Pork Industry Economic Update Meyer

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Pork Industry Economic Update, Managing Inputs and Marketing: Where Do We Go From Here? Dr. Steve Meyer, Paragon Economics, Inc., from the 2009 Iowa Pork Congress, January 28 - 29, Des Moines, Iowa, USA.

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  • good ppts... i like it
    upload more of pork regarding slaughter and transportation
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Pork Industry Economic Update Meyer

  1. 1. Iowa Pork Congress – January 2009 Pork Industry Economic Update
  2. 2. <ul><li>COMPETITORS </li></ul>
  3. 3. Current market shares of broiler companies
  4. 4. ’08 broiler slaughter: DOWN 0.7% . . . . . . On equal number of weeks! Q4: -5.8%
  5. 5. Higher weights offset some of the reduction . . . production still grew – but only 1.2% in ‘08
  6. 6. But HUGE cutbacks are on the way w/ sets . . . . . . down 2.9% for ’08, 7.6% for Q4-08, 6.4% YTD
  7. 7. Prices ARE better this year . . . . . . but are not good enough to cover costs
  8. 8. Signs of longer-term reductions . . .
  9. 9. Dec COF was 6.2% lower than in ’07 . . . . . . and COF was yr/yr lower from July on
  10. 10. Jan 1 COF was down 7.1% from Jan 2007
  11. 11. But the July Cattle Inventory said . . . . . . there are plenty of cattle still out there
  12. 12. January Cattle report due out tomorrow . . . . . . still a lot of feeder cattle vs. placements
  13. 13. Delayed placements due to feed costs . . . . . . mean larger cattle in and out of lots
  14. 14. Longer term – fewer beef cows . . . . . . Canadian cows are ~30% of this increase
  15. 15. <ul><li>FEED PRICES AND COSTS </li></ul>
  16. 16. Corn and oil correlation is breaking down . . . . . Speculative? Necessary for acres?
  17. 17. Corn prices have likely made a bottom . . . . . . Future a function of soybeans, weather
  18. 18. Weekly chart: Now in ’06-’07 trading range. . . . . . But $3 to $4.50 is VERY wide, historically
  19. 19. Corn MUST compete and keep S/C ratio low
  20. 20. SBM futures: Confirmed double bottom . . . . . . Now a function of Brazil, Arg, U.S. weather
  21. 21. Feed costs have risen since early December
  22. 22. Monthly profits have plunged again . . . . . . -$45 & -$40 in Nov & Dec, -$21.54 for ‘08
  23. 23. 2008 will be the second worst year EVER
  24. 24. Producer wealth is now at ’97 and ’06 levels
  25. 25. <ul><li>DEMAND </li></ul>
  26. 26. Demand indexes are down for all meats . . . . . . And ALL have had a tough 3 years
  27. 27. An alternate demand measure: RPCE
  28. 28. Monthly RPCE clearly shows ’08 problem . . . . . . retail price did not make up for exports
  29. 29. Huge growth in pork exports -- +53.4% YTD . . . but November was up only 0.5% from ‘07
  30. 30. Exports to China are down 82% from June. . . . . . other markets are holding pretty well
  31. 31. Impact 1: Exports pulled up low value cuts . . . but we are back to “normal” now
  32. 32. Impact 2: Record high by-product values . . . but those are returning to “normal”, too
  33. 33. How will a stronger $US impact exports? . . . $US is still WEAK in historic terms
  34. 34. <ul><li>HOG SUPPLIES </li></ul>
  35. 35. December H&P Report: A hodge-podge
  36. 36. Lower hog supplies are on the way . . . . . . with significant reductions in Q2 & Q3
  37. 37. Fewer Canadian market hogs -- MCOOL?
  38. 38. FP imports: 6.7 mil in ’08, 5 to 5.2 mil in ’09?
  39. 39. MCOOL: Current and potential impacts <ul><li>Government rules were pretty well understood – until the final rule! </li></ul><ul><li>Wild card: Consumer reaction to multi-country label </li></ul><ul><ul><li>Will “Canada” on label be a problem? </li></ul></ul><ul><ul><li>“ Mexico”, “Uruguay”, etc. may be – beef </li></ul></ul><ul><li>My expectation: Consumer will NOT dis-criminate against “U.S & Canada” label </li></ul><ul><ul><li>Canadian feeders/weaners will be wanted </li></ul></ul><ul><ul><li>How many producers will still be left? </li></ul></ul>
  40. 40. Weaned prices exploded in Q4-08 . . . . . . lower corn, lower summer farrowings
  41. 41. Breeding herds are falling rapidly . . . . . . But the incentives have changed
  42. 42. Canada-U.S. BH is smallest since 1986
  43. 43. Sow slaughter slowed markedly in late ‘08
  44. 44. Quarterly slaughter forecasts . . .
  45. 45. Price forecasts – futures have fallen . . .
  46. 46. 2009 prices are not “BAD” hog prices!!! . . . but they’ve fallen $8 since Jan 1
  47. 47. 2009: Average LOSS of $2.49/cwt carcass
  48. 48. July & Aug: About 50% of seasonal rally . . . . . . comes after January – mid to upper $80s
  49. 49. Supply and price expectations <ul><li>HIGHER meat prices LED by chicken this winter </li></ul>
  50. 50. Retail meat prices may flatten in short run . . . . . but they still must rise to cover all costs!
  51. 51. Supply and price expectations <ul><li>HIGHER meat prices LED by chicken this winter </li></ul><ul><li>Hog prices – poor Q1, GOOD Q2 and 3, tough Q4 again </li></ul><ul><ul><li>More breeding herd reduction – Canada? </li></ul></ul><ul><ul><li>Weights constant to growing slightly </li></ul></ul><ul><ul><li>Productivity will increase sharply </li></ul></ul><ul><ul><li>Will the cutback be enough to keep the industry profitable? </li></ul></ul>
  52. 52. Risks <ul><li>Demand, both domestic and international, given the financial crisis </li></ul><ul><li>Exports – Declining growth rate is virtually certain but will they actually fall? </li></ul><ul><ul><li>Yes: Exchange rates – esp. Mexico </li></ul></ul><ul><ul><li>No: Output reductions by competitors (mainly EU) </li></ul></ul><ul><ul><li>Wild card: China? </li></ul></ul><ul><li>Productivity growth may out-strip breeding herd/flock reductions </li></ul><ul><li>A new round of cost increases in ’09 -- bidding for acres? weather? </li></ul><ul><li>MCOOL – impacts? </li></ul>
  53. 53. CME’s Daily Livestock Report www.dailylivestockreport.com National Hog Farmer’s North American Preview www.nationalhogfarmer.com
  54. 54. Price forecasts – futures have fallen . . .

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