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Agricultural Economic Outlook

This article explores the economic outlook, supply trends, and demand factors in the U.S. pork and beef industries, including crush margins and projections for expansion. It delves into key factors impacting meat production and prices.

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Agricultural Economic Outlook

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  1. Agricultural Economic Outlook Iowa Division of Banking Annual Meeting Des Moines, Iowa June 9, 2015 Chad Hart Associate Professor/Crop Markets Specialist chart@iastate.edu 515-294-9911

  2. U.S. Meat Production & Prices Source: USDA-WAOB

  3. Overarching Pork Industry • Economic Outlook • Supplies • Increasing; Breeding herd expansion ongoing • Increase in com slght depends on inv, wts, PEDv & PRRS • Demand • Strength “lost” in supply story • +Yr-over-Yrfor 10 straight quarters • +5% in Q1.2014, +8% Q2, +7% Q3, +11% Q4, & 18% Q1:2015 • Combined: “excitement & uncertainty”

  4. Hog Crush Margin The Crush Margin is the return after the pig, corn and soybean meal costs. Carcass weight: 200 pounds Pig price: 50% of 5 mth out lean hog futures Corn: 10 bushels per pig Soybean meal: 150 pounds per pig Source: ISU Extension

  5. Data Source: USDA-NASS, Compiled & Analysis by LMIC Livestock Marketing Information Center

  6. 2013 = +$6.21 [-$25.60 to +$24.57] 2014 = +$61.85 [+$13.15 to +$107.25] ~2015 = +$17.31 [-$3.23 to +$39.26] ~Jan-Aug 2016 = +$18.43 [+$7.76 to +$29.96]

  7. Data Source: USDA/NASS

  8. Data Source: USDA/NASS

  9. Data Source: USDA/NASS

  10. Data Source: USDA/NASS

  11. LMIC Pork Production and Price Quarterly Forecasts (6/1/15) Sources: USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC

  12. 2015-YTD 0.13% (vs. 2014) Data Source: USDA/AMS

  13. LMIC Pork Production and Price Quarterly Forecasts (6/1/15) Sources: USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC

  14. Data Source: USDA/NASS

  15. Data Source: USDA/NASS

  16. How Much Expansion? USDA & FAPRI Projections http://www.ers.usda.gov/publications/oce-usda-agricultural-projections/oce151.aspx http://www.fapri.missouri.edu/wp-content/uploads/2015/03/FAPRI-MU-Report-01-15.pdf Yr-over-Yr FAPRI 2015: +2.0% 2016: +6.9% 2017: +4.2% 2018: +0.6% 2014-24: +14.0% Yr-over-Yr USDA 2015: +1.0% 2016: +2.3% 2017: +0.8% 2018: +0.8% 2014-24: +8.1%

  17. Overarching Beef Industry • Economic Outlook • Tight beef & cattle supplies + • Attractive beef-to-feed price ratios + • Strong retail meat demand + • Initiated (slow???) herd expansion = • Record: • Prices throughout industry • Cash at-stake (so ROI may not be record) • Opportunity/Threat ... in the eye of the beholder...

  18. Cattle Crush Margin The Crush Margin is the return after the feeder steer and corn costs. Live weight: 1250 pounds Feeder weight: 750 pounds Corn: 50 bushels per head Source: ISU Extension

  19. Data Source: USDA-NASS, Compiled & Analysis by LMIC Livestock Marketing Information Center

  20. Quarterly Cattle & Beef Forecasts (LMIC: 6/1/2015)

  21. Quarterly Cattle & Beef Forecasts (LMIC: 6/1/2015)

  22. Data Source: USDA-AMS, Compiled and Analysis by LMIC Livestock Marketing Information Center

  23. 2014 Slaughter -17.9% (vs. 2013) -27.3% (vs. 2008-12) 2015-YTD Slaughter -15.7% (vs. 2014) -14.9% (vs. 2009-13) Beef Cow Culling Rates 2005 = 7.9% 2006 - 2007 = 9.4% 2008 - 2012 = 11.3% 2013 = 10.5% 2014 = 8.8% Data Source: USDA-AMS & USDA-NASS Livestock Marketing Information Center

  24. Data Source: USDA/AMS

  25. National Cow Herd: 2.1%vs 2014 (still lowest level since 1962) CHANGE IN BEEF COWS NUMBERSJANUARY 1, 2014 TO JANUARY 2015(1000 Head) ― U.S. Total: + 607.7 Livestock Marketing Information Center Data Source: USDA-NASS

  26. Data Source: USDA/NASS

  27. How Much Expansion? USDA & FAPRI Projections http://www.ers.usda.gov/publications/oce-usda-agricultural-projections/oce151.aspx http://www.fapri.missouri.edu/wp-content/uploads/2015/03/FAPRI-MU-Report-01-15.pdf Yr-over-Yr FAPRI 2015: +1.8% 2016: +3.1% 2017: +1.6% 2018: +0.7% 2015-24: +2.6% Yr-over-Yr USDA 2015: -0.4% 2016: +0.2% 2017: +2.6% 2018: +4.2% 2015-24: +16.5%

  28. How Much Expansion? USDA & FAPRI Projections http://www.ers.usda.gov/publications/oce-usda-agricultural-projections.aspx http://www.fapri.missouri.edu/wp-content/uploads/2015/03/FAPRI-MU-Report-01-15.pdf

  29. How Much Expansion? USDA & FAPRI Projections http://www.ers.usda.gov/publications/oce-usda-agricultural-projections.aspx http://www.fapri.missouri.edu/wp-content/uploads/2015/03/FAPRI-MU-Report-01-15.pdf

  30. How Much Expansion? FAPRI Projections http://www.fapri.missouri.edu/wp-content/uploads/2015/03/FAPRI-MU-Report-01-15.pdf

  31. Data Source: USDA/NASS

  32. 2013 Profits = -$100.77 2014 Profits = +$197.24 ~2015 Profits = -$91.18 ~Jan-Oct 2016 Profits = -$113.18 Oct-14 Profit = $269 Total Cost: = $1,857 ROI = 15% Oct-03 Profit = $378 Total Cost: = $920 ROI = 41%

  33. U.S. Corn Supply and Use Source: USDA-WAOB

  34. Corn Planting Progress Source: USDA-NASS

  35. Corn Emergence Source: USDA-NASS

  36. World Corn Production Source: USDA-WAOB

  37. Corn Export Shifts Source: USDA-FAS

  38. Corn Export Sales Source: USDA-FAS

  39. Crude Oil Prices Sources: EIA and CME

  40. Strength of the U.S. Dollar Source: Federal Reserve

  41. Corn Grind for Ethanol

  42. Current Corn Futures 3.64 3.52 Source: CME Group, 6/1/2015

  43. U.S. Soybean Supply and Use Source: USDA-WAOB

  44. Soybean Planting Progress Source: USDA-NASS

  45. Soybean Emergence Source: USDA-NASS

  46. World Soybean Production Source: USDA-WAOB

  47. Soybean Export Shifts Source: USDA-FAS

  48. Soybean Export Shifts Source: USDA-FAS

  49. Current Soybean Futures 9.96 8.69 Source: CME Group, 6/1/2015

  50. 2014/15 Crop Margins

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