Market Outlook for

Meat and PoultryPaul Aho, PhD – Economist and Consultant, Poultry Perspective

Randy Blach – CEO, CattleFax

Steve R. Meyer, PhD – Economist, Kerns & Associates

Tuesday, March 3, 2020 8:00 AM – 9:45 AM

Poultry / Grain Outlook

Dr. Paul Aho - Poultry Perspective

Coronavirus

• Impacting Trade of all kinds

• Internal Chinese Supply Chain

China Per Capita Consumption in Pounds 2018 – Chicken is White Feathered

0

20

40

60

80

100

Meat 90 77 15 15

Pork Fish Beef Chicken

China –Chicken Imports % of Total World Trade

0

2

4

6

8

10

2018 2019 2020

White Feathered Chicken Production in China - Ready-to-Cook - Millions of Metric Tons

4

5

6

7

8

9

10

MMT 8.2 8.6 9.9 8.8 8.1 7.6 7.4 8.4 8.5

2012 2013 2014 2015 2016 2017 2018 2019 2020

Mexico and Cuba Biggest US Export Markets 2019

•Mexico is the #1 Buyer 1,500,000,000 Pounds / year

•21% of all exports•Next largest buyer – Cuba-

500,000,000 lbs.

Potential Increased Bottom Line Income from Sales to China – Without

Current Extra Duty of 30%

•$600 Million paws•$400 Million CLQ/drums/wing tips•Opportunity for Turkey and Turkey products•$1 Billion per year

Recent Trade Deals – Effect on US Poultry Exports

• China Market opened for chicken - extra duty affects CLQ, drums and wing tips

• US genetics still banned in China• Mexico deal continues good status quo• Don’t forget Japan, market now open with

low tariffs

10

Thigh Price 2018 -2019 Cents per Pound – USDA Northeast Price

25

35

45

55

65

75

85

95

Jan

Feb Mar

April

May Ju

nJu

lAug

Sept

Oct

Nov

Dec

2019

2018

Leg Quarter Price – 2019-2020Cents per Pound – USDA Northeast Price

20

24

28

32

36

40

44

48

52

Jan

Feb Mar

April

May Ju

nJu

lAug

Sept

Oct

Nov

Dec

2020

2019

Current Situation in the US

• Economic Growth, will it continue?

• Rise in Total Meat Availability

• Recently a lot more chicken

US Quarterly Broiler Production –Million Pounds – USDA

10250

10500

10750

11000

11250

11500

11750

12000

1st Q 2nd Q 3rd Q 4th Q

2020

2019

2018

Weekly Chick Placement - Millions 7 Weeks Forward – 2020 versus 2019

174

176

178

180

182

184

186

188

190

192

194

15-Feb 22-Feb 29-Feb 7-Mar 14-Mar 21-Mar

2020

2019

Large Increase in Meat Total Use 2018- 2020 - USDA

• Pork and Beef - 1.2 Billion pounds

• Poultry - 2.8 billion pounds

4 Billion pounds, Red Meat and Poultry

Smaller Increase in Meat Total Use 2020- 2022

• Beef and Pork 0.6 billion lbs.

• Poultry 1.4 billion lbs.

2 Billion pounds, Red Meat and Poultry

US Per Capita Consumption of Red Meat and Poultry lbs.

92

96

100

104

108

112

116

120

2007 2009 2011 2013 2015 2017 2019

Red Meat

Poultry

USDA to 2020

US Per Capita Meat Use in Pounds & Household Median Income

200

205

210

215

220

225

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

50000

52000

54000

56000

58000

60000

62000

64000

Total Meat Use

Median Income

Median income US Census to 2017 -Meat Use WASDE to 2018

Deboned Breast Price

• Long term decline due to increased efficiency of production

• 80% drop in price since 1986

Deboned Breast - Cents/lb2020 Dollars – USDA Northeast

0

100

200

300

400

500

1986 1990 1994 1998 2002 2006 2010 2014 2018

Deboned Breast – 2019-2020USDA – Northeast Price – Cents/lb

70

80

90

100

110

120

130

140

Jan Mar May Jul Sept Nov

2019

2020

Wing Price

• Robust Demand

• Low unemployment higher wages

• Prices similar to 2019

Whole Wing Prices – 2019-2020USDA-Northeast Price- Cents/lb

150

160

170

180

190

200

210

220

Jan Mar May Jul Sept Nov

2020

2019

Wholesale Price in Cents/lb

2010 2020 2030

Leg

Quarters

0.40 0.42 0.57

Deboned

Breast

1.55 1.00 1.00

Wings 1.23 1.90 1.75

Poultry Price Conclusion

• Deboned Breast lower than last year

• Wings High and Stable

• Leg Quarters rising

• Paws much more valuable this year

What would be the Catalyst for Higher Grain Prices?

•Significantly higher sales to China •Supply hiccup - drought

28

29

Chance of a Drought is 17% for any Given Year

The Same as Getting a “7” with dice

Corn Yield 1970-2019Bushels Per Acre – US – Drought Years in Red

50

75

100

125

150

175

200

1970

1974

1978

1982

1986

1990

1994

1998

2002

2006

2010

2014

2018

US Ending Stock of Corn Millions of Bushels

0

500

1000

1500

2000

2500

Bushels 821 1232 1731 1737 2293 2140 2114 1892 2300

2013 2014 2015 2016 2017 2018 2019 2020 2021

World Ending Stock of Corn MMT – USDA to 2020

200

225

250

275

300

325

350

375

MMT 337 350 341 320 298 310

2016 2017 2018 2019 2020 2021

China – Corn Imports –Millions of Metric Tons

0

2

4

6

8

10

2016-

2017

2017-

2018

2018-

2019

2019-

2020

2020-

2021

2021-

2022

Average US Farm Price of Corn$/Bushel USDA to 2019-2020

$2.00

$2.50

$3.00

$3.50

$4.00

2014-2015 2016-2017 2018-2019 2020-2021

US Ending Stock of Soybeans in Millions of Bushels – USDA to 2020

0

200

400

600

800

1000

MB 141 92 191 197 302 438 913 425 525

2013 2014 2015 2016 2017 2018 2019 2020 2021

World Ending Stock of Soybeans in Millions of Metric Tons

0

20

40

60

80

100

120

MMT 57 63 78 78 96 99 110 96 102

2013 2014 2015 2016 2017 2018 2019 2020 2021

China – Soybean Imports –Millions of Metric Tons

0

20

40

60

80

100

2001-

2002

2004-

2005

2007-

2008

2010-

2011

2013-

2014

2016-

2017

2019-

2020

Average US Crop year Price of SBM USDA to 2019-2020

$200

$250

$300

$350

$400

2014-2015 2016-2017 2018-2019 2020-2021

Grain Price Conclusion

•Corn heading lower

•Soybeans sideways

The King of Meats?

In Millions of Metric Tons - USDA

85

90

95

100

105

110

115

2017 2018 2019 2020 2021 2022

Chicken

Pork