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

2. 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

3. 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

4. Extension and Outreach/Department of Economics

5. 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]

6. 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, 2015 2015 as %Pre-Report Actual - 20142015of 2014RangeEstimate Inventories on Sep 1 * All hogs and pigs 65,97968,395103.7103.0 - 104.7103.60.1 Kept for breeding 5,9205,986101.199.0 - 101.0100.30.8 Market 60,05962,410103.9103.0 - 105.1103.90.0 Under 50 pounds 20,39020,29199.598.8 - 101.0100.2-0.7 50-119 pounds 17,45817,986103.0102.0 - 104.5103.2-0.2 120-179 pounds 12,11213,080108.0104.9 - 108.4106.61.4 180 pounds and over 10,09811,053109.5107.9 - 111.2109.7-0.2 Farrowing ** Jun – Aug sows farrowed 2,9912,94498.497.0 - 100.598.10.3 Sep – Nov intentions 2,9942,92097.595.7 - 99.597.20.3 Dec – Feb intentions 2,8952,87599.395.7 - 101.299.10.2 Jun – Aug Pig Crop * 30,40230,585100.699.0 - 103.0100.40.2 Jun – Aug Pigs per Litter 10.1610.39102.3101.9 - 103.0102.4-0.1 * 1,000 head** 1,000 litters

7. 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

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

9. 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%-18,544-0.5% 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)

10. Extension and Outreach/Department of Economics YearComm’l% Chg.Avg Carcass% Chg.Comm’l Pork% Chg. QuarterSlaughterYear AgoWeightYear AgoProductionYear Ago 2015 I 28,7235.9 2150.86,1616.5 II 27,8488.9 213-1.15,9257.6 III 28,47411.4 209-1.55,9579.8 IV 30,2435.7 214-0.26,4785.7 Year 115,2887.9 213-0.524,5217.3 2016 I 29,1611.5 215-0.26,2571.6 II 27,536-1.1 2130.25,877-0.8 III 28,319-0.5 2090.15,929-0.5 IV 30,4350.6 2150.36,5370.9 Year 115,4510.1 2130.124,6000.3 2017 I 29,9092.6 2150.26,4312.8 II 28,1632.3 2140.26,0232.5 III 28,4950.6 2100.25,9760.8 IV 31,3353.0 2150.26,7423.1 Year 117,9022.1 2130.225,1722.3 LMIC Pork Production and Price Quarterly Forecasts (12/10/15) Sources: USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC

11. Extension and Outreach/Department of Economics YearNat’l Wtd% Chg.CME QuarterAvg Base PriceYear AgoLHF Price 2015 I 68.55-25.0 II 73.52-34.3 III 74.60-32.3 IV 63-64-29.5 Year 70-71-30.2 2016 I 64-66-5.259-63 II 74-783.463-76 III 75-804.067-76 IV 65-717.164-67 Year 71-732.1 2017 I 62-690.867-68 II 70-78-2.6 III 70-79-3.9 IV 60-70-4.4 Year 66-74-2.8 LMIC Pork Production and Price Quarterly Forecasts (12/10/15) Sources: USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC

12. 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

13. 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

14. Extension and Outreach/Department of Economics ChangeAverage ChangeCommercialChange CommercialfromDressedfromBeeffrom YearSlaughterYear AgoWeightYear AgoProductionYear Ago Quarter(1,000 hd)(%)(lbs)(%)(mil lbs)(%) 2015 I 6,967-5.5 8132.25,664-3.5 II 7,227-7.8 8102.75,855-5.3 III 7,288-4.5 8322.86,066-1.8 IV 7,283-0.6 8412.36,1231.7 Year 28,765-4.7 8242.523,708-2.2 2016 I 7,1402.5 8221.15,8683.6 II 7,4052.5 8130.46,0202.8 III 7,6234.6 8360.46,3705.0 IV 7,5193.2 839-0.26,3093.0 Year 29,6873.2 8280.424,5673.6 2017 I 7,4464.3 8270.76,1615.0 II 7,7204.3 8160.46,2994.6 III 7,8152.5 8390.46,5593.0 IV 7,8574.5 8420.46,6164.9 Year 30,8383.9 8310.525,6354.3 Quarterly Cattle & Beef Forecasts (LMIC: 12/10/2015)

15. 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 162.4311.0215.87276.14 II 158.117.0225.29279.32 III 144.22-9.0214.38246.04 IV 132-133-20.0183-184214-216 Year 149-150-3.3209-210253-255 2016 I 140-144-12.6178-182217-222 II 144-148-7.7181-186221-228 III 138-143-2.6178-184217-225 IV 138-1446.4175-182210-219 Year 141-145-4.3179-183217-223 2017 I 138-145-0.4173-181213-223 II 138-146-2.7174-183214-225 III 133-143-1.8171-181212-223 IV 134-145-1.1167-179202-216 Year 137-143-2.1173-179212-220 Quarterly Cattle & Beef Forecasts (LMIC: 12/10/2015)

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

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

18. 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]

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

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

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

22. Extension and Outreach/Department of Economics

23. 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%-289,010-13.4% (Volume excluding by- products & variety meats)

24. 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% -186-13% Costa Rica -14%-22%1,8118% Other Countries13%-8%7558% Total-18%-13%593,26925% (Volume excluding by- products & variety meats)

25. Extension and Outreach/Department of Economics U.S. Corn Supply and Use 20122013201420152015 Δ Area Planted(mil. acres)97.395.490.688.40 Yield(bu./acre)123.1158.1171.0169.30 Production(mil. bu.)10,75513,82914,21613,6540 Beg. Stocks(mil. bu.)9898211,2321,7310 Imports(mil. bu.)1603632300 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.)7301,9201,8641,750-50 Total Use(mil. bu.)11,08313,45413,74813,630-25 Ending Stocks(mil. bu.)8211,2321,7311,78525 Season-Average Price($/bu.)6.894.463.703.650 Source: USDA-WAOB

26. Extension and Outreach/Department of Economics U.S. Soybean Supply and Use 20122013201420152015 Δ Area Planted(mil. acres)77.276.883.383.20 Yield(bu./acre)40.044.047.548.30 Production(mil. bu.)3,0423,3583,9273,9810 Beg. Stocks(mil. bu.)169141921910 Imports(mil. bu.)417233300 Total Supply(mil. bu.)3,2523,5704,0524,2030 Crush(mil. bu.)1,6891,7341,8731,8900 Seed & Residual(mil. bu.)1051071451330 Exports(mil. bu.)1,3171,6381,8431,7150 Total Use(mil. bu.)3,1113,4783,8613,7380 Ending Stocks(mil. bu.)141921914650 Season-Average Price($/bu.)14.4013.0010.108.900 Source: USDA-WAOB

27. 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

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

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

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

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

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

33. Extension and Outreach/Department of Economics Corn Grind for Ethanol

34. Extension and Outreach/Department of Economics Current Corn Futures Source: CME Group, 12/14/2015 3.61 3.78

35. Extension and Outreach/Department of Economics Current Soybean Futures Source: CME Group, 12/14/2015 8.55 8.48

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

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

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

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

40. Extension and Outreach/Department of Economics Iowa Corn Costs Source: AgDM A1-21 46% 88% 26% 88% Overall 75% increase

41. Extension and Outreach/Department of Economics Iowa Soybean Costs Source: AgDM A1-21 72% 56% 14% 88% Overall 69% increase

42. Extension and Outreach/Department of Economics 2015 Iowa Land Values

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

44. Extension and Outreach/Department of Economics 2015 Iowa Land Values

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

46. Extension and Outreach/Department of Economics Thank you for your time! Any questions? My web site: http://www2.econ.iastate.edu/faculty/hart/ Iowa Farm Outlook: http://www2.econ.iastate.edu/ifo/ Ag Decision Maker: http://www.extension.iastate.edu/agdm/