Extension and Outreach/Department of Economics Ag Market Update Ohnward Financial Advisor Services Meeting Monticello, Iowa Dec. 15, 2015 Chad Hart Associate Professor/Crop Markets Specialist

Extension and Outreach/Department of Economics  Feedstuffs – ADVANTAGEOUS for livestock sector  Size of hog industry driven by last year’s profitability – Productivity to guide 2016 supply prospects  Tight cattle-beef supplies but expansion well underway – Supply of heavy cattle has driven market lately  HPAI in U.S. poultry – HUGE hit on layers/eggs, only meat impact was turkey, broilers were okay – Rebuild/expansion underway  Relatively stable domestic dairy herd expected through 2017 – Worldwide production up, prices  U.S. consumer demand has been GOOD – International trade a bit of a drag but should improve Key factors for 2015/16 and beyond

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

2013 = +$4.77 [-$14.80 to +$22.07] 2014 = +$39.48 [+$1.62 to +$84.64] 2015* = -$14.20 [-$30.45 to +$4.70] 2016* = -$6.29 [-$16.39 to +$12.26]

Extension and Outreach/Department of Economics Data Source: USDA/NASS. Urner Barry pre-report estimates USDA Quarterly Hogs and Pigs Report – United States September 25, as %Pre-Report Actual of 2014RangeEstimate Inventories on Sep 1 * All hogs and pigs 65,97968, Kept for breeding 5,9205, Market 60,05962, Under 50 pounds 20,39020, pounds 17,45817, pounds 12,11213, pounds and over 10,09811, Farrowing ** Jun – Aug sows farrowed 2,9912, Sep – Nov intentions 2,9942, Dec – Feb intentions 2,8952, Jun – Aug Pig Crop * 30,40230, Jun – Aug Pigs per Litter * 1,000 head** 1,000 litters

Extension and Outreach/Department of Economics Data Source: USDA/AMS. * Steve Meyer, Vice President, Pork Analysis, Express Markets Inc. Analytics. New Pork Packing Plants (2017) Sioux City, IA ― Seaboard/Triumph Coldwater, MI ― Clements Foods

Extension and Outreach/Department of Economics Data Source: USDA/AMS

Extension and Outreach/Department of Economics Oct-15/Sep-15Oct-15/Oct-14Year-to-Date CountryPercent 1,000 lbsPercent Japan -10%-4%-40,063-4% Mexico 3%10%134,70812% Canada -15%-1%-15,458-3% South Korea 50%-6%104,84334% China (Mainland) -9%7%-92,686-30% Hong Kong 126%45%-12,032-12% Australia -25%87%13,16510% Philippines -11%99%-24,900-29% China (Taiwan) 29%378%11,19949% Honduras 5%45%11,10027% Colombia 38%6%-17,701-16% Dominican Republic 1%60%14,42236% Chile -22%-41%2,1446% Other Countries23%-6%-107,287-39% Total2%7%-18, % U.S. Pork Exports, Jan-Oct 2015 Source: USDA/ERS WASDE U.S.: 2014: 4,857 mil lbs 2015: 4,946 (+1.8% vs 2014) 2016: 5,125 (+3.6% vs 2015) (Volume excluding by- products & variety meats)

Extension and Outreach/Department of Economics YearComm’l% Chg.Avg Carcass% Chg.Comm’l Pork% Chg. QuarterSlaughterYear AgoWeightYear AgoProductionYear Ago 2015 I 28, , II 27, , III 28, , IV 30, , Year 115, , I 29, , II 27, , III 28, , IV 30, , Year 115, , I 29, , II 28, , III 28, , IV 31, , Year 117, , LMIC Pork Production and Price Quarterly Forecasts (12/10/15) Sources: USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC

Extension and Outreach/Department of Economics YearNat’l Wtd% Chg.CME QuarterAvg Base PriceYear AgoLHF Price 2015 I II III IV Year I II III IV Year I II III IV Year LMIC Pork Production and Price Quarterly Forecasts (12/10/15) Sources: USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC

Extension and Outreach/Department of Economics Broad 2015/16 Profitability Situation & Outlook Industry at tipping point on role of tight supplies –Cow-calf: Good (but not 2014) –Backgrounding: Discouraging, VOG estimates low and volatile –Feedlot: Struggle, with lots of $ tied up

Extension and Outreach/Department of Economics Cattle Crush Margin Source: ISU Extension The Crush Margin is the return after the feeder steer and corn costs. Live weight: 1250 poundsFeeder weight: 750 pounds Corn: 50 bushels per head

Extension and Outreach/Department of Economics ChangeAverage ChangeCommercialChange CommercialfromDressedfromBeeffrom YearSlaughterYear AgoWeightYear AgoProductionYear Ago Quarter(1,000 hd)(%)(lbs)(%)(mil lbs)(%) 2015 I 6, , II 7, , III 7, , IV 7, , Year 28, , I 7, , II 7, , III 7, , IV 7, , Year 29, , I 7, , II 7, , III 7, , IV 7, , Year 30, , Quarterly Cattle & Beef Forecasts (LMIC: 12/10/2015)

Extension and Outreach/Department of Economics Steer Price Change FromFeeder Steer Price Year 5-Mkt Avg Year AgoSouthern Plains Quarter($/cwt)(%)7-800#5-600# 2015 I II III IV Year I II III IV Year I II III IV Year Quarterly Cattle & Beef Forecasts (LMIC: 12/10/2015)

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

Extension and Outreach/Department of Economics Data Source: USDA/AMS

Extension and Outreach/Department of Economics Cattle on Feed―11/20 report (1,000+ head capacity feedlots) Nov.1 On Feed: +2.1% –Vs. +2.2% pre-report est. (+1.6%, +3.2%)  IA: +8.5% vs last year [1,000+ Head]  IA: +6.3% vs last year [<1,000 Head] Oct. Placements: -3.7% –Vs. -3.9% pre-report est. (-6.2%, -1.6%)  IA: +18.2% vs last year; largest (+) of main states [1,000+ Head]  IA: +9.3% vs last year [<1,000 Head] Oct. Marketings: -3.3% –Vs. -3.9% pre-report est. (-5.0%, -2.0%)  IA: +13.0% vs last year (TX -14%, KS -6%, SD -9%, MN +45%) [1,000+ Head]  IA: +28.8% vs last year [<1,000 Head]

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

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

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

Extension and Outreach/Department of Economics

U.S. Beef Exports, Jan-Oct 2015 Source: USDA/ERS WASDE U.S.: 2014: 2,573 mil lbs2015: 2,223 (-13.6%)2016: 2,425 (+9.1%) Oct-15/Sep-15Oct-15/Oct-14Year-to-Date CountryPercent 1,000 lbsPercent Mexico 14%13%-72,469-20% Japan -12%-41%-102,254-18% Canada 16%-10%-39,635-13% South Korea 24%-11%13,3855% Hong Kong 79%-12%-93,350-28% China (Taiwan) 20%-16%2,7853% Vietnam 65%42%2,87143% Netherlands 3%-1%2,4598% Philippines 28%-17%2,51010% United Arab Emirates 87%-3%1,27311% Dominican Republic 40%37%3,02220% Chile 6%7%-2,688-12% Italy -28%-40%-582-4% Other Countries11%2%-6,337-5% Total18%-14%-289, % (Volume excluding by- products & variety meats)

Extension and Outreach/Department of Economics U.S. Beef Imports, Jan-Oct 2015 Source: USDA/ERS WASDE U.S.: 2014: 2,947 mil lbs2015: 3,382 (+14.8%)2016: 2,945 (-12.9%) Oct-15/Sep-15Oct-15/Oct-14Year-to-Date CountryPercent 1,000 lbsPercent Australia -33% 292,36534% Canada -6%5%33,9757% New Zealand -17%8%91,29917% Brazil -29%20%66,53299% Uruguay 13%57%43,38857% Mexico 9%20%76,72530% Nicaragua 53%-42%-13,396-13% Argentina -100% % Costa Rica -14%-22%1,8118% Other Countries13%-8%7558% Total-18%-13%593,26925% (Volume excluding by- products & variety meats)

Extension and Outreach/Department of Economics U.S. Corn Supply and Use Δ Area Planted(mil. acres) Yield(bu./acre) Production(mil. bu.)10,75513,82914,21613,6540 Beg. Stocks(mil. bu.) ,2321,7310 Imports(mil. bu.) Total Supply(mil. bu.)11,90414,68615,47915,4150 Feed & Residual(mil. bu.)4,3155,0405,3155,3000 Ethanol(mil. bu.)4,6415,1245,2095,20025 Food, Seed, & Other(mil. bu.)1,3971,3691,3591,3800 Exports(mil. bu.)7301,9201,8641, Total Use(mil. bu.)11,08313,45413,74813, Ending Stocks(mil. bu.)8211,2321,7311,78525 Season-Average Price($/bu.) Source: USDA-WAOB

Extension and Outreach/Department of Economics U.S. Soybean Supply and Use Δ Area Planted(mil. acres) Yield(bu./acre) Production(mil. bu.)3,0423,3583,9273,9810 Beg. Stocks(mil. bu.) Imports(mil. bu.) Total Supply(mil. bu.)3,2523,5704,0524,2030 Crush(mil. bu.)1,6891,7341,8731,8900 Seed & Residual(mil. bu.) Exports(mil. bu.)1,3171,6381,8431,7150 Total Use(mil. bu.)3,1113,4783,8613,7380 Ending Stocks(mil. bu.) Season-Average Price($/bu.) Source: USDA-WAOB

Extension and Outreach/Department of Economics Cattle Crush Margin Source: ISU Extension The Crush Margin is the return after the feeder steer and corn costs. Live weight: 1250 poundsFeeder weight: 750 pounds Corn: 50 bushels per head

Extension and Outreach/Department of Economics U.S. Meat Production & Prices Source: USDA-WAOB

Extension and Outreach/Department of Economics Corn Export Sales Source: USDA-FAS

Extension and Outreach/Department of Economics Soybean Export Sales Source: USDA-FAS

Extension and Outreach/Department of Economics Strength of the U.S. Dollar Source: Federal Reserve

Extension and Outreach/Department of Economics Crude Oil Prices Sources: EIA and CME

Extension and Outreach/Department of Economics Corn Grind for Ethanol

Extension and Outreach/Department of Economics Current Corn Futures Source: CME Group, 12/14/

Extension and Outreach/Department of Economics Current Soybean Futures Source: CME Group, 12/14/

Extension and Outreach/Department of Economics 2015/16 Crop Margins

Extension and Outreach/Department of Economics 2016/17 Crop Margins

Extension and Outreach/Department of Economics Iowa Corn Prices vs. Costs

Extension and Outreach/Department of Economics Iowa Soybean Prices vs. Costs

Extension and Outreach/Department of Economics Iowa Corn Costs Source: AgDM A % 88% 26% 88% Overall 75% increase

Extension and Outreach/Department of Economics Iowa Soybean Costs Source: AgDM A % 56% 14% 88% Overall 69% increase

Extension and Outreach/Department of Economics 2015 Iowa Land Values

Extension and Outreach/Department of Economics 2015 Iowa Land Values - % Change

Extension and Outreach/Department of Economics 2015 Iowa Land Values

Extension and Outreach/Department of Economics 2015 Iowa Land Values - % Change

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