Iowa Pork Congress – 2012Meat Sector OutlookSteve R. Meyer, Ph.D.Paragon Economics, Inc.                            Parago...
Key issues for „12 pork producer profits   Exports – Exchange rates, trade policy,    disease status   U.S. demand – U.S...
CROPS and COSTS           Paragon Economics, Inc.             From information, knowledge
„12 corn yield 5.8% below 1960-2010 trend . . .            . . . And 8.2% below “biotech” trend                           ...
Result: Continually shrinking corn crop . . .. . higher stocks, but still 2nd lowest S/U ratio    U.S. CORN SUPPLY AND UTI...
January Grain Stocks reports                GRAIN STOCKS, DECEMBER 1, 2011                     January 12, 2012 Grain Stoc...
Ethanol now uses more corn than feed/res.                           Paragon Economics, Inc.                             Fr...
Corn went to ethanol due to PROFITS!!!!                             Paragon Economics, Inc.                               ...
World corn stocks: Forecast is 3rd lowest                            Paragon Economics, Inc.                              ...
Corn at bottom of “range” – lower in Q3 & Q4                             Paragon Economics, Inc.                          ...
2011 drought grew into the Cornbelt                            Paragon Economics, Inc.                              From i...
Conditions have improved – but . . .                              Paragon Economics, Inc.                                F...
U.S. soybean crop has held up better    U.S. SOYBEAN SUPPLY & UTILIZATION - JANUARY                                       ...
World soybean stocks/use is in good shape                          Paragon Economics, Inc.                            From...
Weekly SBM cash and futures prices                          Paragon Economics, Inc.                            From inform...
Still have ample wheat stocks                           Paragon Economics, Inc.                                From inform...
And wheat is NOT keeping up with corn . . .  . . . More feeding is likely a long-term trend                              P...
DDGS may be pricing OUT of hog diets . . .            . . . Cattle feed demand, exports                             Parago...
Hog costs were record high in ‟11 . . .  . . . Have risen from $81.12 for ‟12 since Dec                              Parag...
MEAT & POULTRY   DEMAND          Paragon Economics, Inc.            From information, knowledge
GDP growth: Improving again– but still slow             QTRLY GROSS DOMESTIC PRODUCT (GDP)                    Real Dollar ...
Per cap Disposable Income = Mid-2006 . . .         . . . And 4.3% below the peak in 2008                                PE...
Consumer sentiment: Highest since June . . .  . . . Improving employment/unemployment                            Paragon E...
Domestic meat demand improved in ‟11 . . . . . For all species, last data point is Dec-Nov                              Pa...
Yr/yr monthly data – have softened recently                             November                            monthly index ...
RPI improving – highest since April . . .                               Paragon Economics, Inc.                           ...
PC consumption fell sharply in 2011 . . .           . . . But demand is strong! How so?                              Parag...
What will be the impact of record prices?. . . NOT lower demand but lower Q demanded                           Paragon Eco...
Dollar Index futures have gained ~10%                           Paragon Economics, Inc.                             From i...
Competitors: All have gained since mid „10   . . . Some recent “flight to safety” – Over?                              Par...
Customers: Same situation . . .     . . . Impact of peso and won weakening?                            Paragon Economics, ...
Pork exports will be record large in 2011                         . . . Again in 2012???                             Parag...
Pork exports – EXCELLENT (+23%) thru Nov. . .   . . . China & Korea up >100%, Mexico -0.5%                            Para...
Total frozen meat/poultry down 7.6% vs. „11 . .     . . . Led by chicken (-22%); pork +1% yr/yr                           ...
CHICKEN      Paragon Economics, Inc.          From information, knowledge
Broiler losses – Large and continuing!  . .. 2010 expansion plus higher grain prices                             Paragon E...
AGGRESSIVE broiler cuts since mid-summer. .                          2011 cuts offset ALL of                             2...
Reason: Higher weights – are persisting . . .  . . . Continuing breast meat glut, low prices                              ...
Broiler cutout FINALLY broke thru $90 . . .    . . . traction from cutbacks has been slow                             Para...
And some improvement in breast meat!                          Paragon Economics, Inc.                            From info...
CATTLE/BEEF         Paragon Economics, Inc.           From information, knowledge
Lowest U.S. beef cow inventory since 1963                                            2011 = 30.9 Million Head             ...
Beef: Four smallest calf crops since 1950                                          2011 = 35.5 Million Head               ...
Drought is the driver for beef industry now                                      State       Beef Cows                    ...
Beef cow slaughter +11.3% since June 1 . . .  . . . Mainly TX & OK, some growth elsewhere                             Para...
Jan 1 COF – about as expected USDA Cattle on Feed Report Summary ---January 2012                                 Thous. Hd...
COF was +3% on Jan 1 – 19 months up . . .          . . . But getting closer each month                             Paragon...
Jan 1 COF – about as expected USDA Cattle on Feed Report Summary ---January 2012                                 Thous. Hd...
COF was +3% on Jan 1 – 19 months up . . .          . . . But getting closer each month                             Paragon...
Slaughter lower than ‟10 in 11 of last 14 wks.                              Paragon Economics, Inc.                       ...
Add in growing exports and . . .. . . U.S. consumption/availability: -3.8% in „12                        U S BEEF CONSUMPT...
New record high for Choice cutout @ $196.64    . . . My $200 prediction appears safe???                            Paragon...
HOGS AND PORK         Paragon Economics, Inc.           From information, knowledge
Dec H&P Report: Continued slow growth . . .                 USDA Quarterly Hogs and Pigs Report                           ...
Litter size growth 2.0% over past 4 years. . .               . . . How high can litter size go?                           ...
Doing more and more with same herd!                          Paragon Economics, Inc.                            From infor...
Q4 ‟11 was -2 to 3% from ‟10 . . . . . . With Q2 and Q3 „12 supplies up 1.5 – 2.5%                              Paragon Ec...
Weights remain large and GROWING. . .          . . . Genetics, fixed costs, matrixes                              Paragon ...
Cutout value begins „12 near „11 level . . . . . . Match yr ago: Exports, domestic demand                            Parag...
Neg‟d Net prices stayed above $80 from Jan!                            Paragon Economics, Inc.                            ...
Sows very likely to remain at $60-plus in „12                             Paragon Economics, Inc.                         ...
„12 profits have increased $10/hd since Dec                            Paragon Economics, Inc.                            ...
Price forecasts                          December 2011 Hogs & Pigs Price Forecasts                          Missouri      ...
Monthly price forecasts                          Paragon Economics, Inc.                            From information, know...
Pork outlook   2012 supplies will be 1.5 – 2.5% larger    with bulk in Q2 and Q3, Q4 steady w/ „11   Weights will remain...
Risks   The U.S. economy   World economy   $US vs. other currencies   2012 corn and soybean crops   Oil prices – corn...
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Dr. Steve Meyer - Riding the Roller Coaster: Economic Outlook

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Riding the Roller Coaster: Economic Outlook - Steve Meyer, livestock and agricultural economist, Paragon Economics, Inc., from the 2012 Iowa Pork Congress, January 24 - 26, Des Moines, IA, USA.

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Dr. Steve Meyer - Riding the Roller Coaster: Economic Outlook

  1. 1. Iowa Pork Congress – 2012Meat Sector OutlookSteve R. Meyer, Ph.D.Paragon Economics, Inc. Paragon Economics, Inc. From information, knowledge
  2. 2. Key issues for „12 pork producer profits Exports – Exchange rates, trade policy, disease status U.S. demand – U.S. economy, prices of competitor goods Feed prices – S. American crops, moisture situation, 2012 acreage/yields Hog/pork supplies -- Productivity (farrow- ings, litter size), herd health, weights Packing capacity re. hog numbers this fall Paragon Economics, Inc. From information, knowledge
  3. 3. CROPS and COSTS Paragon Economics, Inc. From information, knowledge
  4. 4. „12 corn yield 5.8% below 1960-2010 trend . . . . . . And 8.2% below “biotech” trend Paragon Economics, Inc. From information, knowledge
  5. 5. Result: Continually shrinking corn crop . . .. . higher stocks, but still 2nd lowest S/U ratio U.S. CORN SUPPLY AND UTILIZATION - JANUARY 2009/10 2010/11 2011/12 Estimate USDA USDA %Chng vs. December January 10-11 Acres Planted Mil A 86.4 88.2 91.9 91.9 4.2% Acres Harvested Mil A 79.5 81.4 83.9 84 3.2% Yield Bu/A 164.7 152.8 146.7 147.2 -3.7% Beginning Stocks Mil Bu. 1673 1708 1128 1128 -34.0% Production Mil Bu. 13092 12447 12310 12358 -0.7% Imports Mil Bu. 8 27 15 15 -44.4% Total Supply Mil Bu. 5961 14182 13453 13501 -4.8% Feed & Residual Mil Bu. 5125 4793 4600 4600 -4.0% Ethanol for fuel Mil Bu. 4591 5021 5000 5000 -0.4% Non-Ethanol FSI Mil Bu. 10183 1395 1405 1405 0.7% Exports Mil Bu. 1980 1835 1600 1650 -10.1% Total Usage Mil Bu. 13066 13053 12605 12655 -3.0% Carryover Mil Bu. 1708 1128 848 846 -25.0% Stocks/Use 13.1% 8.6% 6.7% 6.7% -22.6% Nat. Wtd. Avg. Farm Price $/Bu. 3.55 5.18 5.90 - 6.90 5.70 - 6.70 27.6% Paragon Economics, Inc. From information, knowledge
  6. 6. January Grain Stocks reports GRAIN STOCKS, DECEMBER 1, 2011 January 12, 2012 Grain Stocks Report Analysts Estimates, Dec. 1, 11 USDA, USDA, USDA, Units Dec 1 10 Sept 1, 11 Low High Average Dec1, 11 Wheat Bil. Bu. 1.933 2.150 1.590 1.904 1.695 1.656 Corn Bil. Bu. 10.057 1.128 9.200 9.700 9.391 9.641 Soybeans Bil. Bu. 2.278 0.215 2.227 2.577 2.324 2.366 Paragon Economics, Inc. From information, knowledge
  7. 7. Ethanol now uses more corn than feed/res. Paragon Economics, Inc. From information, knowledge
  8. 8. Corn went to ethanol due to PROFITS!!!! Paragon Economics, Inc. From information, knowledge
  9. 9. World corn stocks: Forecast is 3rd lowest Paragon Economics, Inc. From information, knowledge
  10. 10. Corn at bottom of “range” – lower in Q3 & Q4 Paragon Economics, Inc. From information, knowledge
  11. 11. 2011 drought grew into the Cornbelt Paragon Economics, Inc. From information, knowledge
  12. 12. Conditions have improved – but . . . Paragon Economics, Inc. From information, knowledge
  13. 13. U.S. soybean crop has held up better U.S. SOYBEAN SUPPLY & UTILIZATION - JANUARY 2009/10 2010/11 2011/12 USDA USDA % Chng vs December January 10-11 Acres Planted Mil A 77.5 77.4 75.0 75.0 -3.1% Acres Harvested Mil A 76.4 76.6 73.7 73.6 -3.9% Yield Bu/A 44.0 43.5 41.3 41.5 -4.6% Beginning Stocks Mil Bu. 138 151 215 215 42.4% Production Mil Bu. 3359 3329 3046 3056 -8.2% Imports Mil Bu. 15 14 15 15 7.1% Total Supply Mil Bu. 3512 3495 3275 3286 -6.0% Crushings Mil Bu. 1752 1648 1625 1615 -2.0% Exports Mil Bu. 1499 1501 1300 1275 -15.1% Seed Mil Bu. 90 87 88 88 1.1% Residual Mil Bu. 20 43 32 32 -25.6% Total Usage Mil Bu. 3361 3280 3045 3011 -8.2% Carryover Mil Bu. 151 215 230 275 27.9% Stocks/Use 4.5% 6.6% 7.6% 9.1% 39.3% Nat. Wtd. Avg. Farm Price $/Bu. 9.59 11.3010.70 - 12.7010.95 - 12.45 3.5% Soybean Oil Price Cents/lb. 35.95 53.20 53.00-57.00 50.50-54.50 -1.3% Soybean Meal Price $/ton 311.27 345.52 355-385 280-310 -15.7% Paragon Economics, Inc. From information, knowledge
  14. 14. World soybean stocks/use is in good shape Paragon Economics, Inc. From information, knowledge
  15. 15. Weekly SBM cash and futures prices Paragon Economics, Inc. From information, knowledge
  16. 16. Still have ample wheat stocks Paragon Economics, Inc. From information, knowledge
  17. 17. And wheat is NOT keeping up with corn . . . . . . More feeding is likely a long-term trend Paragon Economics, Inc. From information, knowledge
  18. 18. DDGS may be pricing OUT of hog diets . . . . . . Cattle feed demand, exports Paragon Economics, Inc. From information, knowledge
  19. 19. Hog costs were record high in ‟11 . . . . . . Have risen from $81.12 for ‟12 since Dec Paragon Economics, Inc. From information, knowledge
  20. 20. MEAT & POULTRY DEMAND Paragon Economics, Inc. From information, knowledge
  21. 21. GDP growth: Improving again– but still slow QTRLY GROSS DOMESTIC PRODUCT (GDP) Real Dollar (2005) Change from Previous Quarter Percent Change 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0 -2.5 1996 1998 2000 2002 2004 2006 2008 2010 Livestock Marketing Information Center 12/29/11 Data Source: Bureau of Economic Analysis, Compiled & Analysis by LMIC Paragon Economics, Inc. From information, knowledge
  22. 22. Per cap Disposable Income = Mid-2006 . . . . . . And 4.3% below the peak in 2008 PER CAPITA DISPOSABLE PERSONAL INCOME Dollars Quarterly 40000 38000 36000 Current Dollar 34000 32000 2005 30000 Dollar 28000 26000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Paragon Economics, Inc. From information, knowledge
  23. 23. Consumer sentiment: Highest since June . . . . . . Improving employment/unemployment Paragon Economics, Inc. From information, knowledge
  24. 24. Domestic meat demand improved in ‟11 . . . . . For all species, last data point is Dec-Nov Paragon Economics, Inc. From information, knowledge
  25. 25. Yr/yr monthly data – have softened recently November monthly index vs. ‘10: Pork: -1.7% Chicken: -8.7% Beef: +1.3% Paragon Economics, Inc. From information, knowledge
  26. 26. RPI improving – highest since April . . . Paragon Economics, Inc. From information, knowledge
  27. 27. PC consumption fell sharply in 2011 . . . . . . But demand is strong! How so? Paragon Economics, Inc. From information, knowledge
  28. 28. What will be the impact of record prices?. . . NOT lower demand but lower Q demanded Paragon Economics, Inc. From information, knowledge
  29. 29. Dollar Index futures have gained ~10% Paragon Economics, Inc. From information, knowledge
  30. 30. Competitors: All have gained since mid „10 . . . Some recent “flight to safety” – Over? Paragon Economics, Inc. From information, knowledge
  31. 31. Customers: Same situation . . . . . . Impact of peso and won weakening? Paragon Economics, Inc. From information, knowledge
  32. 32. Pork exports will be record large in 2011 . . . Again in 2012??? Paragon Economics, Inc. From information, knowledge
  33. 33. Pork exports – EXCELLENT (+23%) thru Nov. . . . . . China & Korea up >100%, Mexico -0.5% Paragon Economics, Inc. From information, knowledge
  34. 34. Total frozen meat/poultry down 7.6% vs. „11 . . . . . Led by chicken (-22%); pork +1% yr/yr Paragon Economics, Inc. From information, knowledge
  35. 35. CHICKEN Paragon Economics, Inc. From information, knowledge
  36. 36. Broiler losses – Large and continuing! . .. 2010 expansion plus higher grain prices Paragon Economics, Inc. From information, knowledge
  37. 37. AGGRESSIVE broiler cuts since mid-summer. . 2011 cuts offset ALL of 2010 increases DOWN 6% YTD 2012 Placements are now -4.2% since June 1 and 3.5% since Jan 1 Paragon Economics, Inc. From information, knowledge
  38. 38. Reason: Higher weights – are persisting . . . . . . Continuing breast meat glut, low prices Paragon Economics, Inc. From information, knowledge
  39. 39. Broiler cutout FINALLY broke thru $90 . . . . . . traction from cutbacks has been slow Paragon Economics, Inc. From information, knowledge
  40. 40. And some improvement in breast meat! Paragon Economics, Inc. From information, knowledge
  41. 41. CATTLE/BEEF Paragon Economics, Inc. From information, knowledge
  42. 42. Lowest U.S. beef cow inventory since 1963 2011 = 30.9 Million Head -1.6 Percent 2011 = 9.1 Million Head +0.7 Percent Livestock Marketing Information Center C-N-02 Data Source: USDA/NASS 07/23/10 Paragon Economics, Inc. From information, knowledge
  43. 43. Beef: Four smallest calf crops since 1950 2011 = 35.5 Million Head -0.5 Percent 2010 = 35.7 Million Head -0.7 Percent Paragon Economics, Inc. From information, knowledge
  44. 44. Drought is the driver for beef industry now State Beef Cows (Thousand) TX 5025 OK 2036 KS 1478 FL 926 CO 727 AL 659 GA 502 MS 495 NM 488 LA 461 NC 351 SC 184 AZ 180 Total 13512 Share 43.8% Paragon Economics, Inc. From information, knowledge
  45. 45. Beef cow slaughter +11.3% since June 1 . . . . . . Mainly TX & OK, some growth elsewhere Paragon Economics, Inc. From information, knowledge
  46. 46. Jan 1 COF – about as expected USDA Cattle on Feed Report Summary ---January 2012 Thous. Hd. 2012 as Pct. of 2011 Esti- Differ- 2011 2012 Actual mate* enceOn Feed, January 1 11,514 11,861 103.0 103.3 -0.3Placed on Feed in December 1,789 1,683 94.1 94.2 -0.1Fed Cattle Marketed, December 1,830 1,796 98.1 97.0 1.1 Paragon Economics, Inc. From information, knowledge
  47. 47. COF was +3% on Jan 1 – 19 months up . . . . . . But getting closer each month Paragon Economics, Inc. From information, knowledge
  48. 48. Jan 1 COF – about as expected USDA Cattle on Feed Report Summary ---January 2012 Thous. Hd. 2012 as Pct. of 2011 Esti- Differ- 2011 2012 Actual mate* enceOn Feed, January 1 11,514 11,861 103.0 103.3 -0.3Placed on Feed in December 1,789 1,683 94.1 94.2 -0.1Fed Cattle Marketed, December 1,830 1,796 98.1 97.0 1.1 Paragon Economics, Inc. From information, knowledge
  49. 49. COF was +3% on Jan 1 – 19 months up . . . . . . But getting closer each month Paragon Economics, Inc. From information, knowledge
  50. 50. Slaughter lower than ‟10 in 11 of last 14 wks. Paragon Economics, Inc. From information, knowledge
  51. 51. Add in growing exports and . . .. . . U.S. consumption/availability: -3.8% in „12 U S BEEF CONSUMPTION Per Capita, Retail Weight, Annual Pounds 75 70 65 60 55 50 1987 1990 1993 1996 1999 2002 2005 2008 2011 Paragon Economics, Inc. From information, knowledge
  52. 52. New record high for Choice cutout @ $196.64 . . . My $200 prediction appears safe??? Paragon Economics, Inc. From information, knowledge
  53. 53. HOGS AND PORK Paragon Economics, Inc. From information, knowledge
  54. 54. Dec H&P Report: Continued slow growth . . . USDA Quarterly Hogs and Pigs Report December 23, 2011 2011 as Pre- Actual - Category 2010 2011 Pct of Report Estimate Inventories on December 11 All hogs and pigs 64,925 65,931 101.5 101.3 0.2 Kept for breeding 5,778 5,803 100.4 100.8 -0.4 Kept for market 59,147 60,128 101.7 101.3 0.4 Under 50 lbs. 18,864 19,271 102.2 101.8 0.4 50-119 lbs. 16,519 16,895 102.3 101.5 0.8 120-179 lbs. 12,233 12,472 102.0 101.0 1.0 180 lbs. and over 11,531 11,490 99.6 101.2 -1.6 Farrowings 2 Sep-Nov sows farrowed 2,874 2,894 100.7 99.9 0.8 Dec-Feb Intentions 2,843 2,865 100.8 100.6 0.2 Mar-May Intentions 2,917 2,890 99.1 100.8 -1.7 Sep-Nov Pig Crop1 28,488 29,014 101.8 101.6 0.2 Sep-Nov pigs saved per litter 9.91 10.02 101.1 101.6 -0.5 *Thousand head **Thousand litters Paragon Economics, Inc. From information, knowledge
  55. 55. Litter size growth 2.0% over past 4 years. . . . . . How high can litter size go? Paragon Economics, Inc. From information, knowledge
  56. 56. Doing more and more with same herd! Paragon Economics, Inc. From information, knowledge
  57. 57. Q4 ‟11 was -2 to 3% from ‟10 . . . . . . With Q2 and Q3 „12 supplies up 1.5 – 2.5% Paragon Economics, Inc. From information, knowledge
  58. 58. Weights remain large and GROWING. . . . . . Genetics, fixed costs, matrixes Paragon Economics, Inc. From information, knowledge
  59. 59. Cutout value begins „12 near „11 level . . . . . . Match yr ago: Exports, domestic demand Paragon Economics, Inc. From information, knowledge
  60. 60. Neg‟d Net prices stayed above $80 from Jan! Paragon Economics, Inc. From information, knowledge
  61. 61. Sows very likely to remain at $60-plus in „12 Paragon Economics, Inc. From information, knowledge
  62. 62. „12 profits have increased $10/hd since Dec Paragon Economics, Inc. From information, knowledge
  63. 63. Price forecasts December 2011 Hogs & Pigs Price Forecasts Missouri ISU LMIC Paragon CME Producer-Sold Ia-Mn Wtd. Avg. National Net Net Price, All National Wtd Negd Price, CME Lean Hog Base Lean Hog 1 Methods Avg. Base Price Wtd. Avg. Futures 1/18/12 2010 Q1 68.20 71.99 65.91 69.13 69.38** Q2 79.54 85.18 77.04 81.89 81.42** Q3 80.68 82.19 78.21 81.90 81.88** Q4 69.26 68.97 67.3 67.12 68.23** Year 74.42 77.08 82.42 75.01 75.23** 2011 Q1 80.63 78.92 78.38 80.91 81.54** Q2 92.39 89.37 89.49 94.89 93.97** Q3 95.74 92.31 92.71 97.61 97.49** Q4 87.68 85.03 85.03 88.74 88.11** Year 89.12 86.41 86.40 90.54 90.28** 2010 Q1 84 - 88 83 - 88 85 - 89 86.70 Q2 91 - 95 89 - 95 92 - 96 93.63 Q3 91 - 95 91 - 97 92 - 96 94.72 Q4 79 - 83 82 - 89 81 - 85 84.13 Year 86 - 90 86 - 92 87 - 91 89.80 1 Prior to Q2-11, ISU forecasts were Ia-Mn Live Price converted using a 75% yield **Average of CME Lean Hog Index *Partial USDA data Paragon Economics, Inc. From information, knowledge
  64. 64. Monthly price forecasts Paragon Economics, Inc. From information, knowledge
  65. 65. Pork outlook 2012 supplies will be 1.5 – 2.5% larger with bulk in Q2 and Q3, Q4 steady w/ „11 Weights will remain high Prices much like „11 – mid „$90s in summer Questions: - Will demand hold? – Competitor prices, economy, $US, consumers - Is there enough finishing space for added pigs? - Slaughter capacity, fall „12? Paragon Economics, Inc. From information, knowledge
  66. 66. Risks The U.S. economy World economy $US vs. other currencies 2012 corn and soybean crops Oil prices – corn is hitched to it RFS waiver/reduction plan Export disruption - OIE disease – unlikely but HUGE impact - Another “swine flu” type scare Paragon Economics, Inc. From information, knowledge

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