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.

1. Iowa Pork Congress – January 2009 Pork Industry Economic Update

3. Current market shares of broiler companies

4. ’08 broiler slaughter: DOWN 0.7% . . . . . . On equal number of weeks! Q4: -5.8%

5. Higher weights offset some of the reduction . . . production still grew – but only 1.2% in ‘08

6. But HUGE cutbacks are on the way w/ sets . . . . . . down 2.9% for ’08, 7.6% for Q4-08, 6.4% YTD

7. Prices ARE better this year . . . . . . but are not good enough to cover costs

8. Signs of longer-term reductions . . .

9. Dec COF was 6.2% lower than in ’07 . . . . . . and COF was yr/yr lower from July on

10. Jan 1 COF was down 7.1% from Jan 2007

11. But the July Cattle Inventory said . . . . . . there are plenty of cattle still out there

12. January Cattle report due out tomorrow . . . . . . still a lot of feeder cattle vs. placements

13. Delayed placements due to feed costs . . . . . . mean larger cattle in and out of lots

14. Longer term – fewer beef cows . . . . . . Canadian cows are ~30% of this increase

16. Corn and oil correlation is breaking down . . . . . Speculative? Necessary for acres?

17. Corn prices have likely made a bottom . . . . . . Future a function of soybeans, weather

18. Weekly chart: Now in ’06-’07 trading range. . . . . . But $3 to $4.50 is VERY wide, historically

19. Corn MUST compete and keep S/C ratio low

20. SBM futures: Confirmed double bottom . . . . . . Now a function of Brazil, Arg, U.S. weather

21. Feed costs have risen since early December

22. Monthly profits have plunged again . . . . . . -$45 & -$40 in Nov & Dec, -$21.54 for ‘08

23. 2008 will be the second worst year EVER

24. Producer wealth is now at ’97 and ’06 levels

26. Demand indexes are down for all meats . . . . . . And ALL have had a tough 3 years

27. An alternate demand measure: RPCE

28. Monthly RPCE clearly shows ’08 problem . . . . . . retail price did not make up for exports

29. Huge growth in pork exports -- +53.4% YTD . . . but November was up only 0.5% from ‘07

30. Exports to China are down 82% from June. . . . . . other markets are holding pretty well

31. Impact 1: Exports pulled up low value cuts . . . but we are back to “normal” now

32. Impact 2: Record high by-product values . . . but those are returning to “normal”, too

33. How will a stronger $US impact exports? . . . $US is still WEAK in historic terms

35. December H&P Report: A hodge-podge

36. Lower hog supplies are on the way . . . . . . with significant reductions in Q2 & Q3

37. Fewer Canadian market hogs -- MCOOL?

38. FP imports: 6.7 mil in ’08, 5 to 5.2 mil in ’09?

40. Weaned prices exploded in Q4-08 . . . . . . lower corn, lower summer farrowings

41. Breeding herds are falling rapidly . . . . . . But the incentives have changed

42. Canada-U.S. BH is smallest since 1986

43. Sow slaughter slowed markedly in late ‘08

44. Quarterly slaughter forecasts . . .

45. Price forecasts – futures have fallen . . .

46. 2009 prices are not “BAD” hog prices!!! . . . but they’ve fallen $8 since Jan 1

47. 2009: Average LOSS of $2.49/cwt carcass

48. July & Aug: About 50% of seasonal rally . . . . . . comes after January – mid to upper $80s

50. Retail meat prices may flatten in short run . . . . . but they still must rise to cover all costs!

53. CME’s Daily Livestock Report www.dailylivestockreport.com National Hog Farmer’s North American Preview www.nationalhogfarmer.com

54. Price forecasts – futures have fallen . . .