What Next? Dennis DiPietre, Ph.D. KnowledgeVentures, LLC USA K-State Swine Day Manhattan, KS November 2014
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
How Did We Get Here? The Inevitable Question on Every Journey!
PEDv A Significant Reduction of Supply
Slowing of New Cases is Not the Same as Recovery Source: AASV.com
Supply Impacts
PEDv Productivity Hit Causes P/L Declines to 2009 Levels Source: CARD, ISU and USDA
Price and Cost Impacts
$- $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00 $100.00 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 2004-2014
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 2004-2014 $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 $-
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 2004-2014 $100.00 $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 $- $-
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-14 120 110 100 90 80 70 60 50 40 30 20 10 0-10 -20-30 -40-50 -60-70 -80 Monthly Estimated Returns, Farrow to Finish (ISU) 2004-2014 Total profit (loss), $/hd Sources: USDA AMS and Iowa State Univeristy
Market Weights
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 80 70 60 50 JUNE, JULY, AUGUST 40 30 20 10 - Week of Year Source: USDA Market News and Univ of Dayton (Temps), Pig333.com (DiPietre)
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 285 280 275 JUNE, JULY, AUGUST 270 265 260 255 250 Week of Year Source: USDA Market News and Univ of Dayton (Temps) Pig333.com (DiPietre)
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 290.0 120 100 80 60 40 20 JUNE, JULY, AUGUST 285.0 280.0 275.0 270.0 265.0 260.0 255.0-250.0 Week of Year Source: USDA Market News and Univ of Dayton (Temps) Pig333.com (DiPietre)
What s Next Reviving a 100 Year Old Metric
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
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 28 26 24 22 20 18 16 14 12 10 8 6 4 2 0 Sources: USDA AMS and Iowa State Univeristy
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 28 26 24 Hog/Corn Ratio Level of Hog/Corn Ratio Traditionally Associated with an Expansion Signal 22 20 18 16 14 12 10 8 6 4 2 0 Sources: USDA AMS and Iowa State University, Pig333.com
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 $120.00 28 26 24 22 20 18 16 14 12 10 8 6 Level of Hog/Corn Ratio Traditionally Associated with an Expansion Signal $100.00 $80.00 $60.00 $40.00 $20.00 $0.00 -$20.00 -$40.00 4 2 0 Month and Year -$60.00 Sources: USDA AMS and Iowa State University, Pig333.com -$80.00
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 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 $120.00 28 26 24 22 20 18 16 14 12 10 8 6 Level of Hog/Corn Ratio Traditionally Associated with an Expansion Signal $100.00 $80.00 $60.00 $40.00 $20.00 $0.00 -$20.00 -$40.00 4 2 0 Month and Year -$60.00 Sources: USDA AMS and Iowa State University, Pig333.com -$80.00
Hog Corn Ratio US Hogs Kept for Breeding (Dec 1 USDA, Million Head) 6.30 6.20 6.10 6.00 5.90 5.80 5.70 5.60 5.50 SEPT 1 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* USDA, Hogs and Pigs Report
Hog Corn Ratio Hogs Keep for Breeding (USDA), 000,000 30 US Hogs Kept for Breeding (Dec 1 USDA, Million Head) and Corresponding Dec 1 Hog/Corn Ratio Value 6.30 25 6.20 6.10 20 6.00 15 5.90 10 5 5.80 5.70 5.60 - SEPT 1 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* 5.50
Hog Corn Ratio Hogs Keep for Breeding (USDA), 000,000 30 US Hogs Kept for Breeding (Dec 1 USDA, Million Head) and Corresponding Dec 1 Hog/Corn Ratio Value 6.30 25 6.20 6.10 20 6.00 15 5.90 10 5 5.80 5.70 5.60 - SEPT 1 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* 5.50
Some Thoughts Going Forward
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
Where Pigs are Produced in the World
Where Research and Private Investment is Raising Corn Yields to Support Increased Production of Swine Rate of Change of Corn Yields Worldwide
World Soybean Production
US Has the Key Future Advantage in Global Production of Pork Conclusion
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
New Outbreaks in Lithuania And along the Polish border Source: Lisa Beckton, DVM, PORK
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
Let s Expand into the New Global Opportunities Armed with a New Vigilance Along a Rational Path Matching Net Export Growth