Extension and Outreach/Department of Economics What to Expect in the Next Year in the Hog Industry Shakespeare Swine Seminar Shakespeare, Ontario Sept. 19, 2012 Chad Hart Associate Professor/Grain Markets Specialist

Extension and Outreach/Department of Economics Livestock Marketing Information Center Data Source: USDA-AMS & USDA-NASS

Extension and Outreach/Department of Economics 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 Livestock Marketing Information Center Data Source: USDA-AMS & USDA-NASS

Extension and Outreach/Department of Economics Livestock Marketing Information Center Data Source: USDA-AMS & USDA-NASS

Extension and Outreach/Department of Economics Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC

Extension and Outreach/Department of Economics Source: Lee Schulz, ISU Extension

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 poundsPig price: 50% of 5 mth out lean hog futures Corn: 10 bushels per pigSoybean meal: 150 pounds per pig

Extension and Outreach/Department of Economics Potential losses Sept-12 through average of $34.64/head Source: Lee Schulz, ISU Extension

Extension and Outreach/Department of Economics Quarterly Forecasts Source: LMIC

Extension and Outreach/Department of Economics U.S. Pork Projections Source: FAPRI-MO

Extension and Outreach/Department of Economics U.S. Corn Supply and Use Area Planted(mil. acres) Yield(bu./acre) Production(mil. bu.)12,09213,09212,44712,35810,727 Beg. Stocks(mil. bu.)1,6241,6731,7081,1281,181 Imports(mil. bu.) Total Supply(mil. bu.)13,72914,77414,18213,51111,983 Feed & Residual(mil. bu.)5,1825,1254,7934,4004,150 Ethanol(mil. bu.)3,7094,5915,0215,0004,500 Food, Seed, & Other(mil. bu.)1,3161,3701,4071,3901,350 Exports(mil. bu.)1,8491,9801,8351,5401,250 Total Use(mil. bu.)12,05613,06613,05512,33011,250 Ending Stocks(mil. bu.)1,6731,7081,1281, Season-Average Price($/bu.) Source: USDA-WAOB

Extension and Outreach/Department of Economics U.S. DDG Supply and Use Production(mil. metric tons) Imports(mil. metric tons) Total Supply(mil. metric tons) Domestic(mil. metric tons) Exports(mil. metric tons) Total Use(mil. metric tons) Average Price($/ton) My estimates, so take with a grain (or pound) of salt

Extension and Outreach/Department of Economics U.S. Soybean Meal Supply and Use Production(thou. short tons)41,70739,25141,25035,700 Beg. Stocks(thou. short tons) Imports(thou. short tons) Total Supply(thou. short tons)42,10139,73241,80036,300 Domestic(thou. short tons)30,64030,30132,00029,200 Exports(thou. short tons)11,1609,0819,5006,800 Total Use(thou. short tons)41,80039,38241,50036,000 Ending Stocks(thou. short tons) Season-Average Price ($/short ton) 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/

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 Area Planted(mil. acres) Yield(bu./acre) Production(mil. bu.)14,38614,15914,35414,46814,676 Beg. Stocks(mil. bu.)6451,5101,6751,7661,789 Imports(mil. bu.)25 Total Supply(mil. bu.)15,05615,69516,05416,25916,490 Feed & Residual(mil. bu.)4,8524,8554,9645,0225,082 Ethanol(mil. bu.)5,3865,6495,6655,6435,657 Food, Seed, & Other(mil. bu.)1,4351,4601,4731,4721,490 Exports(mil. bu.)1,8902,0552,1862,3222,445 Total Use(mil. bu.)13,54614,02014,28814,47014,675 Ending Stocks(mil. bu.)1,5101,6751,7661,7891,815 Season-Average Price($/bu.)

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 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 Beyond  Supply/demand concerns  Soil moisture  South America gets 1 st chance to respond to drought pricing  Will supply be able to keep pace with demand?  Drought is pulling supply down  But high prices are diminishing demand  General economic conditions  Continued worldwide economic recovery is a key for crop prices  US job recovery, European financial concerns, China?  2012/13: USDA:Corn $8.20; Soy $16.00 Futures (as of 9/12/12):Corn $7.18; Soy $16.20  2013/14: FuturesCorn $6.14; Soy $13.09  2014/15: FuturesCorn $5.61; Soy $12.46

Extension and Outreach/Department of Economics Thank you for your time! Any questions? My web site: Iowa Farm Outlook: Ag Decision Maker: