1. Ron Plain Professor of Agricultural Economics University of Missouri-Columbia http://web.missouri.edu/~plainr/ Swine Industry Outlook Worse than 1998?

2. Iowa Farrow to Finish Profits, 1965-2008 Source: John Lawrence, Iowa State University 1965-74: $10.04/head profit 1975-84: $14.22/head profit 1985-94: $10.51/head profit 1995-04: $ 0.52/head loss

3. Iowa Farrow to Finish Profits, 1997-2009 Source: John Lawrence, Iowa State University

4. Pig/Month Accumulated Profits, 1990-2009 Source: John Lawrence, Iowa State University

5. Corn Milled for Ethanol Forecast % corn for ethanol: 2000-01: 6% 2005-06: 14% 2007-08: 23% 2008-09: 31% 2009-10: 34%

6. Source: LMIC

7. Weekly Corn & Ethanol Prices, 2007-09

8. Source: U.S. Energy Information Administration Weekly Gasoline & Corn Prices, 2007- 09

9. Source: LMIC

10. 2007 Renewable Fuels Mandate

11. Ethanol Production, 1990-2016 mandated use actual production Beginning in 2015, the U.S. will annually use more corn to make ethanol than the U.S. produced in any year before 1971

12. Recent EPA Decisions U.S. corn ethanol has a worse impact on the environment than gasoline due to land use impact, i.e. more acres being cropped Brazilian sugarcane ethanol reduces GHG emissions by 64% compared to gasoline

13. U.S. Average Corn Price, 1908-2008 Source: USDA/NASS

14. U.S. Average Corn Price, 1908-2008 Source: USDA/NASS 1908-1942 35 years Avg $0.78 1942-1972 30 years Avg $1.26 1973-2006 34 years Avg $2.37

15. U.S. Average Corn Price, 1908-2008 1908-1942 35 years Avg $0.78 1942-1972 30 years Avg $1.26 1973-2006 34 years Avg $2.37 The 1940s step raised corn price 62%; the 70s step 88%. A 75% step will take corn to $4.15/bu What’s the next level?

16. Northwest Iowa Prices, 2006-09 Source: LMIC

17. DDGS Price as % of Corn Price, Northwest Iowa, 2006-09 Source: LMIC

18. WDGS Price as % of DDGS Price, Northwest Iowa, 2006-08 Source: LMIC

19. Impact on hogs

20. Cost of Slaughter Hog Production Iowa State University Calculations, 1987-2009 Source: John Lawrence, Iowa State University

21. Hog Price & Cost, 1996-2008 2008 hog prices were $2.60 above the 13 year average 2008 production cost was $13.85 above the 13 year average

22. Breakeven Hog Price & U.S. Corn Price Iowa State University Calculations, 1990-2008

23. Production Efficiency Since 1930, the U.S. has reduced sow inventory by 42% and increased annual pork production by 245%

24. Pigs Per Litter, 1930-2008 USDA Hogs & Pigs Reports

25. Litters Per Sow Per Year, 1930-2008

26. Pigs Per Sow Per Year, 1930-2008 USDA Hogs & Pigs Reports

27. Average U.S. Hog Carcass Weight, 1930-2008

28. Annual U.S. Pork Production Per Sow, 1930-2008 1930-80 growth rate: 2.027% 1980-07 growth rate: 2.793%

29. Hog Cycle

30. Annual U.S. Pork Production, 1930-2008 In 2008, U.S. pork production was 8.2% above trend

31. U.S. Commercial Hog Slaughter Quarterly Data, 1970-2009

32. Terminal Market Barrow & Gilt Price Quarterly Data 1970-2009

33. Hog Price Flexibility Quarterly Data 1970-2009 % ch T Mkt B&G price / % ch com hog slt In 9 of last 19 quarters, price & slaughter moved in the same direction

34. International Trade

35. Source: USDA/FAS

36. Forecast Change in Pork Production -----Percent Change----- Country 2007-082008-09 China +7.6%+5.5% E.U.-27 - 1.4%- 1.9% USA +6.4%- 2.5% Brazil +0.8%- 0.2% Russia +7.9%+4.1% Canada +1.4%+2.1% Vietnam +1.0%+0.0% Japan - 0.1%- 0.7% WORLD +4.0%+1.9% Source: USDA/FAS, April 2009

37. Source: USDA/FAS

38. Forecast Change in Pork Imports -----Percent Change----- Country 2007-082008-09 Japan + 4.7%- 2.1% Russia + 17.8%-28.8% Mexico + 18.6%-11.2% S. Korea - 3.8%- 7.0% U.S.A. - 14.1%+ 1.1% Hong Kong + 14.6%- 0.3% China +117.2%-30.2% Canada + 14.0%+ 5.1% Australia + 7.8%- 7.9% WORLD + 16.3%-13.3% Source: USDA/FAS, April 2009

39. Source: USDA/FAS

40. Forecast Change in Pork Exports -----Percent Change----- Country 2007-082008-09 U.S.A. +48.6%-13.2% E.U.-27 +33.4%-27.1% Canada + 9.3%+ 1.9% Brazil - 14.4%- 2.4% China - 36.3%- 5.8% Chile - 4.1%- 8.5% Mexico +13.8%+ 4.4% Australia - 11.1%+ 4.2% Vietnam - 42.1%+ 0.0% WORLD +18.9%-12.4% Source: USDA/FAS, April 2009

41. 2008 was the 17 th consecutive record year for U.S. pork exports

42. Source: U.S. Meat Export Federation

43. U.S. Pork Imports & Exports, 2000-2009

44. U.S. Pork Production, Exports & Imports, million pounds, 2007 & 2008 Jan-Dec 2007 Jan-Dec 2008 Percent Change U.S. pork production 21,942.623,347.8 + 6.4% U.S. pork exports 3,141.2 4,668.3 + 48.6% U.S. pork imports 968.4 831.9 - 14.1% Production- exports + imports 19,769.819,511.4 - 1.3%

45. U.S. Pork Exports, 2008 Change From Year Ago Country 000 lbs Percent Japan250,972 + 23.39% Mexico222,617 + 49.32% Canada 54,712 + 14.88% China & HK496,336 +139.79% S. Korea 32,113 + 12.12% Russia185,757 + 76.03% Australia 31,125 + 40.33% TOTAL 1,527,132 + 48.62%

46. U.S. Pork Exports, Jan-April 09 Change From Year Ago Country 000 lbs Percent Japan 36,048 + 8.45% Mexico 95,933 + 53.95% China & HK-221,626 - 64.18% Canada - 8,998 - 6.81% S. Korea - 4,730 - 3.92% Russia - 70,222 - 47.22% Australia 12,338 + 39.95% TOTAL -166,768 - 10.79%

47. U.S. Pork Exports, 2005-2009

48. Pork Exports & Frozen Pork, 2006-09

49. 2008 hog imports were dn 6.6% compared to 2007

51. Weekly Hog Imports, 2007- 09 Source: USDA/APHIS

52. Weekly Hog Imports, 2008-09 Source: USDA/APHIS

53. Change in Hog Slaughter: US & Canada Weekly F.I. Hog Slaughter, 2006-09

54. U.S. Dollar Exchange Rate Index

55. Trade Weighted Exchange Rate, 2005-2009 Source: Federal Reserve Bank of St Louis

56. U.S. Pork Exports, 2006-2009

57. U.S. Pork Imports & Exports as % of U.S. Pork Production, 2006-2009

58. U.S. Net Pork Exports as % of U.S. Pork Production, 2006-2009

60. Exchange Rate: Can $ Per US $

61. Steve Meyer’s survey indicates 2009 capacity of 444,925

62. U.S. Daily Slaughter Capacity PackerFall 07 Spring 09change Smithfield121,900126,300 4,400 Tyson 74,300 74,550 250 Swift 47,000 47,000 0 Excel 36,000 38,500 2,500 Hormel 36,800 37,000 200 Seaboard 16,800 19,200 2,400 Triumph 17,500 19,000 1,500 Indiana Pack 15,000 16,500 1,500 Hatfield 10,600 10,600 0 Others 52,435 56,275 3,840 Total428,335444,92516,590 Source: Steve Meyer, Paragon Economics

63. 17 Largest Hog Slaughter Weeks Rank Date Head. 1.12/22/072,469,770 2.01/12/082,434,492 3.01/19/082,419,483 4. 01/10/092,387,946 5.12/01/072,381,022 6.11/01/082,278,877 7.12/08/072,377,351 8.10/11/082,374,375 9.11/17/072,372,466 10.12/20/082,370,785 11.12/06/082,367,889 12.11/22/082,367,556 13.12/15/072,362,972 14.11/10/072,360,450 15.10/18/082,357,496 16.09/27/082,346,069 17.10/13/072,339,945 The 35 weeks with the largest slaughter have all been since September 2007

65. Demand

66. U.S. Per Capita Pork Consumption, 1930-2008

67. Change in Export Pork Demand Base Elasticity = - 0.5

68. 6/5/09 Exchange rate: 98.18 Yen per US $

69. Change in Domestic Pork Demand Base Elasticity = - 0.75

70. Change in Hog Demand Base Elasticity = - 0.2

71. Cheap vs Expensive Cuts

72. Livestock Marketing Information Center

73. Ground Chuck, Retail Price, Monthly, 2000- 2009 Source: USDA/ERS

74. Choice Boneless Sirloin Steak as % of Ground Chuck, Retail Prices, Monthly, 2000-2009 Source: USDA/ERS

75. Boneless Pork Chops as % of Ground Chuck Retail Prices, Monthly, 2000-2009 Source: USDA/ERS

76. Boneless Chicken Breast as % of Ground Chuck Retail Prices, Monthly, 2001-2009 Source: USDA/ERS

77. Whole Frozen Turkey as % of Ground Chuck Retail Prices, Monthly, 2000-2009 Source: USDA/ERS

78. Bologna as % of Ground Chuck Retail Prices, Monthly, 2000-2009 Source: USDA/ERS

79. Retail Boneless Pork Prices Retail Prices, Monthly, 2001-2009 Source: USDA/ERS

80. Inventory Reports

81. We are in the down phase of the hog cycle

82. Hog Inventory Reports U.S. Mar Canada Apr

83. U.S. Sows Farrowed by Quarter

84. U.S. Pigs Per Litter by Quarter

85. Canada Sows Farrowed by Quarter

86. Sows Farrowed-U.S. & Canada Combined

87. 2008 sow slaughter was up 5.0% Last 13 weeks were down 13.2%

88. Sow Slaughter, 2008-09 4 week moving average Source: USDA/AMS

89. Estimated Gilt Retention & Sow Loss, 2007-2009 GG Cattle & Hog Fax

90. Estimated Gilt Retention & Sow Loss, 2008-2009 GG Cattle & Hog Fax

92. Prior to 2007, packers had never killed 2.3 million hogs in a week

93. Actual & Predicted Change in Hog Slaughter U.S. Weekly F.I. Hog Slaughter, 2008-09

96. Prices

99. Hog Cutout Value

100. Livestock Marketing Information Center

101. Source: USDA Prior Day Purchased reports

105. Barrow & Gilt Negotiated Live Price Source: USDA Prior Day Purchased reports

106. Source: USDA’s Prior Day Slaughtered

107. Pork Packer Gross Margin Per Retail Pound, Monthly, 2000-2009 Source: USDA/ERS

108. My Forecast

109. Commercial Hog Slaughter Forecast Million Head * actual 2007 2008 2009 Qtr 1 26.684* 29.601* 28.488* Qtr 2 25.526* 27.941* 26.700 Qtr 3 26.566* 28.696* 27.250 Qtr 4 30.396* 30.214* 29.300 Year109.172*116.452*111.738 ------Change------ 07-08 08-09. +10.9% - 3.8%. + 9.5% - 4.4% + 8.0% - 5.0% - 0.6% - 3.0% + 6.7% - 4.0% Note: Q3 07 & Q1 09 have only 63 slaughter days

110. Iowa-Minn Hog Price Forecast Negotiated Base Price Per Carcass Hundredweight 2006 2007 2008 2009 Qtr 1$56.38*$59.90*$52.49* 57.23* Qtr 2$65.27*$69.45*$70.43* 57-58 Qtr 3$68.04*$66.14*$75.67* 60-63 Qtr 4$60.53*$52.08*$55.60* 54-58 Year$62.54*$61.91*$63.58* $57-60 * actual price – prior day purchased

111. Iowa-Minn Live Hog Price Forecast Negotiated Live Base Price Equivalent 2006 2007 2008 2009 Qtr 1$42.85*$45.52*$39.89* 43.49* Qtr 2$49.61*$52.78*$53.53* 43-44 Qtr 3$51.71*$50.27*$57.51* 46-49 Qtr 4$46.00*$39.58*$42.26* 41-44 Year$47.53*$47.05*$48.32* $43-46 * actual carcass price x 76%

112. U.S. Pork Production, Exports & Imports, million pounds, USDA forecast, 2008 & 2009 Jan-Dec 2008 Jan-Dec 2009 Percent Change U.S. pork production 23,34722,746 - 2.6% U.S. pork exports 4,668 4,183 - 10.4% U.S. pork imports 831 800 - 3.7% Production- exports + imports 19,51019,363 - 0.8% Source: USDA/OCE WASDE June 2009

113. Source: USDA’s Prior Day Slaughtered

114. The Non-Swine Flu

115. National PDP Base and 04/24/09 CME futures minus $2

116. National PDP Base and 05/29/09 CME futures minus $2

117. National PDP Base and CME futures minus $2

118. National PDP Base and 04/24/09 CME futures minus $2

119. Impact of Non-Swine Flu CME Futures Contracts $/cwt 4/24 5/29Change Impact May$69.00$62.12-$ 6.88 -$113M June$71.65$63.92-$ 8.73 -$141M July$72.60$65.62-$ 6.98 -$126M Aug$72.05$65.97-$ 6.08 -$107M Total$$$ -$487M

120. Forecast Change in Meat Production --Percent Change-- Type 2007-082008-09 Pork +6.40%-2.57% Beef+0.53%-0.37% Chicken+2.07%-4.03% Turkey +4.94%-7.30% All Meats+2.90%-2.84% Source: USDA/OCE WASDE, June 2009

121. Forecast Change in Meat Production --Percent Change-- Type 2008-092009-10 Pork -2.57%- 1.76% Beef-0.37%- 1.79% Chicken-4.03%+1.43% Turkey -7.30%+1.99% All Meats-2.84%- 0.28% Source: USDA/OCE WASDE, June 2009

122. Forecast Summary Farrowings trending down Continued productivity growth Fewer imports of Canadian hogs/pigs Decrease in pork exports Weak domestic demand High feed cost Red ink for producers

123. Any Questions?