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.
15. Weekly SBM cash and futures prices
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16. Still have ample wheat stocks
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17. And wheat is NOT keeping up with corn . . .
. . . More feeding is likely a long-term trend
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18. DDGS may be pricing OUT of hog diets . . .
. . . Cattle feed demand, exports
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19. Hog costs were record high in ‟11 . . .
. . . Have risen from $81.12 for ‟12 since Dec
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20. MEAT & POULTRY
DEMAND
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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
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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
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23. Consumer sentiment: Highest since June . . .
. . . Improving employment/unemployment
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24. Domestic meat demand improved in ‟11 . . .
. . For all species, last data point is Dec-Nov
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25. Yr/yr monthly data – have softened recently
November
monthly index
vs. ‘10:
Pork: -1.7%
Chicken: -8.7%
Beef: +1.3%
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26. RPI improving – highest since April . . .
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27. PC consumption fell sharply in 2011 . . .
. . . But demand is strong! How so?
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28. What will be the impact of record prices?
. . . NOT lower demand but lower Q demanded
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29. Dollar Index futures have gained ~10%
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30. Competitors: All have gained since mid „10
. . . Some recent “flight to safety” – Over?
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31. Customers: Same situation . . .
. . . Impact of peso and won weakening?
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32. Pork exports will be record large in 2011
. . . Again in 2012???
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33. Pork exports – EXCELLENT (+23%) thru Nov. . .
. . . China & Korea up >100%, Mexico -0.5%
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34. Total frozen meat/poultry down 7.6% vs. „11 . .
. . . Led by chicken (-22%); pork +1% yr/yr
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35. CHICKEN
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36. Broiler losses – Large and continuing!
. .. 2010 expansion plus higher grain prices
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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
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38. Reason: Higher weights – are persisting . . .
. . . Continuing breast meat glut, low prices
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39. Broiler cutout FINALLY broke thru $90 . . .
. . . traction from cutbacks has been slow
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40. And some improvement in breast meat!
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41. CATTLE/BEEF
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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
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43. Beef: Four smallest calf crops since 1950
2011 = 35.5 Million Head
-0.5 Percent
2010 = 35.7 Million Head
-0.7 Percent
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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%
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45. Beef cow slaughter +11.3% since June 1 . . .
. . . Mainly TX & OK, some growth elsewhere
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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* ence
On Feed, January 1 11,514 11,861 103.0 103.3 -0.3
Placed on Feed in December 1,789 1,683 94.1 94.2 -0.1
Fed Cattle Marketed, December 1,830 1,796 98.1 97.0 1.1
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47. COF was +3% on Jan 1 – 19 months up . . .
. . . But getting closer each month
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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* ence
On Feed, January 1 11,514 11,861 103.0 103.3 -0.3
Placed on Feed in December 1,789 1,683 94.1 94.2 -0.1
Fed Cattle Marketed, December 1,830 1,796 98.1 97.0 1.1
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49. COF was +3% on Jan 1 – 19 months up . . .
. . . But getting closer each month
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50. Slaughter lower than ‟10 in 11 of last 14 wks.
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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
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52. New record high for Choice cutout @ $196.64
. . . My $200 prediction appears safe???
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53. HOGS AND PORK
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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
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55. Litter size growth 2.0% over past 4 years. . .
. . . How high can litter size go?
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56. Doing more and more with same herd!
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57. Q4 ‟11 was -2 to 3% from ‟10 . . .
. . . With Q2 and Q3 „12 supplies up 1.5 – 2.5%
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58. Weights remain large and GROWING. . .
. . . Genetics, fixed costs, matrixes
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59. Cutout value begins „12 near „11 level . . .
. . . Match yr ago: Exports, domestic demand
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60. Neg‟d Net prices stayed above $80 from Jan!
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61. Sows very likely to remain at $60-plus in „12
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62. „12 profits have increased $10/hd since Dec
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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 Neg'd 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
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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. 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
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