1. 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 chart@iastate.edu 515-294-9911

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

3. 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

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

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

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

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

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

9. 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

10. Extension and Outreach/Department of Economics Potential losses Sept-12 through Jul-13 @ average of $34.64/head Source: Lee Schulz, ISU Extension

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

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

13. Extension and Outreach/Department of Economics U.S. Corn Supply and Use 20082009201020112012 Area Planted(mil. acres)86.086.488.291.996.4 Yield(bu./acre)153.9164.7152.8147.2122.8 Production(mil. bu.)12,09213,09212,44712,35810,727 Beg. Stocks(mil. bu.)1,6241,6731,7081,1281,181 Imports(mil. bu.)148282575 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.)1,6731,7081,1281,181733 Season-Average Price($/bu.)4.063.555.186.257.90 Source: USDA-WAOB

14. Extension and Outreach/Department of Economics U.S. DDG Supply and Use 20082009201020112012 Production(mil. metric tons)28.635.438.738.634.7 Imports(mil. metric tons)0.30.4 0.3 Total Supply(mil. metric tons)28.935.839.238.935.0 Domestic(mil. metric tons)23.927.530.931.228.1 Exports(mil. metric tons)5.08.3 7.76.9 Total Use(mil. metric tons)28.935.839.138.935.0 Average Price($/ton)126114188222275 My estimates, so take with a grain (or pound) of salt

15. Extension and Outreach/Department of Economics U.S. Soybean Meal Supply and Use 2009201020112012 Production(thou. short tons)41,70739,25141,25035,700 Beg. Stocks(thou. short tons)235302350300 Imports(thou. short tons)160180200300 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)302350300 Season-Average Price ($/short ton)311.27345.52397.00500.00 Source: USDA-WAOB

16. Extension and Outreach/Department of Economics Prices

17. Extension and Outreach/Department of Economics World Corn Production Source: USDA-WAOB

18. Extension and Outreach/Department of Economics Current Corn Futures Source: CME Group, 9/12/2012 7.18 6.14 5.61

19. Extension and Outreach/Department of Economics Early Prices for 2013 Crops

20. Extension and Outreach/Department of Economics Total Acreage Shift Source: USDA-NASS

21. Extension and Outreach/Department of Economics Corn Projections Source: FAPRI-MO 20132014201520162017 Area Planted(mil. acres)96.193.193.292.792.8 Yield(bu./acre)163.2165.7167.9170.2172.4 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.)5.204.864.74 4.75

22. 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 - 1.3 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

23. 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

24. Extension and Outreach/Department of Economics Thank you for your time! Any questions? My web site: http://www.econ.iastate.edu/~chart/ Iowa Farm Outlook: http://www.econ.iastate.edu/ifo/ Ag Decision Maker: http://www.extension.iastate.edu/agdm/