Extension and Outreach/Department of Economics
What to Expect in the Next Year in the Hog Industry
Shakespeare Swine SeminarShakespeare, Ontario
Sept. 19, 2012
Chad HartAssociate Professor/Grain Markets Specialist
Extension and Outreach/Department of Economics
H-S-1508/24/12
Livestock Marketing Information Center
Data Source: USDA-AMS & USDA-NASS
SOW SLAUGHTERFederally Inspected, Weekly
40
45
50
55
60
65
70Thou. Head
Avg.2006-10
2011
2012
Extension and Outreach/Department of Economics
HOG SLAUGHTERFederally Inspected, Weekly
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
2,400
2,500Thou. Head
Avg.2006-10
2011
2012
H-S-0508/24/12
Livestock Marketing Information Center
Data Source: USDA-AMS & USDA-NASS
Spring 2012 Capacity at 5.4 days/week = 2.38 million head/week
Extension and Outreach/Department of Economics
H-S-2408/24/12
Livestock Marketing Information Center
Data Source: USDA-AMS & USDA-NASS
BARROW AND GILT DRESSED WEIGHTFederally Inspected, Weekly
192
194
196
198
200
202
204
206
208Pounds
Avg.2006-10
2011
2012
Extension and Outreach/Department of Economics
M-S-1908/27/12
Livestock Marketing Information Center
Data Source: USDA-AMS & USDA-NASS
PORK PRODUCTIONFederally Inspected, Weekly
325
350
375
400
425
450
475
500
525Mil. Pounds
Avg.2006-10
2011
2012
Extension and Outreach/Department of Economics
H-P-0908/27/12
Livestock Marketing Information Center
Data Source: USDA-AMS, Compiled & Analysis by LMIC
BARROW AND GILT PRICESIowa - So. Minnesota, Carcass Base Price, Weekly
50
60
70
80
90
100
110$ Per Cwt.
Avg.2006-10
2011
2012
Extension and Outreach/Department of EconomicsSource: Lee Schulz, ISU Extension
-$60
-$40
-$20
$0
$20
$40
$60
Estimated Returns to Farrow to Finish Production in Iowa, $/Head
Extension and Outreach/Department of Economics
U.S. Meat Production & Prices
Source: USDA-WAOB
Extension and Outreach/Department of Economics
Hog Crush Margin
Source: ISU Extension
The Crush Margin is the return after the pig, corn and soybean meal costs.Carcass weight: 200 pounds Pig price: 50% of 5 mth out lean hog futuresCorn: 10 bushels per pig Soybean meal: 150 pounds per pig
Extension and Outreach/Department of Economics
-$70
-$50
-$30
-$10
$10
$30
$50
$70
Potential Returns to Farrow to Finish Production in Iowa, $/Head
Potential lossesSept-12 through Jul-13 @ average of $34.64/head
Source: Lee Schulz, ISU Extension
Extension and Outreach/Department of Economics
Quarterly Forecasts
Source: LMIC
Year Comm. Chg. from Comm. Pork Chg. from Per Capita Chg. fromQuarter Slaughter Year Ago Production Year Ago Consumption Year Ago
(1,000 Head) (%) (Mil. Lbs.) (%) (Retail lbs.) (%)2012
I 28,104 2.3 5,858 2.4 10.4 -2.7 II 26,659 2.1 5,519 2.8 10.3 -1.2 III 27,172 -0.8 5,429 -1.0 10.4 0.4 IV 30,603 2.4 6,279 1.5 11.9 3.7
Year 112,538 1.5 23,084 1.4 43.0 0.1 2013
I 27,974 -0.5 5,770 -1.5 10.5 0.3 II 26,801 0.5 5,495 -0.4 10.1 -1.5 III 26,738 -1.6 5,294 -2.5 9.8 -5.2 IV 29,771 -2.7 6,120 -2.5 11.5 -3.4
Year 111,284 -1.1 22,679 -1.8 42.0 -2.5 2014
I 27,666 -1.1 5,717 -0.9 10.2 -2.3 II 27,021 0.8 5,552 1.0 10.2 0.3 III 26,892 0.6 5,336 0.8 9.9 0.5 IV 30,097 1.1 6,210 1.5 11.6 0.6
Year 111,676 0.4 22,814 0.6 41.8 -0.2
Extension and Outreach/Department of Economics
U.S. Pork Projections
Source: FAPRI-MO
Extension and Outreach/Department of Economics
U.S. Corn Supply and Use2008 2009 2010 2011 2012
Area Planted (mil. acres) 86.0 86.4 88.2 91.9 96.4
Yield (bu./acre) 153.9 164.7 152.8 147.2 122.8
Production (mil. bu.) 12,092 13,092 12,447 12,358 10,727
Beg. Stocks (mil. bu.) 1,624 1,673 1,708 1,128 1,181
Imports (mil. bu.) 14 8 28 25 75
Total Supply (mil. bu.) 13,729 14,774 14,182 13,511 11,983
Feed & Residual (mil. bu.) 5,182 5,125 4,793 4,400 4,150
Ethanol (mil. bu.) 3,709 4,591 5,021 5,000 4,500
Food, Seed, & Other (mil. bu.) 1,316 1,370 1,407 1,390 1,350
Exports (mil. bu.) 1,849 1,980 1,835 1,540 1,250
Total Use (mil. bu.) 12,056 13,066 13,055 12,330 11,250
Ending Stocks (mil. bu.) 1,673 1,708 1,128 1,181 733
Season-Average Price ($/bu.) 4.06 3.55 5.18 6.25 7.90
Source: USDA-WAOB
Extension and Outreach/Department of Economics
U.S. DDG Supply and Use2008 2009 2010 2011 2012
Production (mil. metric tons) 28.6 35.4 38.7 38.6 34.7
Imports (mil. metric tons) 0.3 0.4 0.4 0.3 0.3
Total Supply (mil. metric tons) 28.9 35.8 39.2 38.9 35.0
Domestic (mil. metric tons) 23.9 27.5 30.9 31.2 28.1
Exports (mil. metric tons) 5.0 8.3 8.3 7.7 6.9
Total Use (mil. metric tons) 28.9 35.8 39.1 38.9 35.0
Average Price ($/ton) 126 114 188 222 275
My estimates, so take with a grain (or pound) of salt
Extension and Outreach/Department of Economics
U.S. Soybean Meal Supply and Use2009 2010 2011 2012
Production (thou. short tons) 41,707 39,251 41,250 35,700
Beg. Stocks (thou. short tons) 235 302 350 300
Imports (thou. short tons) 160 180 200 300
Total Supply (thou. short tons) 42,101 39,732 41,800 36,300
Domestic (thou. short tons) 30,640 30,301 32,000 29,200
Exports (thou. short tons) 11,160 9,081 9,500 6,800
Total Use (thou. short tons) 41,800 39,382 41,500 36,000
Ending Stocks (thou. short tons) 302 350 300 300
Season-Average Price
($/short ton) 311.27 345.52 397.00 500.00
Source: USDA-WAOB
Extension and Outreach/Department of Economics
Prices
Extension and Outreach/Department of Economics
World Corn Production
Source: USDA-WAOB
Extension and Outreach/Department of Economics
Current Corn Futures
Source: CME Group, 9/12/2012
7.18
6.14
5.61
Extension and Outreach/Department of Economics
Early Prices for 2013 Crops
Extension and Outreach/Department of Economics
Total Acreage Shift
Source: USDA-NASS
Extension and Outreach/Department of Economics
Corn Projections
Source: FAPRI-MO
2013 2014 2015 2016 2017
Area Planted (mil. acres) 96.1 93.1 93.2 92.7 92.8
Yield (bu./acre) 163.2 165.7 167.9 170.2 172.4
Production (mil. bu.) 14,386 14,159 14,354 14,468 14,676
Beg. Stocks (mil. bu.) 645 1,510 1,675 1,766 1,789
Imports (mil. bu.) 25 25 25 25 25
Total Supply (mil. bu.) 15,056 15,695 16,054 16,259 16,490
Feed & Residual (mil. bu.) 4,852 4,855 4,964 5,022 5,082
Ethanol (mil. bu.) 5,386 5,649 5,665 5,643 5,657
Food, Seed, & Other (mil. bu.) 1,435 1,460 1,473 1,472 1,490
Exports (mil. bu.) 1,890 2,055 2,186 2,322 2,445
Total Use (mil. bu.) 13,546 14,020 14,288 14,470 14,675
Ending Stocks (mil. bu.) 1,510 1,675 1,766 1,789 1,815
Season-Average Price ($/bu.) 5.20 4.86 4.74 4.74 4.75
Extension and Outreach/Department of Economics
Thoughts for 2013 and Beyond Breeding herd liquidation in Canada has picked-up
Year-over-year increases in sows sent to the U.S. for slaughter
Farrowing intentions (% year ago): -1.4 in 2012.qt3 and -1.3 in 2012.qtr4
Domestic demand struggling Down 6% in 2012.qtr2 compared to 2011.qtr2
Exports increasing in importance Export demand up 5% in 2012.qtr2 compared to
2011.qtr2 First six months of the year exports are 12% above year
ago levels
Source: Lee Schulz, ISU Extension
Extension and Outreach/Department of Economics
Thoughts for 2013 and BeyondSupply/demand concerns
Soil moistureSouth America gets 1st chance to respond to drought pricingWill supply be able to keep pace with demand?
Drought is pulling supply downBut high prices are diminishing demand
General economic conditionsContinued worldwide economic recovery is a key for crop pricesUS job recovery, European financial concerns, China?
2012/13: USDA: Corn $8.20; Soy $16.00Futures (as of 9/12/12): Corn $7.18; Soy $16.20
2013/14: Futures Corn $6.14; Soy $13.092014/15: Futures Corn $5.61; Soy $12.46
Extension and Outreach/Department of Economics
Thank you for your time!
Any questions?
My web site:http://www.econ.iastate.edu/~chart/
Iowa Farm Outlook:http://www.econ.iastate.edu/ifo/
Ag Decision Maker:http://www.extension.iastate.edu/agdm/