From information, knowledge Paragon Economics, Inc. Steve R. Meyer, Ph.D. Paragon Economics, Inc. NPB Pork Management Conference -- 2010 Profit Prospects for Pork Producers – 2010 and Beyond
From information, knowledge
Paragon Economics, Inc.
Steve R. Meyer, Ph.D.Paragon Economics, Inc.
NPB Pork Management Conference -- 2010
Profit Prospects for Pork Producers
– 2010 and Beyond
From information, knowledge
Paragon Economics, Inc.
Profit outlook for 2010 and 2011 . . .
GOOD!
FINALLY!!!!
From information, knowledge
Paragon Economics, Inc.
Profits for the foreseeable future because:
Lower – but NOT LOW – costs with even lower input prices possible
- EXCELLENT planting season
- Acres are good, condition is good at present
- It‟s up to Mother Nature – and maybe the EU
Hog price recovery – better than expected
- Slightly lower supplies
- Stronger wholesale and farm demand
- Help from competitors – but will it last?
From information, knowledge
Paragon Economics, Inc.
Short-term risks to consider:
Weather – the crop is not made YET
Economic turmoil in Europe and the impact on $US and exports
Domestic demand if the “recovery” remains soft
Quick supply response to profits
A host of potential goofy occurrences –remember H1N1?
From information, knowledge
Paragon Economics, Inc.
Grain and feed cost outlook – Issues:
Record-early corn planting and very good crop condition
Weak ethanol margins, “low” oil prices –will not be supportive of corn
Modest increase in corn exports -- $US???
Expectations on E-15 decision
El Nino – La Nina???
Last week‟s Crop Prod & WASDE – nothing big
BIG REPORTS: June 30 Acreage & Stocks
From information, knowledge
Paragon Economics, Inc.
Corn planting and conditionCORN CROP PROGRESS
Percent Planted, 18 States
0
10
20
30
40
50
60
70
80
90
100
4/4 4/11 4/18 4/25 5/2 5/9 5/16 5/23 5/30 6/6 6/13 6/20
2005: Fastest since 1990
1993: Slowest since 1990
'05-'09 Average2009
2010
Corn planting is
complete – but
look when the
bulk occurred!
Crop condition
is the best ever
for 1st week of
June
CORN CROP CONDITIONPercent rated Good or Excellent
30
40
50
60
70
80
90
5/23 5/30 6/6 6/13 6/20 6/27 7/4 7/11 7/18 7/25 8/1 8/8 8/15 8/22 8/29 9/5 9/12 9/19 9/26
2002: Worst annual
rating since 1990
1994: Best annual
rating since 19902010
2009
10-yr average
From information, knowledge
Paragon Economics, Inc.
Planting progress, though . . .
CORN -- YIELDS VS. MID-MAY PLANTINGS
-20%
-15%
-10%
-5%
0%
5%
10%
15%
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Year
Pct
Yie
ld D
evia
tio
n f
rom
Tre
nd
30
40
50
60
70
80
90
100
Pe
rce
nt
Pla
nte
d
Yield Deviation
Mid-May Planting
. . . Is NOT a good yield predictor
R2 for yield deviation = 0.3, for yield = 0.17
From information, knowledge
Paragon Economics, Inc.
June 2010 WASDE forecast by USDA
2008/09 2009/10 2010/11
USDA,
June
% Chng.
vs '08-.09
USDA,
June
%Chng
vs. '09-'10
Acres Planted Mil A 86.0 86.5 0.6% 88.8 2.7%
Acres Harvested Mil A 78.6 79.6 1.3% 81.8 2.8%
Yield Bu/A 153.9 164.7 7.0% 163.5 -0.7%
Beginning Stocks Mil Bu. 1624 1673 3.0% 1603 -4.2%
Production Mil Bu. 12092 13110 8.4% 13370 2.0%
Imports Mil Bu. 14 10 -28.6% 10 0.0%
Total Supply Mil Bu. 13729 14793 7.8% 14983 1.3%
Food, Seed & Ind Mil Bu. 1316 1340 1.8% 1360 1.5%
Ethanol for fuel Mil Bu. 3677 4550 23.7% 4700 3.3%
Feed & Resid Mil Bu. 5205 5350 2.8% 5350 0.0%
Exports Mil Bu. 1858 1950 5.0% 2000 2.6%
Total Usage Mil Bu. 12056 13190 9.4% 13410 1.7%
Carryover Mil Bu. 1673 1603 -4.2% 1573 -1.9%
Stocks/Use 13.9% 12.2% -12.4% 11.7% -3.5%
Nat. Wtd. Avg. Farm Price $/Bu. 4.06 3.45-3.65 -11.3% 3.30-3.90 -2.8%
U.S. CORN SUPPLY AND UTILIZATION - JUNE
From information, knowledge
Paragon Economics, Inc.
Usage - graphically
U.S. CORN USAGE BY CATEGORY
0
1000
2000
3000
4000
5000
6000
7000
1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008
Million bu.
Ethanol
FSI-Non Ethanol
Feed & Residual
Exports
USDA Forecasts, June 2010
From information, knowledge
Paragon Economics, Inc.
Ethanol margins have fallen -- again
From information, knowledge
Paragon Economics, Inc.
Corn export pace has been SLOWU.S. CORN EXPORTS
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
S O N D J F M A M J J A
1000 Bu.
2009
2008
Avg. '04-'08
U.S. CORN EXPORTS, PCT. OF ANNUAL
0%
20%
40%
60%
80%
100%
120%
S O N D J F M A M J J A
Percent
2009
2008
Avg. '04-'08
From information, knowledge
Paragon Economics, Inc.
2010 forecast is in line with ‟09 corn demand
U.S. CORN PRICE VS. S/U RATIO
1990-2010
19901991
1992
1993
1994
1995
1996
19981999 2000
2001
20022003
20042005
2006
2009
2008
2010
2007
1997
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
0% 5% 10% 15% 20% 25% 30%
Ending Stocks/Use Ratio
$/bu
Note: Data label is
the year of the
Latest information: 6/10/2010
From information, knowledge
Paragon Economics, Inc.
Implications and risks
Season-average price of $3.60 implies an Iowa harvest price of $3.10 to $3.20/bu
USDA yield of 163.5 bu./A is already 1.7 bu./A ABOVE the ‟96-‟07 “biotech” trend
Good crop conditions, lagging export pace may push corn lower through late summer
From information, knowledge
Paragon Economics, Inc.
But new-crop futures found support . . .
Those “lows”, though,
were at $3.56 for Dec
and $3.88 for March!
. . . At contract-life lows
From information, knowledge
Paragon Economics, Inc.
How much bottom side is available?
CASH CORN PRICE, OMAHA, WEEKLY
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
$/bu.
Source: USDA, Agricultural Marketing Service
From information, knowledge
Paragon Economics, Inc.
Implications and risks
Season-average price of $3.50 implies an Iowa harvest price of $3.00 to $3.10/bu
USDA yield of 163.5 bu/acre is 1.7 bu above the ‟96-‟07 “biotech” trend
Good crop conditions will push corn lower through late summer
Remember -- Season lows were in Sept in „‟06, early Oct in ‟07 and July in ‟09
From information, knowledge
Paragon Economics, Inc.
Implications and risks
Season-average price of $3.50 implies an Iowa harvest price of $3.00 to $3.10/bu
USDA yield of 163.5 bu/acre is 1.7 bu above the ‟96-‟07 “biotech” trend
Good crop conditions will push corn lower through late summer
Remember that season lows were in Sept in „‟06, early Oct in ‟07 and July in ‟09
Strong $US could keep oil prices – and ethanol prices -- in check
From information, knowledge
Paragon Economics, Inc.
Oil is back near $70 – less support for corn
From information, knowledge
Paragon Economics, Inc.
Implications and risks
Season-average price of $3.50 implies an Iowa harvest price of $3.00 to $3.10/bu
USDA yield of 163.5 bu/acre is 1.7 bu above the ‟96-‟07 “biotech” trend
Good crop conditions will push corn lower through late summer
Remember that season lows were in Sept in „‟06, early Oct in ‟07 and July in ‟09
Strong $US could keep oil prices – and ethanol prices in check
E-15 (or E-11 or E-12) decision
From information, knowledge
Paragon Economics, Inc.
Corn strategies
Given the price outlook for hog --
- “Higher” corn prices can be handled
- Extreme corn prices, as always, cannot!
Start filling storage EARLY in harvest
Having physical corn in hand is normally advisable – perhaps not a big deal for 2010-11
Buy “insurance” out-of-the-money calls if your balance sheet is still weak
From information, knowledge
Paragon Economics, Inc.
Soybean planting and early condition
Soybean planting
has been slowed
by rain – now
EQUAL to 2009
Crop rating this
week is RECORD
HIGH at 73%
Good/Exc.
SOYBEAN CROP PROGRESSAcres Planted, 18 States
0
10
20
30
40
50
60
70
80
90
100
5/2 5/9 5/16 5/23 5/30 6/6 6/13 6/20 6/27 7/4 7/11 7/18
Percent
2000: Fastest since 1990
1993: Slowest since 1990
'03-'08 Average
2009
2010
SOYBEAN CROP CONDITIONPercent Rated Good or Excellent
30
40
50
60
70
80
90
6/6 6/20 7/4 7/18 8/1 8/15 8/29 9/12 9/26 10/10
1994 = Best
since 1990
1993 = Worst
since 1990
2009
10-yr Average
2010
From information, knowledge
Paragon Economics, Inc.
June USDA WASDE – 2X on S/U ratio for ‟11 . . .
2008/09
Est.
USDA,
May
% Chng
vs '08-'09
USDA,
May
% Chng
vs '09-'10
Acres Planted Mil A 75.7 77.5 2.4% 78.1 0.8%
Acres Harvested Mil A 74.7 76.6 2.5% 77.1 0.7%
Yield Bu/A 39.7 44.0 10.8% 42.9 -2.5%
Beginning Stocks Mil Bu. 205 138 -32.7% 185 34.1%
Production Mil Bu. 2967 3359 13.2% 3310 -1.5%
Imports Mil Bu. 15 15 0.0% 10 -33.3%
Total Supply Mil Bu. 3187 3512 10.2% 3505 -0.2%
Crushings Mil Bu. 1662 1740 4.7% 1640 -5.7%
Exports Mil Bu. 1280 1435 12.1% 1350 -5.9%
Seed Mil Bu. 95 91 -4.2% 88 -3.3%
Residual Mil Bu. 11 42 281.8% 66 57.1%
Total Usage Mil Bu. 3049 3323 9.0% 3144 -5.4%
Carryover Mil Bu. 138 185 34.1% 360 94.6%
Stocks/Use 4.5% 5.6% 23.0% 11.5% 105.7%
Nat. Wtd. Avg. Farm Price $/Bu. 9.97 9.50 -8.2% 8.00-9.50 -7.9%
Soybean Oil Price Cents/lb. 32.16 36.00 11.9% 34 - 38 0.0%
Soybean Meal Price $/ton 331.17 295.00 -10.9% 230-270 -15.3%
U.S. SOYBEAN SUPPLY & UTILIZATION - JUNE2009/10 2010/11
. . . But this summer could still be tight
From information, knowledge
Paragon Economics, Inc.
Bean exports have been robust!!
U.S. SOYBEAN EXPORTS
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
S O N D J F M A M J J A
1000 Bu.
2008
2009
Avg. '04-'08
. . . Could leave supplies tight in July-Aug
From information, knowledge
Paragon Economics, Inc.
Pace relative to annual is slower . . .
U.S. SOYBEAN EXPORTS, PCT. OF
ANNUAL
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
S O N D J F M A M J J A
Percent
2009
2008
Avg. '04-'08
. . . will they exceed expected 1.435 bil. bu.?
From information, knowledge
Paragon Economics, Inc.
Remember where cash SBM went . . .
. . . The past two summers on tight suppliesCASH SBM PRICE, DECATUR, WEEKLY
100
150
200
250
300
350
400
450
500
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
$/ton
From information, knowledge
Paragon Economics, Inc.
2011 futures are at the BOTTOM . . .
. . . of the apparent “new normal” range CASH SBM PRICE, DECATUR, WEEKLY
100
150
200
250
300
350
400
450
500
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
$/ton
Decature 48% SBM
6/15/2010 Futures
From information, knowledge
Paragon Economics, Inc.
Factors to consider
As is the case for corn, good weather could push prices lower in late summer
So could a slowdown in the torrid export pace
2011 prices: Will Brazil and Argentina raise another bumper crop?
How wrong can you be with SBM hedged at $250 or maybe even $230?
From information, knowledge
Paragon Economics, Inc.
A word about DDGS prices . . .
DDGS $ PER LB / CORN $ PER LB
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Ratio
DDGS is competitive with corn in
hog diets in this range
. . . Larger supplies = Pricing “into” hog diets
From information, knowledge
Paragon Economics, Inc.
PORK AND HOG OUTLOOK
From information, knowledge
Paragon Economics, Inc.
Summary
Hog supplies have been CLOSE to levels expected from March H&P
Prices have exceeded levels a) expected and b) consistent with supply changes and stable farm-level demand
Conflicting signals:- Near-record cutout values and hog prices
STRONG packer margins
- “Okay” exports – at least through March
- But SOFT consumer-level demand
From information, knowledge
Paragon Economics, Inc.
Summary (continued)
Feed cost outlook is positive for profits –depending on weather
Few signs of expansion yet- Sow slaughter is low but not exceptionally so
as a percent of the BH
- Gilt slaughter frequently above 49.5%
But – anecdotal expansion evidence- Some repops in the works
- 473k sows cut since Dec ‟07 – Estimate that 1/4th could be repopped – 2% growth
From information, knowledge
Paragon Economics, Inc.
COMPETITORS
From information, knowledge
Paragon Economics, Inc.
Chicken production capacity is growing . . .
BROILER HATCHERY FLOCK
30,000
35,000
40,000
45,000
50,000
55,000
60,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Thousand Hens
October 2009:
Smallest flock since
Sept '97 at 52.366
million
April '10: +2.4% Yr/Yr
From information, knowledge
Paragon Economics, Inc.
Current output measures are positive . . .WEEKLY BROILER EGG SETS
180,000
185,000
190,000
195,000
200,000
205,000
210,000
215,000
220,000
J F M A M J J A S O N D
Thousand
2010
2009
Average '04-'08
y
YTD 2010: +1.4%
U.S. FI BROILER SLAUGHTER, WEEKLY
100,000
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
J F M A M J J A S O N D
Thous. Hd.
2010
2009
2008
Avg. '03-'07
2010: 3.4%
FI BROILER PRODUCTION, WEEKLY
600.00
650.00
700.00
750.00
800.00
850.00
900.00
950.00
1000.00
J F M A M J J A S O N D
Mil. lbs. RTC
2010
2009
Avg. '04-'08
YTD 2010: +4.9%
From information, knowledge
Paragon Economics, Inc.
But chicken prices are near-record high
BROILER PRICES12-City Composite, Weekly
68
73
78
83
88
93
JAN
APR
JUL
OCT
Cents Per Pound
Avg.2004-08
2009
2010
From information, knowledge
Paragon Economics, Inc.
Driven by a resurgence in breast prices . . .
WHOLESALE CHICKEN BREAST PRICESSkinless/Boneless, Northeast, Truckload, Weekly
100
110
120
130
140
150
160
170
180
JAN
APRJU
LOCT
Cents Per Pound
Avg.2004-08
2009
2010
. . . At least until last week!
From information, knowledge
Paragon Economics, Inc.
Cattle slaughter: Closer and closer to „09
U.S. FI CATTLE SLAUGHTER, WEEKLY
450
500
550
600
650
700
750
J F M A M J J A S O N D
Thous. hd.
2009
2010
Average, '04-'08
From information, knowledge
Paragon Economics, Inc.
Sharply lower weights have limited outputFI CATTLE CARCASS WEIGHTS
740
750
760
770
780
790
800
810
J F M A M J J A S O N D
Pounds
2009
2010
Avg. '04-'08 FI BEEF PRODUCTION, WEEKLY
350
400
450
500
550
600
J F M A M J J A S O N D
Mil. lbs. carc.
2009
2010
Avg '04-'08
YTD 2010: -0.4%
From information, knowledge
Paragon Economics, Inc.
Cutout has been near record-high . . .
. . . But has peaked for the year
600-900# CHOICE BEEF CUTOUT VALUE
75
100
125
150
175
200
99 00 01 02 03 04 05 06 07 08 09 10
$/cwt carcass
From information, knowledge
Paragon Economics, Inc.
Beef F/S cuts have fallen, tooWHOLESALE BEEF FULL TENDER PRICES
Musl-On, 5 Pounds and Up, Weekly
550
650
750
850
950
1050
1150
JAN
APR
JUL
OCT
$ Per Cwt.
Avg.2004-08
2009
2010
WHOLESALE BEEF LOIN STRIP PRICESBoneless 0x1, Weekly
350
400
450
500
550
600
650
700
JAN
APR
JUL
OCT
$ Per Cwt.
Avg.2004-08
2009
2010
WHOLESALE BEEF RIBEYE PRICESBoneless, Light, Weekly
400
450
500
550
600
650
700
750
JAN
APR
JUL
OCT
$ Per Cwt.
Avg.2004-08
2009
2010
WHOLESALE BONELESS BEEF PRICESFresh, 50% Lean, Weekly
35
45
55
65
75
85
95
105
115
125
JAN
APR
JUL
OCT
$ Per Cwt.
Avg.2004-08
2009
2010
From information, knowledge
Paragon Economics, Inc.
Impact of competitors
Positive so far! – chicken and beef prices have been very supportive so far in ‟10
Will be less supportive in months to come
- Beef is in a seasonal price decline but sup-plies will get tighter, higher fed prices in „11
- Chicken may be at its peak – expansions by Pilgrim, Sanderson, others in ‟11 and ‟12
Trade developments will help chicken –nothing has moved to Russia yet
From information, knowledge
Paragon Economics, Inc.
Actual slghtr has been -1% from March H&P
. . and -2.7% from ‟09 -- -4.5% yr/yr comingFI HOG SLAUGHTER, WEEKLY
1500
1600
1700
1800
1900
2000
2100
2200
2300
2400
2500
J F M A M J J A S O N D
Thous. Hd.
Actual 09
Pred '10
Actual 10
Pred '11
Based on USDA Hogs & Pigs Report, March '10
These 2011 forecasts may
be revised as the impact
of
winter performance is
determined over Q2.
From information, knowledge
Paragon Economics, Inc.
Weights: YTD equal to 2009, +1# recently . . .
. . . larger hogs=more profit, slack spaceFI CARCASS WEIGHTS, HOGS
192
194
196
198
200
202
204
206
208
J F M A M J J A S O N D
Pounds
2008
2009
2010
Avg '04-'08
From information, knowledge
Paragon Economics, Inc.
YTD output is still -3.6% from last year . . .
. . . Says prices should be +8 to 12%FI PORK PRODUCTION, WEEKLY
280
320
360
400
440
480
520
J F M A M J J A S O N D
Mil. lbs. carc.
2009
2008
2010
Avg '04-'08
YTD 2010: -3.6%
From information, knowledge
Paragon Economics, Inc.
Record-high hog prices -- +30% from „09
U.S. NEG'D NET PRICE, WTD. AVERAGE
40
45
50
55
60
65
70
75
80
85
90
95
100
J F M A M J J A S O N D
$/cwt carcass
2009
2008
2010
Avg '04-'08
From information, knowledge
Paragon Economics, Inc.
Why the discrepancy in prices?
‟09 prices were artificially depressed
- H1N1 aftermath
- High weights driven by unusual weather
- An “unrepresentative base” from which to compute prices
Positive impact of other species
- Using a price flexibility considers only own-quantity impacts
- Cross-price elasticities are smaller but not zero!
From information, knowledge
Paragon Economics, Inc.
Exports +2.2% in April, +1.5% YTD . . .
MONTHLY U.S. PORK EXPORTS
-
100,000
200,000
300,000
400,000
500,000
600,000
J-98 J-99 J-00 J-01 J-02 J-03 J-04 J-05 J-06 J-07 J-08 J-09 J-10
Thous. lbs. carc.
April 2010 exports:
+2.2%from 2009
'04-'07 Trend
From information, knowledge
Paragon Economics, Inc.
Competitors: EU has gained an advantage
U.S. EXPORT COMPETITORS'
CURRENCIES VS. $U.S.
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 10
Euro & $Can/$US
0.9
1.3
1.7
2.1
2.5
2.9
3.3
3.7
4.1
Real/$US
Euro
Canadian $
Real
From information, knowledge
Paragon Economics, Inc.
Customers: Recent changes, Japan & Mexico
U.S. EXPORT CUSTOMERS' CURRENCIES
VS. $U.S.
0
20
40
60
80
100
120
140
160
180
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 10
Yen/$US,
Peso/$10US
Renminbi/$10US
400
600
800
1000
1200
1400
1600
1800
2000Won/$USPesos/$10 Yen/US$
Renminbi/$10 Won/US$
From information, knowledge
Paragon Economics, Inc.
Big recovery for Japan in April . . .
U.S. PORK EXPORTS BY DESTINATION
-
20
40
60
80
100
120
140
160
J-05 J-06 J-07 J-08 J-09 J-10
Million lbs. carc.
JAPAN
CANADA
MEXICO
RUSSIA
HONG KONG +CHINA
TAIWAN
KOREA
. . .Mexico is still strong, Russia‟s the problem
From information, knowledge
Paragon Economics, Inc.
Pork demand: conflict with hogs & whlsle . .
PORK DEMAND INDEX
80
90
100
110
120
130
70 73 76 79 82 85 88 91 94 97 00 03 06
Index, '85=100
Pork Demand
declined 4.2% per
year -- 1979 -1985
2010: -5.3%
. . . I suspect the retail price data!
From information, knowledge
Paragon Economics, Inc.
Pork and chicken prices don‟t make sense!
RETAIL MEAT PRICES, USDA
0
50
100
150
200
250
300
350
400
450
500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Cents/lb.
All-Fresh Beef
Choice Beef
Pork
Composite Broiler
Turkey
From information, knowledge
Paragon Economics, Inc.
Profits are back – in a BIG way!!!
PROFIT PER HEAD
IOWA FARROW-TO-FINISH OPERATIONS
-70
-60
-50
-40
-30
-20
-10
0
10
20
30
40
50
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
$/HD.
Source: Estimated Costs and Returns, Dr. John Lawrence, Department of Economics, Iowa State University
From information, knowledge
Paragon Economics, Inc.
But financial positions are generally weak
ACCUMULATED PROFITS
IOWA FARROW-TO-FINISH OPERATIONS(Sum of the profits from selling one pig per month since January 1991)
$(200)
$(100)
$-
$100
$200
$300
$400
$500
$600
$700
$800
$900
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Peak in Sept '07 = $786.87
Top to Bottom:
Sept '07 to Feb 2010
Lost $639.68
81% of peak amount
Source: Paragon Economics, Inc. using data from Estimated Costs and Returns, Dr. John Lawrence, Department of Economics, Iowa State
University
March '10 = $156.02
8 years
From information, knowledge
Paragon Economics, Inc.
Sow slaughter is lower – 3 to 4% since April
U.S. SOW SLAUGHTER
40
45
50
55
60
65
70
75
J F M A M J J A S O N D
Thousand Hd.
2009
2010
Avg. '04-'08
From information, knowledge
Paragon Economics, Inc.
But slaughter of US sows is equal to ‟09 . . .
. . . YTD ‟10 = 17.1% vs. 16.9% in „09
FI SLAUGHTER OF U.S. SOWS As a Percent of Previous Quarter's Breeding Herd
0.30%
0.40%
0.50%
0.60%
0.70%
0.80%
0.90%
1.00%
1.10%
1.20%
J F M A M J J A S O N D
Percent
2009
2010
Avg. '07-'09
From information, knowledge
Paragon Economics, Inc.
YTD gilt slaughter: +0.1% vs. ‟09, -0.1 vs. „08
GILTS AS A PERCENT OF TOTAL
BARROW/GILT SLAUGHTER
47.0
48.0
49.0
50.0
51.0
52.0
53.0
J F M A M J J A S O N D
Percent
2009
2010
Avg. '00-'09
From information, knowledge
Paragon Economics, Inc.
Futures: Profits of ~$16/hd for all of ‟10 . . .
. . . and nearly $20 for rest of ‟10, $19 for „11 ACTUAL & PREDICTED HOG
PRODUCTION COSTS* AND PRICES
10
20
30
40
50
60
70
80
90
100
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
$/cwt carcassActual Costs per ISU - Carcass
Predicted/Forecast Costs - Carcass
Cash Hog Price
Futures-Implied IA-MN Price
*Based on relationsip between ISU Estimated Costs & Returns data and historic Omaha corn and Decatur soybean meal prices
6/14/10
Forecast 2010 Profits
$15.82/head
From information, knowledge
Paragon Economics, Inc.
Slaughter forecasts
Mil. Hd % Chnge Mil. Hd % Chnge Mil. Hd % Chnge Mil. Hd % Chnge
2009 Year 113.583 -2.7%
2010 Q1 27.631 -3.1% 27.631 -3.1% 27.631 -3.1% 27.631 -3.1%
Q2 26.575 -1.8% 26.395 -2.5% 26.198 -3.2% 26.139 -2.6%
Q3 27.425 -3.5% 27.860 -2.0% 27.807 -2.2% 27.175 -4.4%
Q4 28.775 -2.8% 28.726 -3.0% 28.973 -2.2% 28.184 -2.3%
Year 110.406 -2.8% 110.612 -2.6% 110.609 -2.6% 109.129 -3.9%
2011 Q1 27.493 -0.5% 27.132 -1.8% 27.983 1.3%
Green figures are actual data from USDA. 3/2/10
March 2010 Commercial Slaughter ForecastsMizzou LMIC MeyerISU
From information, knowledge
Paragon Economics, Inc.
Price forecasts
Missouri ISU LMIC Meyer CME
Producer-Sold
Net Carcass
Ia-S. Mn. Live
Price1
National Wtd
Avg. Base Price
National Net
Neg'd Price,
Wtd. Avg.
CME Lean
Hog Futures
6/4/10
2009 Q1 60.43 56.48 58.11 57.22 $58.14**
Q2 61.76 58.39 59.45 58.19 $59.03**
Q3 56.68 52.60 54.01 52.39 $54.18**
Q4 57.64 55.92 55.57 55.81 $56.60**
Year 59.11 55.84 56.87 55.90 $56.98**
2010 Q1 68.60* 70.41* 65.95* 68.75* 69.38**
Q2 71 - 75 77 - 81 74-75 81.98* 80.70**
Q3 73 - 77 72 - 75 70-74 76 - 78 77.51
Q4 66 - 70 61 - 65 67-71 68 - 70 71.04
Year 70 - 73 70 - 73 69-71 73 - 74 74.66
2011 Q1 63 - 67 70-75 66 - 70 70.131Converted to carcass using a yield of 75% *Partial USDA data **Average of CME Lean Hog Index
March 2010 Hogs & Pigs Price Forecasts
From information, knowledge
Paragon Economics, Inc.
My expectations
June Hogs and Pigs may show small BH growth from March but still down 2-3% from ‟09; 3-4% lower market supplies.
Hog supplies will be supportive of prices in the upper $70s to low $80s for the rest of the summer
Q4 prices in the upper $60s
Little or no expansion, 2011 numbers very close to 2010, prices depend on demand!
From information, knowledge
Paragon Economics, Inc.
QUESTIONS & DISCUSSION?