Hog and Pork Situation and Outlook August 13, 2014 Lee Schulz Assistant Professor & Extension Livestock Economist Department of Economics Iowa State University lschulz@iastate.edu (515) 294-3356 2014 Midwest & Great Plains/Western Extension Summer Outlook Conference
Updated: Farrow to Finish Wean to Finish Added: Farrow to Wean Wean to Feeder (nursery) Feeder to Finish Comparison of how the updated returns series would have looked over the 2007-2013 period under the updated procedures. To be transparent, an explanation of how monthly returns series are estimated.
Avg 2007-13: Updated Previous Returns = +$11.33 (w/o manure credit) Returns = +$15.06 (w/ manure credit) Est 2011 = +$16.58 Est 2012 = +$0.34 Est 2013 = +$6.21 For 2014 = +$62.77
Avg 2007-13: Updated Previous Returns = +$7.02 (w/o manure credit) Returns = +$9.84 (w/ manure credit) Est 2011 = +$11.43 Est 2012 = -$0.40 Est 2013 = +$4.77 For 2014 = +$40.26
Key Drivers of Pork Producer Profits What will input prices and production costs be? How many hogs will the market see and how big will they be? Much anticipated USDA Hogs and Pigs Report(s) What do inventories suggest? What do sows farrowing (and intentions) suggest? What do pigs saved per litter suggest? What do pig crops suggest? What will hog slaughter be? What will hog weights be? in 2014-15 How will pork demand hold up?
Forecasted 2014 = +$62.77 Forecasted Jan-Nov 2015 = +$36.30
DDGS is most competitive with corn in hog diets in this range Source: USDA/AMS
Data Source: USDA/NASS
Thou. Head 70 65 60 55 50 45 40 35 SOW SLAUGHTER Federally Inspected, Weekly 2014-YTD Sow Slaughter -6.0% (vs. 2013) -11.6% (vs. 2008-12) 2014-YTD Gilt Slaughter* +0.6% (vs. 2013) * University of Missouri 30 JAN APR JUL OCT Data Source: USDA-AMS & USDA-NASS Livestock Marketing Information Center Avg. 2008-12 2013 2014 H-S-15 08/08/14
Thou. Head 2350 2250 2150 2050 1950 1850 1750 1650 BARROW AND GILT SLAUGHTER Federally Inspected, Weekly 2014-YTD B & G Slaughter -3.9% (vs. 2013) -4.1% (vs. 2008-12) 1550 JAN APR JUL OCT Data Source: USDA-AMS & USDA-NASS Livestock Marketing Information Center Avg. 2008-12 2013 2014 H-S-13 08/08/14
Thou. Head 2500 2400 2300 2200 2100 2000 1900 1800 1700 1600 ** The approximate times when hog inventory reported in June comes to market HOG SLAUGHTER Federally Inspected, Weekly 180+ JAN APR JUL OCT Data Source: USDA-AMS & USDA-NASS Livestock Marketing Information Center Avg. 2008-12 2013 2014 2014-YTD Hog Slaughter -4.3% (vs. 2013) -4.5% (vs. 2008-12) 120-179 50-119 <50 2014-Last 6 weeks -7.6% (vs. 2013) -8.3% (vs. 2008-12) H-S-05 08/08/14
Data Source: USDA/AMS
Mil. Pounds 525 500 475 450 425 PORK PRODUCTION Federally Inspected, Weekly 2014-YTD Pork Production -0.4% (vs. 2013) 0.3% (vs. 2008-12) 400 375 350 325 WASDE U.S. 2014 Pork Production (yr/yr): Proj in Aug = -1.8% WASDE U.S. 2015 Pork Production (yr/yr): Proj in Aug = +2.2 JAN APR JUL OCT Data Source: USDA-AMS & USDA-NASS Livestock Marketing Information Center Avg. 2008-12 2013 2014 M-S-19 08/04/14
Mil. Pounds 750 PORK IN COLD STORAGE Frozen and Cured, End of the Month 2014 YTD Pork in Cold Storage -7.0% (vs. 2013) 3.9% (vs. 2008-12) 700 650 600 550 500 450 Data Source: USDA/NASS JAN MAR MAY JUL SEP NOV Livestock Marketing Information Center Avg. 2008-12 2013 2014 M-S-10 07/22/14
Quarterly Hog & Pork Forecasts (LMIC:08/11/2014) Change Average Change Commercial Change Change Year Commercial from Carcass from Pork from Per Capita from Quarter Slaughter Year Ago Weight Year Ago Production Year Ago Consumption Year Ago (1,000 hd) (%) (lbs) (%) (mil lbs) (%) (retail wt) (%) 2012 I 28,105 2.3 209 0.2 5,858 2.4 11.1-2.6 II 26,661 2.1 207 0.6 5,519 2.8 10.9-1.2 III 27,965 2.1 201 0.3 5,631 2.7 11.2 1.8 IV 30,433 1.8 206-0.8 6,244 0.9 12.7 3.6 Year 113,163 2.1 206 0.1 23,253 2.2 45.9 0.5 2013 I 27,864-0.9 208-0.5 5,775-1.4 11.5 3.0 II 26,765 0.4 206-0.5 5,516-0.1 11.3 2.9 III 27,657-1.1 204 1.2 5,622-0.2 11.4 2.0 IV 29,792-2.1 211 2.6 6,274 0.5 12.7-0.0 Year 112,077-1.0 207 0.7 23,187-0.3 46.8 1.9 2014 I 27,134-2.6 213 2.7 5,785 0.2 11.3-1.0 II 25,574-4.4 215 4.4 5,504-0.2 11.0-1.9 III 25,978-6.1 211 3.8 5,490-2.3 11.1-2.4 IV 28,531-4.2 214 1.5 6,111-2.6 12.1-4.8 Year 107,217-4.3 214 3.1 22,890-1.3 45.6-2.6 2015 I 27,347 0.8 216 1.0 5,894 1.9 11.3-0.3 II 25,902 1.3 216 0.2 5,586 1.5 11.0-0.3 III 26,488 2.0 212 0.5 5,627 2.5 10.9-1.7 IV 29,310 2.7 216 0.8 6,327 3.5 12.1 0.5 Year 109,047 1.7 215 0.6 23,434 2.4 45.4-0.4
$ Per Cwt. 135 BARROW AND GILT PRICES Iowa So. Minnesota, Carcass Base Price, Weekly 125 115 105 95 85 75 65 55 JAN APR JUL OCT Data Source: USDA-AMS, Compiled & Analysis by LMIC Livestock Marketing Information Center Avg. 2008-12 2013 2014 H-P-09 08/11/14
Data Source: Barchart.com
PEDV Positive Biological Accessions PDCoV Positive Biological Accessions Data Source: AASV.org
Data Source: AASV.org
Data Source: AASV.org
Data Source: USDA/NASS
Data Source: USDA/NASS
2014-YTD Feeder Pigs -9.6% (vs. 2013) -19.7% (vs. 2012) Data Source: USDA/AMS & APHIS
2014-YTD Early Weaned Pig Cash Trade -27.8% (vs. 2013) -26.5% (vs. 2012) -15.2% (vs. Avg 2007-11) 2014-YTD Early Weaned Pig Formula Trade -12.7% (vs. 2013) -30.2% (vs. 2012) -23.9% (vs. Avg 2007-11) 2014-YTD Feeder Pig Cash Trade -2.5% (vs. 2013) -39.6% (vs. 2012) -38.0% (vs. 2012) Data Source: USDA/AMS
Data Source: USDA/AMS
Wean to Finish Crush Margin The Crush Margin is the return after the weaned pig, corn, and soybean meal costs Carcass weight: 200 pounds Corn: 10 bu per head SBM: 150 pounds Pig price: 50% of 5-month out LHF Data Source: ISU Livestock Crush Margins
Data Source: USDA/AMS, LMIC
Data Source: USDA/AMS, LMIC
Data Source: USDA/AMS
Data Source: USDA/ERS, BLS
Data Source: USDA/ERS, BLS
$ Per Pound 3.50 3.40 3.30 3.20 3.10 3.00 2.90 2.80 2.70 PORK PRICE-QUANTITY RELATIONSHIP Annual, Retail Weight, Deflated Choice Retail Price 11 12 13 97 10 96 90 91 01 05 06 08 07 09 00 0402 98 95 03 89 93 88 99 92 45 46 47 48 49 50 51 52 53 Pounds Per Capita Data Source: Bureau of Economic Analysis & USDA-ERS, Compiled and Analysis by LMIC Livestock Marketing Information Center 6.34% demand change 94 H-P-12 03/30/14
$ Per Pound 3.50 3.40 3.30 3.20 3.10 3.00 2.90 2.80 2.70 PORK PRICE-QUANTITY RELATIONSHIP Annual, Retail Weight, Deflated Choice Retail Price 11 12 13 Given LMIC forecast 45.3 lbs/capita) in 2014: No demand change 90 IF 2014 Pork Price = $387.5/lb (+4.3% from 2013) 91 01 97 00 0402 88 10 05 98 96 03 89 99 06 08 07 92 09 93 94 45 46 47 48 49 50 51 52 53 Pounds Per Capita Data Source: Bureau of Economic Analysis & USDA-ERS, Compiled and Analysis by LMIC Livestock Marketing Information Center 95 H-P-12 03/30/14
Q2.2014 = +8.96% 7 th consecutive yr/yr increase (since Q3.2012) Q2. 2014: Per Capita Consumption = -1.92% (yr/yr) Real Pork Prices = +11.65% IF Real Pork Prices +2.47% = 0.0% Demand Change Data Source: USDA/ERS & USDL/BLS, Compiled & Analysis by Lee Schulz
Data Source: USDA/ERS
U.S. Pork Exports, Jan-Jun 2014 Change from a Year Ago Country Carcass Weight, 1,000 lbs Percent Japan 9,549 1.4% Mexico 115,696 20.6% Canada -19,493-6.9% China (Mainland) 26,820 11.7% South Korea 52,993 31.7% Russia 31,703 184.4% Hong Kong -25,400-35.2% Australia WASDE U.S. 2014 15,089 17.0% China (Taiwan) Pork Exports (yr/yr): -5,911-24.2% Proj in Jun = -2.6% Philippines Jul = +0.3% -2,202-3.7% Other Countries Aug = +1.5% -17,259-6.5% Total 181,586 7.4% Data Source: USDA/ERS
USDA s Pork Long-Term Trade Projections (as of Nov 2013 released Feb 2014) Data Source: USDA/ERS
Data Source: USDA/ERS
Data Source: Policy Analysis Computing & Information Facility In Commerce
USDA s Pork Long-Term Trade Projections (as of Nov 2013 released Feb 2014) Pork Exporters: thousand 2013 to 2023 Growth metric tons, carcass weight 2012 2013 2014 2023 % Total Brazil 661 600 610 661 10% 61 Canada 1,243 1,245 1,235 1,350 8% 105 Mexico 95 110 117 151 38% 41 European Union 1/ 2,175 2,204 2,200 2,423 10% 219 China 235 250 265 383 53% 133 United States 2,441 2,292 2,390 2,901 27% 609 Major Exporters 6,850 6,701 6,817 7,869 17% 1168 1/ Excludes intra-eu trade. The projections were completed in November 2013. Data Source: USDA/ERS
Data Source: Policy Analysis Computing & Information Facility In Commerce
Data Source: InterPig
Data Source: USDA/ERS, FAPRI
Thank You! More information available at: Iowa Farm Outlook & News www.econ.iastate.edu/ifo/ Ag Decision Maker www.extension.iastate.edu/agdm/ ISU Estimated Livestock Returns www.econ.iastate.edu/estimated-returns/ ISU Livestock Crush Margins www.econ.iastate.edu/margins/