What to Expect in the Next Year in the Hog Industry

Extension and Outreach/Department of Economics

What to Expect in the Next Year in the Hog Industry

Shakespeare Swine SeminarShakespeare, Ontario

Sept. 19, 2012

Chad HartAssociate Professor/Grain Markets Specialist

[email protected]

Extension and Outreach/Department of Economics

H-S-1508/24/12

Livestock Marketing Information Center

Data Source: USDA-AMS & USDA-NASS

SOW SLAUGHTERFederally Inspected, Weekly

40

45

50

55

60

65

70Thou. Head

Avg.2006-10

2011

2012

Extension and Outreach/Department of Economics

HOG SLAUGHTERFederally Inspected, Weekly

1,600

1,700

1,800

1,900

2,000

2,100

2,200

2,300

2,400

2,500Thou. Head

Avg.2006-10

2011

2012

H-S-0508/24/12

Livestock Marketing Information Center

Data Source: USDA-AMS & USDA-NASS

Spring 2012 Capacity at 5.4 days/week = 2.38 million head/week

Extension and Outreach/Department of Economics

H-S-2408/24/12

Livestock Marketing Information Center

Data Source: USDA-AMS & USDA-NASS

BARROW AND GILT DRESSED WEIGHTFederally Inspected, Weekly

192

194

196

198

200

202

204

206

208Pounds

Avg.2006-10

2011

2012

Extension and Outreach/Department of Economics

M-S-1908/27/12

Livestock Marketing Information Center

Data Source: USDA-AMS & USDA-NASS

PORK PRODUCTIONFederally Inspected, Weekly

325

350

375

400

425

450

475

500

525Mil. Pounds

Avg.2006-10

2011

2012

Extension and Outreach/Department of Economics

H-P-0908/27/12

Livestock Marketing Information Center

Data Source: USDA-AMS, Compiled & Analysis by LMIC

BARROW AND GILT PRICESIowa - So. Minnesota, Carcass Base Price, Weekly

50

60

70

80

90

100

110$ Per Cwt.

Avg.2006-10

2011

2012

Extension and Outreach/Department of EconomicsSource: Lee Schulz, ISU Extension

-$60

-$40

-$20

$0

$20

$40

$60

Estimated Returns to Farrow to Finish Production in Iowa, $/Head

Extension and Outreach/Department of Economics

U.S. Meat Production & Prices

Source: USDA-WAOB

Extension and Outreach/Department of Economics

Hog Crush Margin

Source: ISU Extension

The Crush Margin is the return after the pig, corn and soybean meal costs.Carcass weight: 200 pounds Pig price: 50% of 5 mth out lean hog futuresCorn: 10 bushels per pig Soybean meal: 150 pounds per pig

Extension and Outreach/Department of Economics

-$70

-$50

-$30

-$10

$10

$30

$50

$70

Potential Returns to Farrow to Finish Production in Iowa, $/Head

Potential lossesSept-12 through Jul-13 @ average of $34.64/head

Source: Lee Schulz, ISU Extension

Extension and Outreach/Department of Economics

Quarterly Forecasts

Source: LMIC

Year Comm. Chg. from Comm. Pork Chg. from Per Capita Chg. fromQuarter Slaughter Year Ago Production Year Ago Consumption Year Ago

(1,000 Head) (%) (Mil. Lbs.) (%) (Retail lbs.) (%)2012

I 28,104 2.3 5,858 2.4 10.4 -2.7 II 26,659 2.1 5,519 2.8 10.3 -1.2 III 27,172 -0.8 5,429 -1.0 10.4 0.4 IV 30,603 2.4 6,279 1.5 11.9 3.7

Year 112,538 1.5 23,084 1.4 43.0 0.1 2013

I 27,974 -0.5 5,770 -1.5 10.5 0.3 II 26,801 0.5 5,495 -0.4 10.1 -1.5 III 26,738 -1.6 5,294 -2.5 9.8 -5.2 IV 29,771 -2.7 6,120 -2.5 11.5 -3.4

Year 111,284 -1.1 22,679 -1.8 42.0 -2.5 2014

I 27,666 -1.1 5,717 -0.9 10.2 -2.3 II 27,021 0.8 5,552 1.0 10.2 0.3 III 26,892 0.6 5,336 0.8 9.9 0.5 IV 30,097 1.1 6,210 1.5 11.6 0.6

Year 111,676 0.4 22,814 0.6 41.8 -0.2

Extension and Outreach/Department of Economics

U.S. Pork Projections

Source: FAPRI-MO

Extension and Outreach/Department of Economics

U.S. Corn Supply and Use2008 2009 2010 2011 2012

Area Planted (mil. acres) 86.0 86.4 88.2 91.9 96.4

Yield (bu./acre) 153.9 164.7 152.8 147.2 122.8

Production (mil. bu.) 12,092 13,092 12,447 12,358 10,727

Beg. Stocks (mil. bu.) 1,624 1,673 1,708 1,128 1,181

Imports (mil. bu.) 14 8 28 25 75

Total Supply (mil. bu.) 13,729 14,774 14,182 13,511 11,983

Feed & Residual (mil. bu.) 5,182 5,125 4,793 4,400 4,150

Ethanol (mil. bu.) 3,709 4,591 5,021 5,000 4,500

Food, Seed, & Other (mil. bu.) 1,316 1,370 1,407 1,390 1,350

Exports (mil. bu.) 1,849 1,980 1,835 1,540 1,250

Total Use (mil. bu.) 12,056 13,066 13,055 12,330 11,250

Ending Stocks (mil. bu.) 1,673 1,708 1,128 1,181 733

Season-Average Price ($/bu.) 4.06 3.55 5.18 6.25 7.90

Source: USDA-WAOB

Extension and Outreach/Department of Economics

U.S. DDG Supply and Use2008 2009 2010 2011 2012

Production (mil. metric tons) 28.6 35.4 38.7 38.6 34.7

Imports (mil. metric tons) 0.3 0.4 0.4 0.3 0.3

Total Supply (mil. metric tons) 28.9 35.8 39.2 38.9 35.0

Domestic (mil. metric tons) 23.9 27.5 30.9 31.2 28.1

Exports (mil. metric tons) 5.0 8.3 8.3 7.7 6.9

Total Use (mil. metric tons) 28.9 35.8 39.1 38.9 35.0

Average Price ($/ton) 126 114 188 222 275

My estimates, so take with a grain (or pound) of salt

Extension and Outreach/Department of Economics

U.S. Soybean Meal Supply and Use2009 2010 2011 2012

Production (thou. short tons) 41,707 39,251 41,250 35,700

Beg. Stocks (thou. short tons) 235 302 350 300

Imports (thou. short tons) 160 180 200 300

Total Supply (thou. short tons) 42,101 39,732 41,800 36,300

Domestic (thou. short tons) 30,640 30,301 32,000 29,200

Exports (thou. short tons) 11,160 9,081 9,500 6,800

Total Use (thou. short tons) 41,800 39,382 41,500 36,000

Ending Stocks (thou. short tons) 302 350 300 300

Season-Average Price

($/short ton) 311.27 345.52 397.00 500.00

Source: USDA-WAOB

Extension and Outreach/Department of Economics

Prices

Extension and Outreach/Department of Economics

World Corn Production

Source: USDA-WAOB

Extension and Outreach/Department of Economics

Current Corn Futures

Source: CME Group, 9/12/2012

7.18

6.14

5.61

Extension and Outreach/Department of Economics

Early Prices for 2013 Crops

Extension and Outreach/Department of Economics

Total Acreage Shift

Source: USDA-NASS

Extension and Outreach/Department of Economics

Corn Projections

Source: FAPRI-MO

2013 2014 2015 2016 2017

Area Planted (mil. acres) 96.1 93.1 93.2 92.7 92.8

Yield (bu./acre) 163.2 165.7 167.9 170.2 172.4

Production (mil. bu.) 14,386 14,159 14,354 14,468 14,676

Beg. Stocks (mil. bu.) 645 1,510 1,675 1,766 1,789

Imports (mil. bu.) 25 25 25 25 25

Total Supply (mil. bu.) 15,056 15,695 16,054 16,259 16,490

Feed & Residual (mil. bu.) 4,852 4,855 4,964 5,022 5,082

Ethanol (mil. bu.) 5,386 5,649 5,665 5,643 5,657

Food, Seed, & Other (mil. bu.) 1,435 1,460 1,473 1,472 1,490

Exports (mil. bu.) 1,890 2,055 2,186 2,322 2,445

Total Use (mil. bu.) 13,546 14,020 14,288 14,470 14,675

Ending Stocks (mil. bu.) 1,510 1,675 1,766 1,789 1,815

Season-Average Price ($/bu.) 5.20 4.86 4.74 4.74 4.75

Extension and Outreach/Department of Economics

Thoughts for 2013 and Beyond Breeding herd liquidation in Canada has picked-up

Year-over-year increases in sows sent to the U.S. for slaughter

Farrowing intentions (% year ago): -1.4 in 2012.qt3 and -1.3 in 2012.qtr4

Domestic demand struggling Down 6% in 2012.qtr2 compared to 2011.qtr2

Exports increasing in importance Export demand up 5% in 2012.qtr2 compared to

2011.qtr2 First six months of the year exports are 12% above year

ago levels

Source: Lee Schulz, ISU Extension

Extension and Outreach/Department of Economics

Thoughts for 2013 and BeyondSupply/demand concerns

Soil moistureSouth America gets 1st chance to respond to drought pricingWill supply be able to keep pace with demand?

Drought is pulling supply downBut high prices are diminishing demand

General economic conditionsContinued worldwide economic recovery is a key for crop pricesUS job recovery, European financial concerns, China?

2012/13: USDA: Corn $8.20; Soy $16.00Futures (as of 9/12/12): Corn $7.18; Soy $16.20

2013/14: Futures Corn $6.14; Soy $13.092014/15: Futures Corn $5.61; Soy $12.46

Extension and Outreach/Department of Economics

Thank you for your time!

Any questions?

My web site:http://www.econ.iastate.edu/~chart/

Iowa Farm Outlook:http://www.econ.iastate.edu/ifo/

Ag Decision Maker:http://www.extension.iastate.edu/agdm/