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FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2012 Turkey and Protein Sector Outlook Dr. Thomas.

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Presentation on theme: "FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2012 Turkey and Protein Sector Outlook Dr. Thomas."— Presentation transcript:

1 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2012 Turkey and Protein Sector Outlook Dr. Thomas E. Elam President FarmEcon LLC January 18,

2 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President $ corn, $ soybean meal Limited feed supplies Record-high meat and poultry exports Value, and Volume Southwest drought, declining beef supply Slow, but positive, domestic demand growth All squeezing U.S. meat and poultry availability, and thus strong prices Overall Protein Market Drivers 2

3 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Feed Cost Drivers: Corn and Soymeal (Futures prices current as of ) 3

4 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Translated to Higher Feed Costs AND Volatility 4 RFS 1 RFS 2

5 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Low U.S. grain stocks Mediocre U.S. yields Declining U.S. major crop acreage Growing global demand Increasing U.S. biofuels mandates High crude oil and finished fuels prices Hot/dry southern hemisphere weather Feed Cost Drivers 5

6 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Protein wholesale prices relative to feed costs: A mixed bag of recent profitability trends 6

7 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Turkeys up 1-2% Pork up 2-3%, export-driven Beef down 4-5% – drought-driven Milk up 1-2% Broilers down 2-4% financial losses Wholesale prices for all likely to increase 2012 Protein Production Outlook 7

8 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Per Capita Meat Disappearance First Year Decline on Record 8

9 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Continued tight feed supplies =Higher feed costs, lower availability =Need for higher product prices =Need to cut production Perceived risks on feed costs Record-high meat and poultry exports recession and lingering effects Why? 9

10 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Feedgrains Ending Stocks/Use Ratio 10

11 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President U.S. Feeding, Major Ingredients 11

12 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Ethanol Use and Corn Prices 12

13 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Total Meat and Poultry Exports 13

14 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2012 TURKEY OUTLOOK DETAILS 14

15 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2012 Summary Current pricing and low ending stocks imply modest 2012 turkey industry production growth. However, growth will be muted by continued high feed costs, and the need to recover those costs in wholesale pricing. 15

16 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2012 Turkey Outlook Features 1/1/2012 cold storage near record low 2011 level Profitability supported by exports and pricing Production: Q1 2012: very near 2011 Q2 2012: production +1% to +2% Q3/Q4 2012: production also +1% to +2% Flat or lower bird numbers, higher weights Farbest adding 3 million birds, but not online until 2013 Exports expected to decline slightly Lower beef and broiler supply, higher prices Feed costs remain the major wild card 16

17 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2011 production & use = balanced inventories 17

18 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President FarmEcon Model: RTC Value Per Pound and Feed Costs Based on FarmEcon LLC model of 70% cut-up and 30% whole bird marketing mix. Prices are USDA/AMS. Does not include value-added products. 18

19 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President U.S. Market RTC Turkey Consumption 19

20 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President U.S. Market RTC Turkey Consumption (Per Capita) 20 ProfitableProfitable UnprofitableUnprofitable

21 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Wholesale Value of Parts and Whole Birds Sets New Record 21

22 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Poult Placements, UB, Weekly, Point to Flat Q Bird Numbers 22

23 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Turkey Export Tonnage Record November Volume, 29% Annualized Gain Over

24 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Turkey Export Value Record Annual Value, 49% Annualized Gain over

25 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Turkey Export Tonnage Shares by Product 25

26 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Turkey Export Value Shares by Product 26

27 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2012 Turkey Forecast Details (Production, Use and Stocks in Million Pounds) 27

28 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Excellent Wholesale Demand Growth 28

29 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Early 2012 Price Comparisons 29

30 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2012 Feed Cost Outlook 30

31 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Acreage and weather Southern hemisphere now U.S. spring plantings and summer growing season USDA reports that have more surprises Grain and meat/poultry export demand Ethanol mandate up 215 million bushels Major Risk Factors for

32 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Corn Price Model Forecast /2012 Assumptions: Feedgrains Stocks/Use Ratio = 7.1% Ethanol Production = 13.7 Billion Gallons Ethanol Price = $2.65 per Gallon Predicted 2011/2012 average farm price received = $6.09 per bushel, and a new record-high

33 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Despite record high crop prices and farm income our acreage is declining. 33

34 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President E10 market is saturated Requires about 13 billion gallons of ethanol We produced 14 billion gallons in 2011 We exported 1 billion gallons Why not sell more E85? Ethanol BTUs are priced at 50% over gasoline Parity is equal cost per BTU Corn priced higher than energy parity Why? The RFS is set too high Blend Wall or Corn Wall? 34

35 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Ethanol/Gasoline Cost/BTU Ethanol Is Not An Affordable Fuel! 35

36 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Typical E85 Price 36

37 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Equal Cost/Mile E85 Price 37

38 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Proud of the Product?

39 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Corn/Soymeal Outlook – 2012 Cash corn prices remain at $5.50-$7.00, meal at $ , through March/April (basis Illinois cash markets) Upside risks on poor South America/Australia weather U.S. acreage, weather and demand drive Jun-Dec prices 2012 predicted corn acreage up, soybeans down Ethanol production will decline slightly (no tax credits) Slightly less DDGS production, and ethanol use mandate = increased corn demand Increasing ethanol and DDGS exports Energy prices are also critical to outlook High volatility in all feed ingredient prices likely 39

40 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Record 14.3 billion bushel crop Make it possible to price corn for: E85 sales Higher feed use More exports Build stocks Likely season average farm price $3.35-$4.00 How likely, and is it repeatable? What Would 165 Bu. Corn Do? 40

41 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 12.6 billion bushel crop 2012 crop = current use rate No room to increase use Higher 2013 RFS crowds out feeding and exports Ethanol priced per gallon higher than gasoline Likely season average farm price $7-$8 How likely? About the same chance as 165 What Would 145 Bu. Corn Do? 41

42 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Summary: Continued high, and volatile, feed costs $5+ corn & $300+ soybean meal=new normal until a bumper corn crop Feed cost volatility an ongoing issue Four broiler company bankruptcies in 2011 Increasing RFS, weather, and limited acreage are on a collision course Another 2008 spike in the next 3-5 years? 42

43 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President RFS reform for conventional ethanol Farm Bill reform to encourage acreage Vigilance on the GIPSA/EPA/FDA fronts What Needs to Happen? 43

44 FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Questions? Comments? 44


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