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Global Pork and Dairy Market
OutlookOctober 17, 2018
International Ingredient Corporation
Dr. Scott Brown
Agricultural Markets and Policy
Division of Applied Social Sciences
Hog Outlook: Ample Global Supplies Ahead
We know 2 major problems on supply/demand balance
US Production: faster growth than US population 15 of 16 quarters
Exports: have helped offset production growth, but at lower prices
Cold Storage: pork stocks above year ago 8 of last 9 months
Domestic demand strength has performed well
Good meat demand has moderated price pain
Demand for pork products has been mixed
Feed prices may moderate cost increases
This appears the only bright spot for profitability
Large 2018 crop nearly in the bin
African Swine Fever Remains The Wild
Card for Global Pork Markets
Swine Health Information Center
Pork Availability per U.S. Resident
45
46
47
48
49
50
51
52
53
54
1986 1990 1994 1998 2002 2006 2010 2014 2018(p)
Pounds (
reta
il w
eig
ht)
1986-2016 hog prices: AVG MAX MIN
8 years with <49 lbs. 60.96 76.03 54.30
11 years with 49-51 lbs. 49.09 57.75 41.24
12 years with >51 lbs. 42.73 52.50 34.00
Feed Costs Remain LowISU U.S. Farrow-Finish Returns
20
30
40
50
60
70
80
90
100
110
2001 2003 2005 2007 2009 2011 2013 2015 2017
Dolla
rs p
er
Cw
t.
Selling price Costs
World Pork Production
0
20
40
60
80
100
120
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018(p)
Mill
ion M
etr
ic T
ons
China EU US Brazil Russia ROW
World Pork Consumption
0
20
40
60
80
100
120
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018(p)
Mill
ion M
etr
ic T
ons
China EU US Russia Brazil ROW
Trade: Why is it Important?
1.00
1.05
1.10
1.15
1.20
1.25
1.30
1.35
1.40
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Index,
1990-9
5 a
vg.
= 1
.00
U.S. Population ROW Population
Trade: Why is it Important?
1.0
1.2
1.4
1.6
1.8
2.0
2.2
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Index,
1990-9
5 a
vg.
= 1
.0
U.S. Real GDP ROW Real GDP
World Pork Exports
0
1
2
3
4
5
6
7
8
9
10
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018(p)
Mill
ion M
etr
ic T
ons
EU US Canada Brazil China ROW
Major Pork Importers
0
1
2
3
4
5
6
7
8
9
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018(p)
Mill
ion M
etr
ic T
ons
China Japan Mexico ROW U.S. exports
China Tariffs for Selected Products
0
10
20
30
40
50
60
70
Soybeans Swineoffal
frozen
Swinecuts
frozen
Hamsbone-infrozen
Bovinemeat
Perc
ent
April 2 increase July 6 increase current applied rate
Value of exports since Jan 2015 (Million U.S. $)
$39,711M
$723M
$46M
$596M $239M
Ham Primal Value
45
50
55
60
65
70
75
80
85
90
95
1 5 9 13 17 21 25 29 33 37 41 45 49
Dolla
rs p
er
Cw
t.
2018 2017 2013-16 avg. 2018 + tariff
U.S. Pork Production Expanding Rapidly
-6
-4
-2
0
2
4
6
8
10
12
2011 2012 2013 2014 2015 2016 2017 2018 2019
Perc
ent
Gro
wth
vs. P
revio
us Y
ear
Production U.S. Population
U.S. Breeding Herd Inventory
5.6
5.7
5.8
5.9
6.0
6.1
6.2
6.3
6.4
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Mill
ion H
ead
Sow Number Changes vs. Profitability
-15
-10
-5
0
5
10
15
20
25
30
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
2002 2004 2006 2008 2010 2012 2014 2016 2018
Change v
s. Y
ear
Ago
Sow Inventory Prior 9 month avg. returns (right axis)
Breeding Herd Growth by State
-10 0 10 20 30 40 50 60 70 80 90
Illinois
Missouri
S. Dakota
N. Carolina
Texas
Iowa
Nebraska
Oklahoma
Ohio
Pennsylvania
Other states combined
Thousand Head, June 2018 vs. June 2014
Pork per Sow Growth
-4
-2
0
2
4
6
8
10
12
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Perc
ent
vs. Y
ear
Ago
2.2% avg. growth since 2000
1.4% avg. growth since 2010
H-S-05
10/12/18
1700
1800
1900
2000
2100
2200
2300
2400
2500
2600
2700
JAN APR JUL OCT
Thou. Head
HOG SLAUGHTERFederally Inspected, Weekly
Avg. 2012-16 2017 2018
Data Source: USDA-AMS & USDA-NASS
Livestock Marketing Information Center
H-S-24
10/12/18
202
204
206
208
210
212
214
216
JAN APR JUL OCT
Pounds
BARROW AND GILT DRESSED WEIGHTFederally Inspected, Weekly
Avg. 2012-16 2017 2018
Data Source: USDA-AMS & USDA-NASS
Livestock Marketing Information Center
U.S. Pork Production/Exports Changes
-300
-200
-100
0
100
200
300
400
500
600
2012 2013 2014 2015 2016 2017 2018 2019
Mill
ion P
ounds v
s.
Pre
vio
us Y
ear
Production Exports
30
40
50
60
70
80
90
2012 2013 2014 2015 2016 2017 2018 2019 (p)
Dolla
rs p
er
Cw
t
-300
-200
-100
0
100
200
300
400
500
600
2012 2013 2014 2015 2016 2017 2018 2019
Mill
ion P
ounds v
s.
Pre
vio
us Y
ear
Production Exports
Pork Production/Exports Changes
Barrow and Gilt Price
U.S. Pork Exports
0
5
10
15
20
25
30
35
40
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
Perc
ent
as % of U.S. production as % of world exports
U.S. Pork Markets
0
10
20
30
40
50
60
2001 2003 2005 2007 2009 2011 2013 2015 2017
Perc
ent
of Tota
l P
ork
Export
s
Mexico Japan Canada S. Korea China other
10/10/18
10
15
20
25
30
35
40
45
1/10/15 7/11/15 1/9/16 7/9/16 1/7/17 7/8/17 1/6/18 7/7/18
1000 MT
TOTAL US EXPORTS OF PORK MUSCLE CUTSWeekly
Data Source: USDA-FAS
Livestock Marketing Information Center
10/10/18
0
2
4
6
8
10
12
14
16
1/4/14 1/10/15 1/9/16 1/7/17 1/6/18
1000 MT
US EXPORTS OF PORK MUSCLE CUTSWeekly
Canada Japan Mexico Korean Rep.
Data Source: USDA-AMS & USDA-APHIS
Livestock Marketing Information Center
U.S. Pork Export Value to China/HK
0
200
400
600
800
1,000
1,200
2010 2011 2012 2013 2014 2015 2016 2017
Mill
ion $
Including Variety Meat Not Including Variety Meat
Meat Production and Trade, Oct. WASDE
Projected
2017 2018 2019
Production (billion lbs.) 99.8 102.2 105.5
Beef 26.3 27.1 28.0
Pork Chicken
25.6 41.2
26.4 42.1
27.8 42.9
Other 6.7 6.6 6.8
Exports (billion lbs.) 16.0 16.7 17.2
Beef Pork Chicken Other
2.9 5.6 6.8 0.7
3.2 6.0 6.9 0.6
3.2 6.2 7.0 0.8
Imports (billion lbs.) 4.5 4.5 4.6
Beef Pork Other
3.0 1.1 0.4
3.0 1.1 0.4
3.1 1.1 0.4
Retail Meat Prices
2.50
3.00
3.50
4.00
4.50
5.00
5.50
6.00
6.50
7.00
2010 2011 2012 2013 2014 2015 2016 2017 2018
Dolla
rs p
er
Pound
Pork Choice Beef Bacon
Selected Retail Meat Prices
-20 0 20 40 60
Ground beef
Chuck roast
Round roast
Beef for stew
Round steak
Sirloin steak
Bacon, sliced
Pork chops
Ham, boneless
Chicken legs, bone-in
Chicken breast, boneless
Percent Change, 2017 vs. 2010
Jan-Sep 2018
vs. 2017:
-4.5%
-2.9%
+5.0%
-2.6%
-4.8%
+4.3%
-1.4%
N/A
-1.2%+0.6%+2.1%
Pork Bellies in Cold Storage
0
20
40
60
80
100
120
Jan 08 Jan 10 Jan 12 Jan 14 Jan 16 Jan 18
Mill
ion P
ounds
Wholesale Pork Prices
60
80
100
120
140
160
180
200
220
240
01/09/15 07/09/15 01/09/16 07/09/16 01/09/17 07/09/17 01/09/18 07/09/18
Dolla
rs p
er
Cw
t.
Belly Primal Pork Cutout
Meat Availability and Prices, Oct. WASDE
Projected
2017 2018 2019
Availability (lbs. / capita) 216.8 219.4 224.3
Beef 56.9 57.2 58.8
Pork Chicken
50.1 90.8
50.8 92.4
53.1 93.4
Other 19.0 19.0 19.0
Prices (cents / lb.)
Fed steer Barrow and gilt Chicken Turkey
121.52 50.48 93.5 96.1
116.29 45.23
97.1 81.1
113 - 122 40 - 43 92 - 99 81 - 88
Hog Price (Quarterly)
30
40
50
60
70
80
90
2012 2013 2014 2015 2016 2017 2018 2019 (p)
Dolla
rs p
er
Cw
t
Farrow-Finish Returns Projection
-15
-10
-5
0
5
10
15
20
25
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019(p)
Dolla
rs p
er
Cw
t.
Know What to Look For Moving Forward
Average profitability will struggle through 2019
Heavy supplies weigh on prices and limit any rallies
The market will struggle to assess tariff impacts
Feed prices will move on weather and tariff news
Locking in positive profits will be difficult
That does not mean that you can’t limit losses
Know what keeps you afloat and lock that in when you can
Domestic demand could offset a lot of other negatives
Economic projections still bright
The majority of our pork is still consumed in this country
What Are the Key Dairy Issues?
U.S. milk supply growth continues
Cow numbers slow to respond to lower returns
Productivity growth adding to the supply
Modest output growth to continue next few quarters
Good news on the international front
Prices moving higher
US exports growing
Margin Protection Program
Debate of the next farm bill underway
Senate ag appropriations makes changes to MPP
What’s Wrong With This Picture?
8.94
9.00
9.06
9.12
9.18
9.24
9.30
9.36
9.42
10
12
14
16
18
20
22
24
26
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Dolla
rs p
er
Cw
t. /
Mill
ion H
ead
All Milk Price Dairy Cows (right axis)
Global Dairy Product Prices
0.0
0.5
1.0
1.5
2.0
2.5
3.0
7 Jan2014
1 Jul2014
6 Jan2015
1 Jul2015
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18
Dolla
rs p
er
Pound
Butter Cheese SMP
Quarterly U.S. All Milk Prices
10
12
14
16
18
20
22
24
26
1997 2001 2005 2009 2013 2017
$ p
er
cwt
USDA Oct. Forecast
World SMP Production
0
1
2
3
4
5
6
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018(p)
Mill
ion M
etr
ic T
ons
EU US India New Zealand Australia ROW
World SMP Consumption
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018(p)
Mill
ion M
etr
ic T
ons
EU India US Mexico China ROW
World SMP Exports
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018(p)
Mill
ion M
etr
ic T
ons
EU US New Zealand Australia Belarus ROW
World WMP Consumption
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018(p)
Mill
ion M
etr
ic T
ons
China Brazil EU Algeria Indonesia ROW
World WMP Exports
0.0
0.5
1.0
1.5
2.0
2.5
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018(p)
Mill
ion M
etr
ic T
ons
New Zealand EU Argentina Australia Mexico ROW
Dairy Markets Continue To Transistion
Larger operations growing fast
Small operations being squeezed
Increase in dairy operations leaving the business
Price outlook remains low for 2019
Inelastic demand markets can move quickly!
Questions
Dr. Scott Brown
University of Missouri
222 Mumford Hall
Columbia, MO 65211
(573) 882 – 3861
Twitter @MUScottBrown
Weekly Livestock Update, Brownfield Ag News
https://brownfieldagnews.com/brownfield-livestock-market-updates/
