

65 Pork outlook 2012 supplies will be % larger with bulk in Q2 and Q3, Q4 steady w/ 11 Weights will remain high Prices much like 11 mid $90s in summer Questions: - Will demand hold? Competitor prices, economy, $US, consumers - Is there enough finishing space for added pigs? - Slaughter capacity, fall 12?

66 Risks The U.S. economy World economy $US vs. other currencies 2012 corn and soybean crops Oil prices corn is hitched to it RFS waiver/reduction plan Export disruption - OIE disease unlikely but HUGE impact - Another swine flu type scare