feed outlook jim dunn ag economist pennsylvania state university

Feed Outlook

Jim Dunn

Ag Economist

Pennsylvania State University

Sources of InformationUSDA

• http://usda.mannlib.cornell.edu/MannUsda/homepage.do

• http://usda.mannlib.cornell.edu/MannUsda/viewTaxonomy.do?taxonomyID=3

• http://usda.mannlib.cornell.edu/MannUsda/viewTaxonomy.do?taxonomyID=25

• http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1273

What these are called

• USDA Economics, Statistics and Market Information System (ESMIS)

• Field Crops

• Outlooks, Yearbooks, and Estimates

• Feed Outlook

Other useful links

• Oil Crops Outlook

• Livestock, Dairy, and Poultry Outlook

• Milk Production

• Feed grains database

• Livestock, Dairy, and Poultry Outlook: Tables

Issues for Feed Economy

• Bio-Fuel

• Expensive inputs

• More debt

• Cheap dollar

• China and India

• Banking crisis

• Weather

Bio-Fuel

• Ethanol• Bio-diesel• Both ethanol & bio-diesel subsidies and

tariff on ethanol expired this year• Does it make sense to use food for fuel?

Source: CME

Jul-06 Nov-06 Apr-07 Aug-07 Jan-08 Jun-08 Oct-08 Mar-09 Jul-09 Dec-090

5

10

15

20

25

30

35

40

Verasun EnergyAventine Renewable EnergyPacific Ethanol

Ethanol Company Stock PricesJuly 06- Jan10

Prices todayVerasun 0Pacific 1.13Aventine 3.10 old shares 0

Ethanol

• 36 of 211 plants are not operating

• Others are on partial slowdown

• All of these plants cannot survive

• Clearfield operating again – present owner has very little capital costs

• Margins may still be negative

Source: Renewable Fuels Association

Corn Supply Year Beg stocks Production Supply

Bil. Bu.

2007/08 1.30 13.07 14.36

2008/09 1.62 12.09 13.73

2009/10 1.67 13.10 14.77

2010/11 1.71 12.45 14.18

2011/12 1.13 12.36 13.51

2012/13 est 0.99 10.73 11.81

Source: USDA

Corn Usagebil. bu

Source: USDA

Year Feed Food Fuel Exports Total

2007/08 5.86 1.32 3.05 2.44 12.74

2008/09 5.18 1.32 3.71 1.85 12.06

2009/10 5.13 1.35 4.59 1.98 13.07

2010/11 4.79 1.41 5.02 1.84 13.05

2011/12 4.55 1.43 5.01 1.54 12.53

2012/13 est 4.15 1.37 4.50 0.90 11.17

Food and Industrial Corn Usemil. bu.

Crop

Year

HFCS Other sweeteners

Starch Fuel Liquor Cereal

2007 490 236 262 3,049 135 192

2008 489 245 234 3,709 134 192

2009 513 257 250 4,568 134 194

2010 521 272 258 5,021 135 197

2011 514 294 254 5,011 135 203

2012 485 280 240 4,500 135 202

Source: USDA

Corn Usage

Crop 2004 2007 2010 2012

Feed 57.8% 46.0% 36.7% 37.1%

Food 12.6% 10.4% 10.8% 12.2%

Exports 17.1% 19.0% 14.1% 10.3%

Ethanol 12.4% 24.7% 38.5% 40.2%

15 25 35 45 55 65 75

Days Carryout

$0

$1

$2

$3

$4

$5

$6

$7

$8

Avg

Far

m P

rice

'00'01'02'03

'04'05

'06

'07 '08'09

'10

'11

'12

US Corn Farm Price vs Days Carryout

2000-2012 crop years

est. 2012 crop carryout

Corn futures prices2/7/13

Month Price (cts/bu.)

March 13 718

(62 cents more than last year

May 13 719

July 13 710

Sept 13 597

Dec 13 573

Corn Price History

US65%

Argentina22%

Brazil9%

Other4%

World Corn Exports2009 Crop Year

Source: USDA

Soybean Supplymil.bu.

Year Carry-in Production Total

2007 574 2677 3261

2008 205 2967 3185

2009 138 3359 3512

2010 151 3329 3495

2011 215 3056 3286

2012 175 3205 3395

Soybean Usage

Year Crush Exports Seed Total

2007 1803 1159 94 3056

2008 1662 1279 106 3047

2009 1752 1501 108 3361

2010 1648 1501 130 3280

2011 1660 1335 116 3111

2012 1645 1485 125 3255

Soybean Carryout & PriceYear Carryout

mil. bu.

Price Days Use of carryout

2006 574 $6.43 67

2007 140 $10.10 24

2008 138 $9.97 16

2009 151 $9.59 16

2010 215 $11.30 19

2011 175 $12.50 23

2012 140 $14.55 15

0 10 20 30 40 50 60 70

Days Carryout

$0

$2

$4

$6

$8

$10

$12

$14

Avg

Far

m P

rice

'00'01

'02

'03

'04 '05'06

'07'08'09

'10

'11

'12

US Soybeans Farm Price vs Days Carryout

2000-12 crop years

Soybean Price History

Soybean futures prices2/7/13

Month Price (cts/bu.)

March 13 1490

May 13 1479

July 13 1468

Sept 13 1380

Nov 13 1329

2003 20042004 20052005 20062006 20072007 20082008 20092009 20102010 20112011 201220120

0.25

0.5

0.75

1

1.25

1.5

1.75

2

broilerbeefhogsmilk

Price/feed Ratio Jan 2003-presentJan 2003 = 1.00

Low values mean animal producers lose money

2000 2002 2004 2006 2008 2010 20120.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

cattlecorn

Cattle Price vs Corn Price 2000=1.0

2000 2002 2004 2006 2008 2010 20120.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

hogscorn

Hog Price vs Corn Price 2000=1.0

2000 2002 2004 2006 2008 2010 20120.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

broilercorn

Broiler Price vs Corn Price 2000=1.0

Beef notes

• Feeder cattle numbers were hit hard by drought in Texas

• Animals put in feed lots early

• High feeder cattle prices

• Feed lots returns low

• Packers can’t pass costs on in this economy – high-valued cuts are not high enough

1977 1982 1987 1992 1997 2002 2007 20120

5

10

15

20

25

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35

40

45

50

55

calvescattle

Beef Cattle Herd and Calf Crop

Hog notes

• Integrators suffering from feed prices

• Demand is okay but prices too low to cover costs

Poultry Notes

• Eggs and Broilers cheapest form of protein

• Margins bad

• Exports important and weakness in world economy affects price

• Demand is okay but feed is too high priced

1980 1985 1990 1995 2000 2005 20100

10

20

30

40

50

60

70

80

90

lbs

beefporkchicken

Per Capita Meat Consumption1980-2012

Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-130

5

10

15

20

25

$/c

wt.

PA all milk priceaverage

PA All Milk PriceJan 2003-present

Source: NASS

2003 20042004 20052005 20062006 20072007 20082008 20092009 20102010 20112011 20122012$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

milk marginaverage

PA Dairy Milk Margin2003-present

Jan Mar May July Sept Nov0

2

4

6

8

10

12

14

16

$/c

wt

200920102011201220135 yr avg

PA Milk Margin2009-13

Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-130

2

4

6

8

10

12

$/cw

t.

Feed Costavg

PA Feed Cost/cwt. MilkJan 2003 - present

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

5

10

15

20

25$/

cwt.

Class IIIaveragefutures

Class III Milk Price

Source: USDA

Concluding Questions

• How will meat producers deal with feed prices?

• How will dairy producers deal with feed situation

• How will consumers adjust consumption in weak economy?

• Will we really keep cutting per capita meat consumption?