OUTLOOK FOR THE U.S. LIVESTOCK AND POULTRY SECTORS

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1 OUTLOOK FOR THE U.S. LIVESTOCK AND POULTRY SECTORS Presented By Shayle D. Shagam World Agricultural Outlook Board, USDA USDA Outlook Forum Washington, D.C. February 26, 2016

2 Red Meat and Poultry Production Will Be Record Large in Billion lbs * Poultry Beef Pork Other * Forecast

3 Total Meat Production 3 Percent Higher Billion pounds % Change Beef Pork Broiler Meat Turkey Total Red Meat And Poultry

4 Meat Exports Will Rise with Lower Prices Billion pounds Exports % Change Beef Pork Broiler Meat Imports Beef Pork

5 Strong Dollar Limited Benefits of Lower Wholesale Prices Dollars per 100 pounds / / / / / /2015 Beef Pork Leg Quarter Trade Weighted Beef* Trade Weighted Pork* Trade Weighted Leg Quarter* *Exchange Rate: Trade Weighted U.S. Dollar Index Federal Reserve Bank of St. Louis

6 Livestock and Poultry Prices Will Decline % Change* Cattle, $/cwt Hogs, $/cwt (live equiv.) National Composite Broiler, $/lb Turkey, $/lb * At midpoint

7 Situation Facing Livestock and Poultry Producers in 2016 Feed prices trending lower Corn: $3.35-$3.85/bu in 2015/16 $3.70 in 2014/2015 Soybean meal: $270-$310/ton in 2015/16 $368 in 2014/2015 Feed prices should decline further moving into 2016/17 crop year Corn season average: $3.45/bu Soybean meal season average: $280/ton

8 Factors Driving the Forecasts: Cattle Increasing Supplies Expanding Inventory

9 Cattle Herd at 92.0 Million on Jan 1, 2016; Expansion Will Continue During Million Head * Forecast

10 Beef Cow Herd in Second Year of Expansion; Calf Crop Increasing Million Head Beef Cows Dairy Cows Calf Crop * 2016 Calf Crop Forecast

11 Factors Driving the Forecasts: Cattle Increasing Supplies Expanding Inventory Incentives to Continue Expanding the Herd

12 Estimated Average Cow Calf Returns Returns Over Cash Cost (Includes Pasture Rent), Annual $/cow Source: Livestock Marketing Information Center

13 Factors Driving the Forecasts: Cattle Increasing Supplies Expanding Inventory Incentives to Continue Expanding the Herd Feeder Cattle Supplies Ample

14 Cattle for Placement Higher on January 1 Million Head % 1.2% 5.3% Outside Feedlots On-Feed

15 Factors Driving the Forecasts: Cattle Tighter Supplies Expanding Inventory Incentives to Continue Expanding the Herd Feeder Cattle Supplies Ample Lower Imports; Higher Exports

16 U.S. Smaller Net Importer Billion Pounds * Imports Exports * Forecast

17 Factors Driving the Forecasts: Hogs Prospects for Expansion Inventory Larger at Beginning of 2016 Farrowings Tempered by Weakening Returns

18 Hog Inventory Increased to 68.3 Million Head on December 1, Inventory on December 1, Preceding Year 68 Million Head * * Forecast

19 Average Returns to Farrow-Finish Operators $ per head Source: Iowa State University

20 Slow Growth in Sows Farrowing % Million Head % -0.1% 0.5% QI QII QIII QIV * * Quarters 1-2 NASS Reported, Quarters 3-4 Forecast

21 Factors Driving the Forecasts: Hogs Prospects for Expansion Inventory Larger at Beginning of 2016 Farrowings Tempered by Weakening Returns Pigs per Litter Recovering from PEDv

22 Growth in Pigs per Litter Recovering From PEDv Head Trend: % 1.3 % 1.2 % 1.9 % -2.7 % * 2.0 % *Forecast

23 Average Hog Carcass Weights Will Flatten Pounds * * Forecast

24 Factors Driving the Forecasts: Broilers - Expansion Continues Producer Returns Under Pressure

25 Indexed Broiler Returns: Market Price Minus Feed Cost =

26 Factors Driving the Forecasts: Broilers Expansion Continues Producer Returns Under Pressure More Birds, Heavier Weights

27 Broiler Laying Flock Increasing Monthly Average Million birds Jan Mar May Jul Sep Nov

28 Broiler Live Weights Growing Pounds Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

29 Factors Driving the Forecasts: Broilers Expansion Continues Producer Returns Under Pressure More Birds, Heavier Weights Exports Affected by HPAI Bans

30 Broiler Exports to Regain Part of Market Lost in 2015 Billion Pounds * * Forecast

31 N.E. Leg Quarter Prices Soft Relative to Other Parts Prices 60% Leg Quarter Price Percent of Composite Whole Bird 55% 50% 45% 40% 35% 30% Jan Mar May Jul Sep Nov

32 Factors Driving the Forecasts: Turkey Industry Recovering from HPAI Flock Declines Reflect Bird Losses Due to HPAI

33 Turkey Poult Placements Recovering Million birds Jan Mar May July Sept Nov

34 Eggs Set Remain Below Year-Earlier Eggs in Incubators, First of Month Million Eggs Jan Mar May July Sept Nov

35 Live Turkey Weights Averaged Lower in 2015 Pounds Jan Mar May July Sept Nov

36 Factors Driving the Forecasts: Eggs HPAI Cut Production Laying Flock Lower on Bird Losses

37 Egg Laying Flock Slowly Recovering Million birds Jan Mar May July Sept Nov

38 Egg Production Will Recover Billion dozen * Table Hatching *Forecast

39 Factors Driving the Forecasts: Eggs HPAI Cut Production Laying Flock Lower on Bird Losses Egg Prices Volatile on Supply Tightness

40 Wholesale Egg Prices Spiked as Reduced Laying Flock Affected Egg Supplies Million birds $/dozen Table Egg Layers (Month Average) Large Egg Price, NY

41 Egg Prices Will Decline to $1.41-$1.50 per Dozen N.Y. Wholesale Price - Large Eggs Dollars per dozen * Forecast

42 Additional information about the USDA outlook is available at the following websites: World Agricultural Outlook Board (WAOB) World Agricultural Supply and Demand Estimates Economic Research Service (ERS) Livestock, Dairy, and Poultry Situation and Outlook Foreign Agricultural Service (FAS) Livestock and Poultry: World Markets and Trade