Steve R. Meyer, Ph.D. Vice-President, Pork Analysis EMI Analytics NPB Swine Educators – September...

Steve R. Meyer, Ph.D.Vice-President, Pork AnalysisEMI Analytics

NPB Swine Educators – September 2015

U.S. Proteins Situation, Outlook & Issues

Key Issues for 2015 and Beyond

U.S. corn and soybean crops – Done deal

HPAI PEDv Beef herd rebuilding – pace and

length Sow herd expansion – equity,

incentive Broiler expansion – flock,

productivity Domestic demand – economy,

consumers Exports – World economy, U.S. dollar

Good/Exc ratings have trailed 2014 all year. . . . . . But exceeded 5-yr avgs. and not

deteriorated

BIG difference in vegetative health vs. ‘14

. . . and regionally

US Corn Usage

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

mil

lio

n b

us

he

ls

Feed Ethanol Exports Food, Seed and Industrial

37%

38%

14%

10%

2015 Forward Forecast

Brazilian RealCME, Monthly

$0.25

$0.30

$0.35

$0.40

$0.45

$0.50

$0.55

$0.60

$0.65

$0.70

2008 2009 2010 2011 2012 2013 2014 2015

cen

ts p

er d

olla

r

Grain prices imply lowest hog costs since ‘07 . . . . . . With best operations at $63-$64/cwt

carcass

3-species RPCE continues to grow . . . . . . But yr/yr gains are moderating –

THEY HAD TO!

Chicken and beef still strong, yr/yr; pork slower

’14 per capita consumption was 201 lbs. . . .. . . forecast to increase to 210 in ‘15

& ‘16

The evidence of strong demand is prices . . . . . Beef record high; pork slightly

higher in July

Consumer attitudes still improving-Peaking?Both indexes are still near their highs

since ‘07

The biggest demand challenge is EXPORTSBeef and pork struggled in 2014 – esp

H2

U.S. dollar – Yr/yr +20% on 7/4 but now “stable”

The key for beef growth is still WEATHER!

Beef: Unprecedented cow/calf profits!

Sharply lower female slaughter has led to . . .

Significantly lower fed beef production

MUCH tighter grinding beef supplies

USDA July 1 report shows expansion

2014 2015 Pct. Yr/Yr Average Range

All Cattle & Calves 96,300 98,400 102.2 101.8 101.2 - 102.2

Cows & Heifers That Have Calved 39,000 39,800 102.1 102.3 101.5 - 103.3

Beef Cows 29,750 30,500 102.5 102.8 101.9 - 104.2

Dairy Cows 9,250 9,300 100.5 100.5 100.4 - 100.6Heifers 500 Pounds & Over 15,600 15,900 101.9 101.2 100.1 - 102.4

Beef Cow Replacements 4,600 4,900 106.5 105.9 102.3 - 109.3

Dairy Cow Replacements 4,100 4,200 102.4 100.3 99.3 - 101.3

Other Heifers 6,900 6,800 98.6 99.0 97.9 - 100.0Steers 500 Pounds & Over 13,700 14,100 102.9 101.6 100.2 - 102.9

Bulls 500 Pounds & Over 1,900 1,900 100.0 101.5 100.0 - 102.6

All Calves <500 Lbs. 26,100 26,700 102.3 101.6 100.8 - 102.3

All Cattle On Feed 11,900 12,100 101.7 101.6 99.9 - 102.2Calf Crop 33,900 34,300 101.2 101.7 100.8 - 102.7

Source: USDA National Agricultural Statistics Service *Urner Barry

Pre-Report Estimates*USDA

JULY 1, 2015 -- U S CATTLE INVENTORY

Friday’s Cattle On Feed report

COF is gaining slightly on ’14 levels . . .

The problem is front-end supplies of BIG cattle – 120+ supply was up 19% on 9/1

Cattle <$130, Choice cutout <$220

. . . But placements are still BELOW 5-yr. lows

Wholesale ratios are back close to “normal”

Cattle and beef summary . . . Profits + Pastures = GROWTH – FINALLY! Some output growth in 2016 – calf crop,

higher heifer and cow slaughter compared to very low rates this year, higher weights

Fed cattle under tremendous pressure from large long-fed supplies – FINALLY taking their toll!

Feeders pressured by feds – below $180 but for how long?

Cows still near $100 but under seasonal pressure

Question: Long-term impacts of VERY HIGH prices?

North American Migratory Bird FlywaysSource: US Fish and Wildlife Service

EMI Protein Outlook Conference, September 2015Copyright © EMI, All Rights Reserved

Quarterly Total Turkey Slaughter USDA

50

52

54

56

58

60

62

64

66

68

70

72

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

mil

lio

n p

ou

nd

s

August 2015 forward forecast


Quarterly RTC Turkey Production USDA

4%3%

5%

7%

9%

5%5%

0%

-10%-9%

-10%-9%

-3%

0%

5%5%

6%

1%

-1%

3%2%

4%3%

1%

-1%-3%

-8%-9%

7%7%

-3%

-8%

-4%

1%

3%

7%

5%

-3%

3%

-4%

-12%

-9%

-6%

-3%

0%

3%

6%

9%

12%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

pe

rce

nt

ch

an

ge


EMI Poultry Outlook Conference, April 23, 2015 Copyright © EMI, All Rights Reserved

Calculated Average Spot Market Returns IndexConsumer Pack Whole Turkey

-15

-10

-5

0

5

10

15

20

25

30

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Ind

ex

20

00

-20

02

Ba

se

EMI Analytics analysis of USDA and industry data,


--Cost structure is industry average cost & production mix--Revenue calculations are wholesale spot market--Results will not reflect individual firms, and are best used as a trend indicator


US Turkey Per Capita Disappearance

6

7

8

9

10

11

12

13

14

15

16

17

18

19

1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016

Po

un

ds

Per

Per

son


EMI Protein Outlook Conference, September 2015 Copyright © EMI, All Rights Reserved

Whole Turkeys, FOB Basis,USDA Monthly

60

65

70

75

80

85

90

95

100

105

110

115

120

125

130

135

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

cen

ts p

er p

ou

nd

USDA National Toms (16-24 lb), FOB Basis

USDA National Hens (8-16 lb), FOB Basis

September 2015 forward forecast

EMI Protein Outlook Conference, September 2015 Copyright © EMI, All Rights Reserved

Turkey Tom Breast Meat,USDA Monthly

100

150

200

250

300

350

400

450

500

550

600

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

cen

ts p

er p

ou

nd

USDA Tom Breast Meat, frozen

USDA Tom Breast Meat, fresh

September 2015 forward forecast

EMI Poultry Outlook Conference, September 2015

Copyright © EMI, All Rights Reserved

Broiler Hatchery Supply FlockUSDA, first of month, quarterly

49

50

51

52

53

54

55

56

57

58

59

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

mil

lio

n h

ens

Sep 2015 forward forecast



Average Broiler LiveweightUSDA, quarterly

4.9

5.0

5.1

5.2

5.3

5.4

5.5

5.6

5.7

5.8

5.9

6.0

6.1

6.2

6.3

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

po

un

ds

Aug 2015 forward forecast



Broiler Sltr Weight BreakoutUSDA, 2005

4.25 lbs & down29%

4.26 - 6.25 lbs48%

6.26 - 7.75 lbs17%

7.76 lbs +6%

Broiler Sltr Weight BreakoutUSDA, 2015 ytd

4.25 lbs & down25%

4.26 - 6.25 lbs34%

6.26 - 7.75 lbs20%

7.76 lbs & up

21%



Broiler Live Weight Production per Kill Dayquarterly

170

175

180

185

190

195

200

205

210

215

220

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

mil

lio

n p

ou

nd

s




Percent of US Broiler Dark Meat Exported

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016




Whole Bird Per Capita Supply vs Priceannual, nominal price

161514

08

07

060504

030201

00 99989796

95 94939291 90

8988

87

86

8584

8382 81 80

091011

12

13

R2 = 0.8165

35404550556065707580859095

100105110115120

4 6 8 10 12 14 16 18 20 22 24 26Whole Broiler Supplies per Capita (pounds)

Mo

nd

ay

GA

Wtd

Av

g (

no

min

al,

ce

nts

/lb

)


nominal averages 2012 = 94 cents

2013 = $1.032014 = $1.10

2015 forecast = $1.132016 forecast = $1.14



B/S Breast Meat Supply/Priceannual, deflated price

161210

80

81

82

838485

86

87

8889

90

919293

949596

9798

99

0001 0203

04

05

06

070809 11

131415

R2 = 0.94

80100120140160180200220240260280300320340360380400420440460

2 4 6 8 10 12 14 16 18 20 22 24

Per Capita B/S Breast Meat Availability (pounds)

De

fla

ted

EM

I B

/S B

rea

st

Me

at,

Ju

mb

o (

ce

nts

/lb

)


nominal averages 2012 = $1.302013 = $1.482014 = $1.56

2015 forecast = $1.332016 forecast = $1.40



Broiler Domestic Dark Meat Supply/Leg Quarter Price Relationship

1615

14

131211

09

0807

06

0504

03

02

01

00

99

98

97

9695

94

9392

91

90898887

86

85

84

83

10

R2 = 0.5848

15

20

25

30

35

40

45

50

55

60

65

70

75

80

14 16 18 20 22 24 26 28 30 32 34

US Per Capita Dark Meat Supplies, pounds

EM

I LQ

, reg

ula

r (d

efla

ted

, cen

ts p

er lb

)

nominal averages 2012 = 50 cents2013 = 49 cents2014 = 45 cents

2015 forecast = 29 cents2016 forecast = 26 cents




EMI Frozen Leg Quarters

10

15

20

25

30

35

40

45

50

55

60

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

ce

nts

pe

r p

ou

nd

EMI Frozen LQ, regular

EMI Frozen LQ, jumbo

Sep 2015 forward forecast

Hogs & pork: Key issue is far fewer PEDv accessions

‘14-’15 high wk. of 3/15 at 161 vs. 291 last year Many are G/F monitoring – NOT MUCH DEATH LOSS

More important: Few sow herd breaks

Data from 902 sow farm, 22 of 26 large systems reporting, 2.376 mil. sows! Worst weeks in ‘15: 9 sow herds broke in two week in late February Anecdotal: MUCH smaller piglet losses even on farms that broke this year!

Sept H&P report was much as expected - neutral. . . . . . Still large front-end supplies, ’16

much like ‘15

Inventories on September 1

All hogs and pigs 65,979 68,395 103.7 103.6 0.1Kept for breeding 5,929 5,986 101.0 100.3 0.7

Kept for marketing 60,059 62,410 103.9 103.9 0.0Under 50 lbs. 20,390 20,291 99.5 100.2 -0.7

50-119 lbs. 17,458 17,986 103.0 103.2 -0.2

120-179 lbs. 12,112 13,080 108.0 106.6 1.4

180 lbs. and over 10,098 11,053 109.5 109.7 -0.2

FarrowingsJun-Aug sows farrowed 2,991 2,944 98.4 98.1 0.3

Sep-Nov Intentions 2,994 2,920 97.5 97.2 0.3

Dec-Feb Intentions 2,895 2,875 99.3 99.1 0.2

Jun-Aug Pig Crop 30,402 30,585 100.6 100.4 0.2

Jun-Aug pigs saved per litter 10.16 10.39 102.3 102.4 -0.1

*Thousand head ** Thousand Litters 1Source: Urner Barry

Category 2014 2015'15 as Pct of

'14

Pre-Report

Est's1

Actual minus Est.

USDA QUARTERLY HOGS & PIGS REPORTSeptember 25, 2015

Are the farrowing intentions reasonable? Recall that June

intentions were VERY low – due to high numbers LAST YEAR

2015 Sep-Nov farrowing RATE is slightly below historical levels – omitting ‘13 and ‘14

Dec-Feb rate is VERY close to historicals

We think the NUMBERS are reasonable – with Sep-Nov perhaps a bit low

And what about litter sizes?June-Aug was RECORD

HIGH again!Litter growth is back on

(or at least near!) the 2%/yr growth trend \

Normal seasonal – Sep-Nov and Dec-Feb will be lower

Mar-May and Jun-Aug will likely be record highs

What will PEDv do this winter???

Weights: Lower than in ’15, rising seasonally . . .

Weight reduction vs. year ago was a big reason for higher-than-expected slaughter in Q1-- ~2/3 of total Q1 change

Weights were 208.6 last week – will rise to ~214 in Nov

Normal seasonal implies -2 to -3% in Q3, -1 to 1.5% in Q4

. . will REDUCE ‘15 prod by 1.5-2%, maybe more

2014 prod was down only 1.4%; ‘15 is up 8.1% YTD. . .Forecasts: Q3 up ~8%, Q4 up 3.7%,

H1-’16 Unchg’d

Cutout: a normal seasonal – not so for hogs. . . . . . a normal fall seasonal puts us in mid-

$60s in Q4

Pork packer margins struggled thru June . . . . . But have recovered well – in spite of

drop values

June H&P report has been VERY ACCURATE . . .. . Sept report suggests steady yr/yr

numbers

LH rally has taken ’15 back to profits . . . . . . And pushed ’16 to highest levels to

date

Slaughter forecasts from Sept H&P

Mil. Hd % Chnge Mil. Hd % Chnge Mil. Hd % Chnge Mil. Hd % Chnge Mil. Hd % Chnge

2013 Year 112.124 -1.0%

2014 Q1 27.134 -2.6%

Q2 25.574 -4.5%

Q3 25.554 -7.6%

Q4 28.617 -4.0%

Year 106.879 -4.7%

2015 Q1 27.571 1.6% 27.650 1.9% 27.398 1.0% 27.405 1.0% 28.723 5.9%

Q2 27.238 6.5% 27.185 6.3% 27.358 7.0% 27.236 6.5% 27.848 8.9%

Q3 28.266 10.6% 27.839 8.9% 27.779 8.7% 28.442 11.3% 28.497 11.5%

Q4 30.098 5.2%

Year* 115.166 7.8%

2016 Q1 28.800 0.3%

Q2 27.598 -0.9%

Q3 28.892 1.4%Red figures are analysts' last FORECAST for the given quarter (Q1 done in Dec, Q2 done in Mar, etc.) 6/29/15

Blue figures are estimated using USDA data *Annual total uses actuals to-date plus forecasts for the rest of the year.

Mizzou ISU LMIC EMI ACTUALSeptember 2015 Hogs & Pigs -- Commercial Slaughter Forecasts

Price forecasts – a good year to come

Mizzou ISU LMIC EMI CME

Producer-Sold Net Price, All

Methods

Ia-Mn Producer-Sold

Neg'd Base

National Wtd Avg. Base Price

National Net Neg'd Price,

Wtd. Avg.

CME Lean Hog Futures/Index

2013 Year 89.56 86.70 87.16 89.21 89.232014 Q1 93.10 93.10 91.34 93.80 94.91

Q2 113.54 115.36 111.61 116.83 117.48Q3 111.84 111.77 109.63 114.25 115.70Q4 91.83 90.49 90.08 91.41 91.85Year 102.23 101.68 100.31 102.95 104.99

2015 Q1 70.40 64.35 68.55 66.03 68.59Q2 75.77 73.76 73.52 73.22 74.36Q3 77.15 67 -72 74.84 75.17 77.02Q4 69 - 71 70.15Year 67 - 70 66 - 69 68 - 69 71 - 72 72.53

2016 Q1 68 - 72 69.80Q2 74 - 79 76.66Q3 74 - 79 79.05

Blue figures are estimated using USDA data 9/30/15

September 2015 Hogs & Pigs -- Price Forecasts

Hog and pork summary Domestic demand growth has slowed – stay >

zero? Export demand is recovering and will gain,

yr/yr, vs. ‘14 for the rest of ‘15 – Likely finish at +2 to +4%

Breeding herd is growing SLOWLY -- +60k from June to Sept, +230k since Dec ‘13 low- Plenty of equity and borrowing capacity- Some “pent up” expansion???

Q1 to Q3-’16 look very good for now Still some risk for Q4-’16 with hog numbers &

pork supplies up 2 to 4% Packing capacity – new plants not up until ‘17

Risks MCOOL retaliatory tariffs – likely! How big? Major export disruption – small prob, HUGE

impact PEDv impact this winter – immunity levels??? HPAI – will it get in SE US broiler areas this

fall? Will it have any market impact? Will it be negative or positive?

Slower demand growth or – GASP – lower demand?- Domestic: Will positive preferences

continue?- Exports: World economy, strong $U.S.

How much expansion in pigs and chicken?

Questions and Discussion?

Steve R. Meyer, Ph.D. Vice-President, Pork Analysis EMI Analytics NPB Swine Educators – September...

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