1. Steve R. Meyer, Ph.D. Vice-President, Pork Analysis EMI Analytics NPB Swine Educators – September 2015 U.S. Proteins Situation, Outlook & Issues

2. 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

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

6. BIG difference in vegetative health vs. ‘14... and regionally

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

19. 3-species RPCE continues to grow...... But yr/yr gains are moderating – THEY HAD TO!

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

21. ’14 per capita consumption was 201 lbs....... forecast to increase to 210 in ‘15 & ‘16

22. The evidence of strong demand is prices..... Beef record high; pork slightly higher in July

23. Consumer attitudes still improving-Peaking? Both indexes are still near their highs since ‘07

24. The biggest demand challenge is EXPORTS Beef and pork struggled in 2014 – esp H2

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

26. The key for beef growth is still WEATHER!

27. Beef: Unprecedented cow/calf profits!

28. Sharply lower female slaughter has led to...  Significantly lower fed beef production  MUCH tighter grinding beef supplies

29. USDA July 1 report shows expansion

30. Friday’s Cattle On Feed report

31. 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

32. Wholesale ratios are back close to “normal”

33. 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?

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35. North American Migratory Bird Flyways Source: US Fish and Wildlife Service

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50. EMI Poultry Outlook Conference, September 2015 Copyright © EMI, All Rights Reserved

51. 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

52. 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!

53. Sept H&P report was much as expected - neutral...... Still large front-end supplies, ’16 much like ‘15

54. 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

55. 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???

56. 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

57. 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

58. Cutout: a normal seasonal – not so for hogs...... a normal fall seasonal puts us in mid-$60s in Q4

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

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

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

62. Slaughter forecasts from Sept H&P

63. Price forecasts – a good year to come

64. 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

65. 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?

66. Questions and Discussion?