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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?
EMI Poultry Outlook Conference, April 23, 2015 Copyright © EMI, All Rights Reserved
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
EMI Protein Outlook Conference, September 2015Copyright © EMI, All Rights Reserved
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
August 2015 forward forecast
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,
August 2015 forward forecast
--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
EMI Protein Outlook Conference, September 2015Copyright © EMI, All Rights Reserved
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
August 2015 forward forecast
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
EMI Poultry Outlook Conference, September 2015
Copyright © EMI, All Rights Reserved
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
EMI Poultry Outlook Conference, September 2015
Copyright © EMI, All Rights Reserved
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%
EMI Poultry Outlook Conference, September 2015
Copyright © EMI, All Rights Reserved
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
Aug 2015 forward forecast
EMI Poultry Outlook Conference, September 2015
Copyright © EMI, All Rights Reserved
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
Aug 2015 forward forecast
EMI Poultry Outlook Conference, September 2015
Copyright © EMI, All Rights Reserved
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
)
Aug 2015 forward forecast
nominal averages 2012 = 94 cents
2013 = $1.032014 = $1.10
2015 forecast = $1.132016 forecast = $1.14
EMI Poultry Outlook Conference, September 2015
Copyright © EMI, All Rights Reserved
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
)
Aug 2015 forward forecast
nominal averages 2012 = $1.302013 = $1.482014 = $1.56
2015 forecast = $1.332016 forecast = $1.40
EMI Poultry Outlook Conference, September 2015
Copyright © EMI, All Rights Reserved
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
Aug 2015 forward forecast
EMI Poultry Outlook Conference, September 2015
Copyright © EMI, All Rights Reserved
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?