Ron Plain, Ph.D. Professor of Agricultural Economics University of Missouri-Columbia
description
Transcript of Ron Plain, Ph.D. Professor of Agricultural Economics University of Missouri-Columbia
Ron Plain, Ph.D.Professor of Agricultural EconomicsUniversity of Missouri-Columbiawww.ssu.missouri.edu/faculty/RPlain
Hog Market Forecast
2004 Iowa Pork Congress
0
10
20
30
40
50
60
70
80
90
Million Metric Tons
1997 1998 1999 2000 2001 2002
World Meat Consumption
Pork Poultry Beef
U.S. Per Capita Meat ConsumptionRetail Weight, 1960-2003
170
180
190
200
210
220
230
24060 63 66 69 72 75 78 81 84 87 90 93 96 99 '02
Poun
ds
U.S. Per Capita Meat ConsumptionRetail Weight, 1960-2003
0
20
40
60
80
100
12060 63 66 69 72 75 78 81 84 87 90 93 96 99 '02
Poun
ds
Beef Pork Broilers Turkey Fish
Compared to 1960
• Today, the average American annually consumes 59 pounds more meat, 57 pounds of which is chicken.
One Cow in Alberta
On May 20, Canada announced they had found a cow in Alberta with BSE. Most
countries immediately stopped importing Canadian cattle and beef.
9% of the beef Americans ate in 2002 came from cattle born in Canada
2003-04 Beef Production
-25
-20
-15
-10
-5
0
5
10
Percent Change
CHOICE SLAUGHTER STEER PRICESSouthern Plains, Weekly
60
65
70
75
80
85
90
95
100
105
110
JAN
APRJU
LO
CT
$ Per Cwt.
Avg. 1995-99 2001 2002 2003
One Cow in Washington
On December 23, USDA announced they had found a cow in Washington with BSE.
Most countries immediately stopped importing U.S. cattle and beef.
9% of U.S. beef production in 2002 was exported
Retail Price of Choice Beef
275
295
315
335
355
375
395
415
435
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Cen
ts P
er P
oun
d
Avg 90-99 2000 2001 2002 2003
April 2000 was record high
Retail Price of Pork
240245250255260265270275280
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Cen
ts Pe
r Pou
nd
2000 2001 2002 2003
February 2000 was record high
Pork: Farm-Wholesale Price Spread
25
30
35
40
45
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Cen
ts /
Ret
ail P
ound
2000 2001 2002 2003
Pork: Wholesale-Retail Price Spread
110
120
130
140
150
160
170
180
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Cen
ts /
Ret
ail P
ound
Avg 96-99 2000 2001 2002 2003
U.S. Pork Production, 1930-2002
02,000
4,0006,000
8,00010,000
12,00014,000
16,00018,000
20,00030 34 38 42 46 50 54 58 62 66 70 74 78 82 86 90 94 98 '02
Mill
ion
Poun
ds
Trend: +1.5%/year
Pork Production & Profitability
• In those years after 1964 when pork production was below the 1.5% trend, Iowa hog producers averaged a profit of $14.99 per hog sold.
• In those years after 1964 when pork production was above the 1.5% trend, Iowa hog producers averaged a net loss of $0.22 per hog sold.
Iowa Farrow to Finish Profits, 1965-2003Iowa State University Calculations
-30
-20
-10
0
10
20
30
4065 68 71 74 77 80 83 86 89 92 95 98 '01
Dol
lars
Per
Hea
d
Source: John Lawrence, Iowa State University
Iowa Farrow to Finish Profits
• 1967-78 $15.61 per hog sold
Source: John Lawrence, Iowa State University
Iowa Farrow to Finish Profits
• 1967-78 $15.61 per hog sold
• 1979-90 $ 9.57 per hog sold
Source: John Lawrence, Iowa State University
Iowa Farrow to Finish Profits
• 1967-78 $15.61 per hog sold
• 1979-90 $ 9.57 per hog sold
• 1991-02 -$ 0.04 per hog sold
Source: John Lawrence, Iowa State University
Iowa Farrow to Finish Profits, 1994-2003Iowa State University Calculations
-70
-50
-30
-10
10
30
5019
94
1995
1996
1997
1998
1999
2000
2001
2002
2003
Dol
lars
Per
Hea
d
Source: John Lawrence, Iowa State University
The typical U.S. producer has lost money 22 of last 26 months
Correlation of Daily Hog Slaughter & Lagged Profit
-25
-20
-15
-10
-5
0
5
10
15
20
2583
-1
84-1
85-1
86-1
87-1
88-1
89-1
90-1
91-1
92-1
93-1
94-1
95-1
96-1
97-1
98-1
99-1
00-1
01-
1
02-
1
03-
1
04-
1
05-
1
-60
-40
-20
0
20
40
60
%ChDaHogSlt Profit Lag 5Q
U.S. Pork Industry Structure Study, 2001
U.S. Marketings by Producer Size
Hogs marketed annually 1988 1991 1994 1997 2000
Under 1,000 32% 23% 17% 5% 2%
1,000-1,999 19 20 17 12 7
2,000-2,999 11 13 12 10 5
3,000-4,999 10 12 12 10 7
5,000-9,999 9 10 12 10 10
10,000-49,999 12 13 13 16 18
50,000 & up 7 9 17 37 51
University of Missouri, Iowa State University, National Pork Board, Pork magazine, PIC, Land O’Lakes, Dekalb Choice Genetics, and Research Institute for Livestock Pricing
U.S. Pork Industry Structure Study, 2001
University of Missouri, Iowa State University, National Pork Board, Pork magazine, PIC, Land O’Lakes, Dekalb Choice Genetics, and Research Institute for Livestock Pricing.
95
90
77
78
79
77
65
0 10 20 30 40 50 60 70 80 90 100
500,000+
50 - 500,000
10 - 50,000
5 - 10,000
3 - 5,000
2 - 3,000
1 - 2,000
Size Class(no. head)
Percent
Percent of Farms with a Profit in 2000
Changes in industry structure
The modern hog industry is more difficult to downsize than the traditional industry
January-December 02 Hog PricesCarcass Price
• Negotiated base price $45.54/cwt• Average net price $49.70/cwt
Source: USDA/AMS Prior Day Slaughter Reports, simple average
January-December 2003 Hog PricesCarcass Price
• Negotiated base price $52.00/cwt• Average net price
$55.21/cwt
Percent of Hogs Sold on the Spot Market
62
4336
26
17 15 13
0
10
20
30
40
50
60
70
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Barrow & Gilt Sales % of marketings
20022003
• Negotiated hogs 14.66 13.28
• S/P Market formula 43.39 39.15
• Other market formula 9.27 7.63
• Other purchase agreement 13.01 19.01
• Packer sold 2.24 2.11
• Packer owned 17.42 18.82Source: USDA/AMS Prior Day Slaughter Reports
National Net Hog PricesUS$ per 100 pounds of carcass weight
• 2002 2003
• Negotiated hogs $47.02 $53.52
• S/P market formula $48.71 $54.65
• Other market formula $51.32 $56.04
• Other purchase agreement $54.87 $57.20
• Packer sold $51.02 $57.40
Source: USDA/AMS Prior Day Slaughter Reports, simple average
Prior Day Base Price for Negotiated Purchases
• 2002 2003• National report $45.04 $51.82• ECB report $44.59 $51.54• WCB report $45.34 $51.95• Iowa-Minn report $45.29 $51.85
– ECB/national premium -$0.45 -$0.28– WCB/national premium $0.30 $0.13– I-M/national premium $0.25 $0.03
Source: USDA/AMS Prior Day Purchased Reports
January-December 03 Hog PricesNational Base Price for Negotiated Purchases
• Morning report $51.39/cwt
• Afternoon report $51.69/cwt
• Prior day report $51.82/cwt– Afternoon/morning premium $0.30– Prior day/morning premium $0.43
Source: USDA/AMS Hog Price Reports
Share of Reported Negotiated Hogs
0
10
20
30
40
50
60
70
80
90
100 J
an 0
2
Mar
May Ju
l
Sep
Nov
Jan
03
Mar
May Ju
l
Sep
Nov
Per
cent
AM Report PM Report
Source: USDA/AMS National Hog Price Reports
Mandatory Price Reports
• The law creating the USDA/AMS mandatory cattle-beef-hog price reports expires in October 2004.
The Hog Cycle
U.S. Commercial Hog SlaughterQuarterly Data, 1970-2003
-30
-20
-10
0
10
20
3070 72 74 76 78 80 82 84 86 88 90 92 94 96 98 '00
'02
Per
cent
Cha
nge
Fro
m Y
ear
Ago
U.S. pork production is becoming more predictable
Terminal Market Barrow & Gilt PriceQuarterly Data 1970-2003
-60
-40
-20
0
20
40
60
8070 72 74 76 78 80 82 84 86 88 90 92 94 96 98 0 2 3
Per
cent
Cha
nge
Fro
m Y
ear
Ago
But, U.S. hog prices are still highly variable
ELASTICITY
• The fundamental relationship between hog production and hog price is changing.
Hog Price FlexibilityQuarterly Data 1970-2003
-25
-20
-15
-10
-5
0
5
10
1570 72 74 76 78 80 82 84 86 88 90 92 94 96 98 '00
'02
% ch T Mkt B&G price / % ch com hog slt
In the last 6 years live hog prices have stayed between $8/cwt and $68/cwt…
and there is a good chance they will trade within this same range most of the time in the next 6 years
Seasonality
Avg U.S. Daily Pork Production, 1990-99
60
62
64
66
68
70
72
74
76
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Million Pounds
U.S. Monthly Average Hog Price, 1990-99
36
38
40
42
44
46
48
50
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
$/cwt
July-November Changes
• Daily Pork Production• 1970s +30%
• Barrow & Gilt Prices• 1970s -11%
July-November Changes
• Daily Pork Production• 1970s +30%• 1980s +24%
• Barrow & Gilt Prices• 1970s -11%• 1980s -13%
July-November Changes
• Daily Pork Production• 1970s +30%• 1980s +24%• 1990s +20%
• Barrow & Gilt Prices• 1970s -11%• 1980s -13%• 1990s -20%
Production Efficiency
Pigs Per Litter, 1930-2002USDA Hogs & Pigs Reports
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.019
30
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
Hea
d
Pigs Per Litter, By Herd Size, 1996-2003
USDA Hogs & Pigs Reports
8.58.68.78.88.99.09.19.2SO
N96
SO
N97
SO
N98
SO
N99
SO
N00
SO
N01
SO
N02
SO
N03
Hea
d
5000+ Avg
Litters Per Sow Per Year, 1930-2002
1.0
1.2
1.4
1.6
1.8
2.0
2.219
30
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
Litt
ers
Average Hot Carcass Weight, 1965-2002
140
150
160
170
180
190
20019
65
1970
1975
1980
1985
1990
1995
2000
Poun
ds
Annual U.S. Pork Production Per Sow, 1960-2002
1,200
1,700
2,200
2,700
3,200
3,7001960
1965
1970
1975
1980
1985
1990
1995
2000
Pou
nds
Rate of Productivity Growth is Increasing
+4% per year
Sow & Gilt Inventory, 1996-03
0
1000
2000
3000
4000
5000
6000
7000
8000 J
an96
Oct
96
Jul
97
Apr
98
Jan
99
Oct
99
Jul
00
Apr
01
Jan
02
Oct
02
Jul
03
Thousands
Canada U.S.A.
Sow & Gilt Inventory, 1996-03
0
1000
2000
3000
4000
5000
6000
7000
8000
9000 J
an96
Jul-
96
Jan
-97
Jul-
97
Jan
-98
Jul-
98
Jan
-99
Jul-
99
Jan
-00
Jul-
00
Jan
01
Ju
l01
Jan
02
Ju
l02
Jan
03
Ju
l03
Thousands
Canada U.S.A.
Pigs Born in Canada, 1996-03
5000
5500
6000
6500
7000
7500
8000
8500
9000JF
M96
JAS9
6
JFM
97
JAS9
7
JFM
98
JAS9
8
JFM
99
JAS9
9
JFM
00
JAS0
0
JFM
01
JAS0
1
JFM
02
JAS0
2
JFM
03
JAS0
3
Thousands
Canadian Hog Production, 1976-02
0
5
10
15
20
25
30
35
76 78 80 82 84 86 88 90 92 94 96 98 '00
'02
Percent of U.S.
Terminal Market Barrow & Gilt Prices, 1950-2003
10
20
30
40
50
6019
5019
5319
5619
5919
6219
6519
6819
7119
7419
7719
8019
8319
8619
8919
9219
9519
9820
01
Dol
lars
Per
Hun
dred
wei
ght
Deflated Barrow & Gilt Prices, 1950-2003
0
5
10
15
20
25
30
35
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
1967
$ P
er H
undr
edw
eigh
t
Cost of Production
OMAHA CORN PRICESWeekly
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00$ Per Bu.
Avg.1995-99
2000
2001
2002
2003
2004
Cost of Slaughter Hog ProductionIowa State University Calculations, 1987-2003
37
3941
43
4547
49
5153
5519
87
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Marketing Month
Dol
lars
Per
Liv
e H
undr
edw
eigh
t
Barrow & Gilt Dressed WeightsWeekly F.I. Hog Slaughter
186
188
190
192
194
196
198
200
Pounds
2000 2001 20022003 2004
International Trade
World Pork Trade
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Million Metric Tons
Source: USDA/FAS
Top Pork Exporting Countries-2002
0
200
400
600
800
1000
1200
1400
Thousand Metric Tons
Source: USDA/FAS
Taiwan Pork Exports
283
331
70
3 0 0 0
381 388
0
50
100
150
200
250
300
350
400
450
1993 1994 1995 1996 1997 1998 1999 2000 2001
Thousand Metric Tons
Taiwan broke with FMD in March 1997
Source: USDA/FAS
Vulnerable Pork Exporters
Country
2002 Exports 1000 m tons
Exports as % production
Canada 863 46.8%
Hungary 125 26.0%
Brazil 590 23.0%
U.S.A. 731 8.2%
E.U. 1194 6.7%
Poland 93 5.7%
Source: USDA/FAS
Top Pork Importing Countries-2002
0
200
400
600
800
1000
1200
1400
Thousand Metric Tons
Source: USDA/FAS
Top 12 Pork Producing Countries - 2002 Thousand Metric Tons
1. China 43,266 7. Russia 1,6302. E.U. 17,825 8. Japan 1,2363. U.S.A 8,929 9. S. Korea 1,1534. Brazil 2,565 10. Philippines 1,0955. Canada 1,854 11. Mexico 1,0856. Poland 1,640 12. Taiwan 900
Source: USDA/FAS
Top 12 Pork Producing Countries - 2002 Percent Change from 1997
1. China 20.3% 7. Russia 3.8%2. E.U. 12.1% 8. Japan -3.7%3. U.S.A 14.0% 9. Mexico 15.4%4. Brazil 66.6% 10. Philippines 21.5%5. Canada 46.8% 11. S. Korea 32.1%6. Poland 6.5% 12. Taiwan -12.6%
Source: USDA/FAS
World 16.2%
Pigs Per Breeding Animal, 1996-03
12
13
14
15
16
17
18
19
20Q
1 96
Q3
96
Q1
97
Q3
97
Q1
98
Q3
98
Q1
99
Q3
99
Q1
00
Q3
00
Q1
01
Q3
01
Q1
02
Q3
02
Q1
03
Q3
03
Canada U.S.A.
U.S. Pork Exports
0
100
200
300
400
500
600
700
800
Thousand Metric Tons
2002 was the 11th consecutive record year for U.S. exports
U.S. Pork Imports & Exports, 1998-2003
Monthly Carcass Weight Equivalent
020406080
100120140160180
Jan-
98
Jan-
99
Jan-
00
Jan
-01
Jan
-02
Jan
-03
Mill
ion
Poun
ds
Imports Exports
U.S. Pork Exports By Destination 2002
Japan 48.1%
Mexico 19.4%
Canada 11.8%
S.Korea 4.4%
Russia 2.6%
Others 13.7%
U.S. Pork Imports By Origin 2002
Canada 82.2%
Denmark 11.5%
Poland 2.3%
Others 4.0%
U.S. Pork Exports, Jan-Nov 03
• Country % Ch Yr Ago
• Japan + 4.0%
• Mexico + 6.7%
• Canada - 0.4%
• S. Korea + 16.8%
• Total + 6.3%
U.S. Hog Imports & Exports
0
1
2
3
4
5
6
719
80
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
Mill
ion
Hea
d
Imports Exports
U.S. Hog Imports from Canada
050,000
100,000150,000200,000250,000300,000350,000400,000450,000500,000
1997
1998
1999
2000
2001
2002
2003
Head Per Month
Slaughter Hogs
Feeders Pigs
Exchange Rate: Can $ Per US $
1.10
1.20
1.30
1.40
1.50
1.60
1.70Q
1 91
Q1
94
Q1
97
Q1
00
Q1
03
Sows Farrowed-U.S. & Canada Combined
-4
-3
-2
-1
0
1
2
3
4
5JF
M99
AM
J99
JAS9
9
ON
D99
JFM
00
AM
J00
JAS0
0
ON
D00
JFM
01
AM
J01
JAS0
1
ON
D01
JFM
02
AM
J02
JAS0
2
ON
D02
JFM
03
AM
J03
JAS0
3
ON
D03
Per
cent
Cha
nge
Fro
m Y
ear
Ago
Estimated Gilt Retention & Sow Loss, 2001-2003GG Cattle & Hog Fax
0
20
40
60
80
100
120Ja
n Fe Ma
Ap
Ma
Jun
Jul
Au
Sep
Oct No
De
Jan Fe Ma
Ap
Ma
Jun
Jul
Au
Sep
Oct No
De
Jan Fe Ma
Ap
Ma
Jun
Jul
Au
Sep
Oct No
De
Tho
usan
d H
ead
Per
Wee
k
Gilts RetainedSow Loss
Average Daily Sow Slaughter
10.5
11.0
11.5
12.0
12.5
13.0
13.5
14.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Thou
sand
Hea
d
2000 2001 2002 2003
Sow & Boar Imports
0
20
40
60
80
100
120
140
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Thou
sand
Hea
d
2000 2001 2002 2003
Average Daily Slaughter Domestic Sows
8
8
9
9
10
10
11
11
12
12
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Thou
sand
Hea
d
2000 2001 2002 2003
USDA Dec Hogs and Pigs Report All Hogs & Pigs 101 Kept for Breeding 99 Kept for Marketing 101 Under 60 lbs 102 60-119 lbs. 102 120-179 lbs. 100 180 lbs. and over 101 Mar-May Farrowings 99 Jun-Aug Farrowings 98 Sep-Nov Farrowings 102 Dec-Feb Farrowing Intentions 101 Mar-May Farrowing Intentions 99
Actual & Predicted Change in Hog SlaughterU.S. Weekly F.I. Hog Slaughter, 2003-04
-8
-6
-4
-2
0
2
4
6
8
10
12Ja
n
Feb
Mar
Ap
r
May
Jun
Jul
Au
g
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Per
cent
Cha
nge
Fro
m Y
ear
Ago
Actual USDA Dec Forecast
Actual & Predicted Change in Hog SlaughterU.S. Weekly F.I. Hog Slaughter, 2003-04
-8
-6
-4
-2
0
2
4
6
8
10
12Ja
n
Feb
Mar
Apr
May Jun
Jul
Aug Sep
Oct
Nov
Dec Jan
Feb
Mar
Per
cent
Cha
nge
Fro
m Y
ear
Ago Actual USDA Dec Forecast U.S. Raised
Cold Storage Stocks – 12/31/03Percent Change From Year Ago
• Pork: up 0.5%
• Beef: down 24.5%
• Chicken: down 20.7%
• Turkey: down 13.0%
Terminal Market Barrow & Gilt Price
25
30
35
40
45
50
55
60
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
$/cw
t
Avg 90s 2001 2002 2003
BASE SLAUGHTER HOG PRICESNational, Weighted Average Carcass Price, Weekly
35
40
45
50
55
60
65
70
75$ Per cwt
2001
2002
2003
U.S. Weekly F.I. Hog Slaughter
1400
1500
1600
1700
1800
1900
2000
2100
2200
2300
Jan
Feb
Mar
Apr Ma
Jun
Jul
Aug Sep
Oct
Nov
Dec
Tho
usan
d H
ead
2002 2003
U.S. Weekly F.I. Hog Slaughter
1400
1500
1600
1700
1800
1900
2000
2100
2200
2300Ja
n
Feb
Mar
Ap
r
Ma
Jun
Jul
Au
g
Sep
Oct
Nov
Dec
Tho
usan
d H
ead
1998 2003
U.S. Weekly F.I. Hog Slaughter
1400
1500
1600
1700
1800
1900
2000
2100
2200
2300Ja
n
Feb
Mar
Ap
r
Ma
Jun
Jul
Au
g
Sep
Oct
Nov
Dec
Tho
usan
d H
ead
1999 2003 2004
Forecast: Slaughter Up in 2004
Thousand Head2002 2003 2004 02 to '03 03 to 04
actual forecast forecast
Q1 24148 24620 25400 1.95% 3.17%
Q2 24280 23890 24400 -1.61% 2.13%
Q3 25120 24698 25200 -1.68% 2.03%
Q4 26715 27569 27300 3.20% -0.98%
Year 100263 100777 102300 0.51% 1.51%
U.S. Commercial Hog Slaughter% Change
Note: Q1 04 has 1 extra slaughter day Note: Q4 04 has 1 less slaughter day
Iowa-Minn Live Hog Price ForecastNegotiated Base Price Per Live Hundredweight
2003• Q1* $34.19• Q2* $41.80• Q3* $41.40• Q4* $36.89
• Year* $38.57
2004• Q1 $36-39• Q2 $39-42• Q3 $38-41• Q4 $32-35
• Year $36-39
*actual price – prior day purchased
Iowa-Minn Carcass Price ForecastNegotiated Base Price Per Carcass Hundredweight
2003• Q1* $46.20• Q2* $56.48• Q3* $55.95• Q4* $49.85
• Year* $52.12
2004• Q1 $49-52• Q2 $53-56• Q3 $51-54• Q4 $45-48
• Year $49-54
*actual price – prior day purchased
Summary of the Good News
Pork exports are strong
Domestic meat demand is up
Adequate slaughter capacity
Survival
It is not the strongest of a species that will survive, nor the most intelligent; but the most adaptable to change.
--Charles Darwin