dr. steve meyer - markets, economic situation, and outlook

From information, knowledge

Paragon Economics, Inc.

Steve R. Meyer, Ph.D.Paragon Economics, Inc.

World Pork Expo – June 2014

Economic Situation & Outlook



Current situation is the culmination . . .

Quantum upward shift of grain prices in 2007 – directly attributable to biofuels

The Great Recession and its impact on demand -- foodservice/retail split

Drought conditions in cow/calf areas for much of the past decade – and 2011-12!

History catches up with the 2012 crop

PEDv04/12/2023 2

. . . of along series of events/mishaps



Key Issues for 2014 and beyond Grain Prices and Costs – Are The Bad

Times Really Over For Good?

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Feed ingredient prices moving downward

Note relative drop in corn vs. SBM – disadvantage to poultry first, then hogs

Planting risk, SB competition premiums are gone from corn – some weather risk remains

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‘14 production costs are hanging near $82 . .

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. . . And back into the $70s for 2015



World corn prod & cons are record high. . .

6/20/2013 6

. . . And stocks have grown – best in 12 years



U.S. biofuels policy fueled growth and . . .

6/20/2013 7

. . . new, ongoing world corn competition



World soybean supply situation is similar . . .

World output +6.2% in ‘13-’14 Consumption +4.4% Ending stocks +20%, S/U tied for 3rd

high

. . . Record high output, consumption, stocks



But SB prices are still over $12 . . . . . . largely due to China’s appetite

& means



Planting intentions reflect relative prices

04/12/2023 10



Planting, emergence, condition are GOOD!

80% of corn is emerged (vs. avg of 80)

Corn 76% G/E vs. 5-yr avg of 63% 50% of beans have emerged (avg. is

45%)04/12/2023 11



USDA’s May WASDE – 50% higher Y/E stocks

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USDA April

USDA May

% Chng vs '12-13

Acres Planted Mil A 97.2 95.4 NA 91.7 -3.9%Acres Harvested Mil A 87.4 87.7 NA 84.3 -3.9%Yield Bu/A 123.4 158.8 NA 165.3 4.1%Beginning Stocks Mil Bu. 989 821 NA 1146 39.6%Production Mil Bu. 10780 13925 NA 13935 0.1%Imports Mil Bu. 162 35 NA 30 -14.3%Total Supply Mil Bu. 11932 14781 NA 15111 2.2%Feed & Residual Mil Bu. 4329 5300 NA 5250 -0.9%Ethanol for fuel Mil Bu. 4648 5050 NA 5050 0.0%Non-Ethanol FSI Mil Bu. 1403 1385 NA 1385 0.0%Exports Mil Bu. 731 1900 NA 1700 -10.5%Total Usage Mil Bu. 11111 13635 NA 13385 -1.8%Carryover Mil Bu. 821 1146 NA 1726 50.6%Stocks/Use Pct. 7.4% 8.4% NA 12.9% 53.4%Nat. Wtd. Avg. Farm Price $/Bu. 6.89 4.50 - 4.80 NA 3.85 - 4.55 -9.7%Source: USDA World Supply and Demand Estimates

U.S. CORN SUPPLY AND UTILIZATION -- MAY

Units 2012/13 2013/142014/15



USDA’s price is in line with recent demand

04/12/2023 13



May WASDE soybean S&D – BIG supply help!

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USDA April

USDA May

% Chng vs '13-14

Acres Planted Mil A 77.2 76.5 NA 81.5 6.5%Acres Harvested Mil A 76.2 75.9 NA 80.5 6.1%Yield Bu/A 39.8 43.3 NA 45.2 4.4%Beginning Stocks Mil Bu. 169 141.0 NA 130 -7.8%Production Mil Bu. 3034 3289.0 NA 3635 10.5%Imports Mil Bu. 36 90.0 NA 15 -83.3%Total Supply Mil Bu. 3239 3519.0 NA 3780 7.4%Crushings Mil Bu. 1689 1695.0 NA 1715 1.2%Exports Mil Bu. 1320 1600.0 NA 1625 1.6%Seed Mil Bu. 89 95.0 NA 92 -3.2%Residual Mil Bu. 1 0.0 NA 18 #DIV/0!Total Usage Mil Bu. 3099 3390.0 NA 3450 1.8%Carryover Mil Bu. 141 130.0 NA 330 153.8%Stocks/Use Pct. 4.5% 3.8% #VALUE! 9.6% 149%Nat. Wtd. Avg. Farm Price $/Bu. 14.40 13.10 NA 9.75 - 11.75 -0.8%Soybean Oil Price Cents/lb. 47.13 40.00 NA 37.00 - 41.00 -2.5%Soybean Meal Price $/ton 468.11 485.00 420 - 465 450 - 490 -3.1%Source: USDA World Supply and Demand Estimates

U.S. SOYBEAN SUPPLY & UTILIZATION - MAY

Units 2012/13 2013/142014/15



Key Soybean issue: Meal is carrying the value!

August SBM Futures

August Soybean Oil Futures

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BIGGEST current risk is bean meal . . . USDA’s Y/E soybean

stocks are 130 mil. bu. – smaller than last year!!!!

Summer SBM highs of $415 & $438 last 2 years

‘14 yr-end S/U=3.8%!

Some plants will run out of beans!

Lock in basis if possible

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Times Really Over For Good? Demand – Can We Make This Last?

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Data Source: U.S. Bureau of Economic Analysis

U.S. economy is still slow – but growing yr/yr!. . . Q1 was LOWER than Q4-13 though

– Weather?

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Some decent employment gains in 2013 . . .

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. . . Jan slowed but Feb, Mar & April are >200k



Data Source: Bureau of Labor Statistics

Unemployment is falling -- 6.3% in April . . . . . . U-6 is down to 12.3% but was

10% in 2008

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2013 RPDI growth averaged 0.1% . . .. . . January was good but growth has

slowed

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Per cap cons.: -10% vs. ‘04, flat thru ’15 . . .

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. . . But this is a function of PRODUCTION!



The evidence of strong demand is PRICES . . .. . . Records set in 2013 and already in ‘14 with

more to come

04/12/2023 23



Demand indexes were ALL higher for 2013!

04/12/2023 24

. . . First time that has ever happened



Meat/Poultry RPCE was higher all of 2013

04/12/2023 25



January meat/poultry RPCE was soft . . .

04/12/2023 26

. . . Feb was better and March was very good



March was a positive yr/yr month . . .

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“People will stop eating pork/beef at these prices!” Some will stop and some will eat less

BUT THEY MUST because less is available

Habits, though, are important!

04/12/2023 28

Price

Quantity/Time

P2

P1

Q1Q2

D

S1

S2



Pork exports exploded in March . . .

04/12/2023 29



March pork: Japan back on top, Mexico +43% . . . China/HK +62% yr/yr & +44%

YTD, Others

04/12/2023 30




Times Really Over For Good? Demand – Can We Make This Last? Beef and Chicken Supplies – Biofuels,

Drought and Production Challenges

04/12/2023 31



Broiler flock +4-5% from July-Nov . . .

04/12/2023 32

. . .down 0.3% & 0.4% last 2 mos. -- AGING!!!



Old flock = fewer, lower quality eggs, placements near yr ago

04/12/2023 33



Slaughter, production are UNCHANGED vs. 2013. . .

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Chicken prices have finally improved . . .

04/12/2023 35



Beef herd: Full expansion mode IF POSSIBLE Will range/pasture conditions be good enough in critical

areas???

04/12/2023 36



Jan Cattle report: Expansion begins . . .

04/12/2023 37

2013 2014Pct of Yr

AgoAverage Range

All Cattle & Calves 89,300 87,730 98.2 98.6 98.0 - 99.1

Cows & Heifers That Have Calved 38,515 38,251 99.3 98.9 98.7 - 99.3 Beef Cows 29,297 29,042 99.1 98.5 98.3 - 99.1 Dairy Cows 9,218 9,209 99.9 99.9 99.8 - 100.0

Heifers 500 Pounds & Over 19,134 18,751 98.0 99.0 97.9 - 99.6 Beef Cow Replacements 5,381 5,471 101.7 103.1 102.4 - 103.5 Dairy Cow Replacements 4,551 4,539 99.7 100.3 98.9 - 101.1 Other Heifers 9,203 8,741 95.0 95.9 93.2 - 97.1

Steers 500 Pounds & Over 15,813 15,415 97.5 98.4 97.3 - 99.6

Bulls 500 Pounds & Over 2,056 2,035 99.0 99.0 98.4 - 99.7

Heifers, Steers & Bulls Under 500 Pounds 13,782 13,278 96.3 97.9 97.0 - 99.1

January 1 Cattle On Feed, All Feedlots 13,364 12,695 95.0 95.0

Rev 2012 2013Calf Crop 34,279 33,930 99.0 97.9 97.7 - 98.1

Source: USDA National Agricultural Statistics Service, Urner Barry

Pre-Report Estimates*

JANUARY 1, 2014 -- U S CATTLE INVENTORY



. . . Feeder supply is down 3%, yr/yr – record low

04/12/2023 38

Livestock Marketing Information CenterData Source: USDA-NASS

Placements are coming from a TIGHT supply



Feb placements were +15%, March & April were -5%

04/12/2023 39



Beef consumption/supply will be -5.3% yr/yr . . .

04/12/2023 40

. . . And down another 3% in 2015!

Livestock Marketing Information CenterData Source: USDA-NASS



RECORD-HIGH cutout values – again this week!

Weekly averages have returned to $220s

We expected $215-$225 for cutouts thru June – but Choice was $233 last week!

Pork prices are now HELPING beef04/12/2023 41



What we knew about PEDv in March . . .

IA and MN were slowing by March 1

IL, IN, OH, NC and KS were still troubling

04/12/2023 42



. . . But they are likely do represent TIMING

04/12/2023 43

NHF article was based

on data thru

January!

Accessions were not useful for NUMBERS lost . .



My computations through February . . .

Weights will add 3-4% -- but prod will still be down near 10% in July, 12% in Aug

Price flexibility of -2 to -3 put prices +25-30% from ‘1304/12/2023 44

PIG LOSS COMPUTATIONS PCT OF PRIOR YR. SLGHTR ADJUSTMENTS TOTAL

Birth Month

Monthly Share

Pigs lost (000 Hd.)

Slghtr Month

'13 Slghtr +2.5%*

Percent loss

Cull reduction Sows

Non PED prod'ty

'14 Slghtr Change

MayJun 1.6% 90.16 Dec 9705.8 0.93% 1.00% -1.00% 2.00% 1.07%Jul 1.5% 104.22 Jan 10209.3 1.02% 1.00% -1.00% 1.90% 0.88%Aug 6.7% 386.12 Feb 8809.3 4.38% 1.00% -1.00% 1.80% -2.58%Sep 4.6% 334.60 Mar 9551.8 3.50% 1.00% -1.00% 1.80% -1.70%Oct 10.4% 630.27 Apr 9596.5 6.57% 1.00% -1.00% 1.70% -4.87%Nov 10.4% 703.45 May 9445.6 7.45% 1.00% -1.00% 1.50% -5.95%Dec 13.8% 890.22 Jun 8405.1 10.59% 1.00% -1.00% 1.30% -9.29%Jan** 21.9% 1256.62 Jul 9307.1 13.50% 1.00% -1.00% 1.25% -12.25%Feb** 29.0% 1683.81 Aug 9796.1 17.19% 1.00% -1.00% 1.20% -15.99%*Added to account for grow/finish death loss and thus compare directly to the pig crop**Used 90% of monthly share to reflect higher number of smaller farms

What About PRRS?



Rabobank made me look like an OPTIMIST!

04/12/2023 45



March H&P: Bearish vs. expectations!

04/12/2023 46

Inventories on March 1*

All hogs and pigs 65072 62899 96.7 94.6 2.1Kept for breeding 5836 5851 100.3 99.4 0.9Kept for marketing 59236 57048 96.3 94.1 2.2

Under 50 lbs. 18852 18101 96.0 93.5 2.550-119 lbs. 16251 15717 96.7 94.2 2.5

120-179 lbs. 13169 12793 97.1 94.1 3.0180 lbs. and over 10965 10436 95.2 95.2 0.0

Farrowings**Dec-Feb sows farrowed 2,788 2,867 102.8 100.0 2.8

Mar-May Intentions 2,816 2,884 102.4 100.5 1.9 June-Aug Intentions 2,902 2,960 102.0 100.9 1.1Dec-Feb Pig Crop* 28,099 27,316 97.2 96.4 0.8Dec-Feb pigs saved per litter 10.08 9.53 94.5 96.4 -1.9

*Thousand head ** Thousand Litters Source: Urner Barry

Category 2013 2014'14 as Pct of

'13

Pre-Report

Est's

Actual - Est

USDA QUARTERLY HOGS & PIGS REPORTMarch 28, 2014

. . . But definitely picked up some impact



Monthly data – BIG drop in litter size but . . .

04/12/2023 47

. . . a slight (curious) improvement for Feb



The devil is in the details, though . . . March H&P would put quarterly 2014 slghtr

totals down 2.1, 3.4, 4 and 2.9% yr/yr.

- IMPLICATION: Higher weights would leave ‘14 production very near 2013 levels

March slaughter was down 6.7% while 180+ inventory was down 4.8%

- AND SEP-NOV PIG CROP WAS UNCHANGED

Dec-Feb pig crops in MN, IA and IL were + 5, +2 and +3% yr/yr IN SPITE OF WIDESPREAD PEDV LOSSES

04/12/2023 48



Latest PEDv info – thru May 10 – shows some improvement

U.S.: new low of 187 wk. ended 5/17 IA has seen another big drop, so too

with MN Some improvement in IL, others stable

04/12/2023 49



Latest data still imply HUGE Jul-Sep cuts . . .

Assumes 58% of sows infected 2.7 pigs lost per sow -- conservative Total loss is now near 8 million pigs

04/12/2023 50

PIG LOSS COMPUTATIONS PCT OF PRIOR YR. SLGHTR ADJUSTMENTS

Birth Month

Monthly Share

Small Farm Adjustment

Pigs lost, thousands

Slaughter Month

Slghtr Yr Ago +2.5%

Percent Change

Cull reduction Sows

Non PED productivity

TOTAL CHANGE

May 4.16% 274.50Jun 6.51% 492.04 Dec 9705.8 -5.07% 1.00% -1.00% 2.00% -3.07%Jul 3.62% 336.35 Jan 10205.3 -3.30% 1.00% -1.00% 1.90% -1.40%Aug 4.52% 352.62 Feb 8806.0 -4.00% 1.00% -1.00% 1.80% -2.20%Sep 3.62% 306.51 Mar 9549.1 -3.21% 1.00% -1.00% 1.80% -1.41%Oct 7.05% 519.71 Apr 9592.3 -5.42% 1.00% -1.00% 1.70% -3.72%Nov 4.52% 404.16 May 9440.7 -4.28% 1.00% -1.00% 1.50% -2.78%Dec 7.23% 545.21 Jun 8401.1 -6.49% 1.00% -1.00% 1.30% -5.19%Jan 11.75% 90% 884.27 Jul 9304.3 -9.50% 1.00% -1.00% 1.25% -8.25%Feb 19.89% 90% 1489.15 Aug 9794.2 -15.20% 1.00% -1.00% 1.20% -14.00%Mar 16.27% 90% 1372.51 Sep 9249.5 -14.84% 1.00% -1.00% 1.15% -13.69%Apr 10.85% 90% 960.22 Oct 10680.5 -8.99% 1.00% -1.00% 1.10% -7.89%



Actual slaughter declines have been larger

04/12/2023 51

CHECK AGAINST ACTUAL SLAUGHTER

TOTAL CHANGE

Slaughter Month

Total Slaughter

Pct. Chng., yr/yr

Barrow/Gilt Slaughter

Pct. Chng., yr/yr

-3.07% Dec 9730.1 -2.14% 9397 -2.01%-1.40% Jan 9791.2 -1.66% 9459 -1.39%-2.20% Feb 8668.2 0.90% 8366 1.10%-1.41% Mar 8674.6 -6.89% 8356 -6.92%-3.72% Apr 8855 -5.38% 8527 -5.32%-2.78% May-5.19% Jun-8.25% Jul

-14.00% Aug-13.69% Sep-7.89% Oct

. . . Partially due to delayed mktg/higher wts



U.S. sow slaughter is down 5.8% YTD . . .

94k sounded like a lot of growth from December through February but the females were available

Immune sows have value – an incentive to keep them!!!

04/12/2023 52

. . . Gilt share of slaughter mix surged in April ?



Bigger hogs is a long-term trend, recent increase

04/12/2023 53

. . is unusual -- but so were the steady wts. of ‘07-’08, ‘12



Cutout and hog values have likely TOPPED . . .

Year-ago prices were too low — Russia, China Summer highs were originally expected at

$105-$110 I’m still at $120-$125 given PEDv losses

04/12/2023 54

. . . Peaks at $130+ were too high – time rationing?



Slaughter forecasts – per March Hog & Pigs

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Mil. Hd % Chnge Mil. Hd % Chnge Mil. Hd % Chnge Mil. Hd % Chnge

2013 Q1 27.870 -0.8%

Q2 26.778 0.4%

Q3 27.668 -1.1%

Q4 29.808 0.8%

Year 112.124 -1.0%

2014 Q1 27.134 -2.6% 27.134 27.134 -2.6% 27.134 -2.6%

Q2 25.420 -5.1% 25.787 -3.7% 25.572 -4.5% 25.020 -6.6%

Q3 26.147 -5.5% 26.423 -4.5% 26.285 -5.0% 24.980 -9.7%

Q4 28.817 -3.3% 29.540 -0.9% 29.952 0.5% 28.300 -5.1%

Year 107.545 -4.1% 108.884 -2.9% 109.023 -2.8% 105.434 -6.0%

2015 Q1 27.921 2.9% 27.934 2.9% 26.800 -1.2%Green figures are actual data from USDA. . Blue figures are estimated using USDA data 4/28/14

March 2014 Hogs & Pigs -- Commercial Slaughter ForecastsMizzou ISU LMIC Paragon



My weekly slaughter forecasts for 2014 . . .

04/12/2023 56



Actual, USDA and Paragon only . . .

04/12/2023 57



Price forecasts for March Hogs & Pigs . . .

04/12/2023 58

Mizzou ISU LMIC Paragon CME

Producer-Sold Net Price, All

Methods

Ia-Mn Wtd. Avg. Base Lean Hog

National Wtd Avg. Base Price

National Net Neg'd Price,

Wtd. Avg.

CME Lean Hog Futures

2013 Q1 83.53 80.83 81.08 82.73 83.34**Q2 91.80 88.06 89.32 90.83 90.66**Q3 97.90 94.34 95.25 98.00 98.98**Q4 84.99 82.57 82.98 85.26 83.93**Year 89.56 86.45 87.16 89.21 89.23**

2014 Q1 93.10 91 - 92 92.44 90.28**Q2 115 - 125 122 - 128 120 - 125 108 - 112 116.88Q3 111 - 121 110 - 118 120 - 127 116 - 120 123.61Q4 90 - 100 90 - 95 86 - 95 94 - 98 100.61Year 102 - 110 104 - 110 102 - 106 113.70

2015 Q1 81 - 91 84 - 95 95 - 98 89.85Green figures are actual data from USDA. Blue figures are estimated using USDA data **CME Lean Hog Index 6/3/14

March 2014 Hogs & Pigs -- Price Forecasts



Closing thoughts . . .

PEDv is not just a short-term hit- No proven effective vaccine in sight- What about NEXT winter?- When does the industry decide it is

endemic and build production capacity to overcome it?

- What happens when a solution is then found?

Beef per cap supply/consumption will be permanently smaller

Chicken output/consumption could make another quantum leap

04/12/2023 59



Questions or Comments?

04/12/2023 60

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