dr. steve meyer - livestock & poultry outlook
TRANSCRIPT
Steve R. Meyer, Ph.D.Vice-President, Pork AnalysisEMI Analytics
World Pork Expo -- 2016
Livestock & Poultry Outlook
Macro variables are a mixed bag . . .
Latest labor market numbers are SOFT (?)
- May employment grew by only 38,000 –October thru March averaged 239,000!
- Labor force is record large but participation rate is still under 63% -- near record low
- Unemployment rate dropped to 4.7%
Real personal disposable income is still growing – 2.5% YTD after 2.63% in ‘15
Median real household income, though, is down 7.2% from ‘98 peak, 6.5% vs. ‘07
Consumer attitudes have not improved . . .
3-species RPCE was down, yr/yr, again in April . .
. . . Reversion to the mean but still on uptrend
Beef, chicken still down in April, pork gained. . .
Pork uptrend is still intact as well – for now . . .
Nice yr/yr gain for pork share of RPCE in April . . .
. . . YTD ‘16 average is 25.7% vs. 28.8% in ‘15
‘15 was the year of a BIG jump in avail/cons . . . .
. . . growth in ‘16 will be smaller – ’17 ????
Prices INCREASED in March – not by much . . .
. . . but reflects continuing strong demand!
Pork still has a big advantage on beef at retail . . .
Broiler Hatchery Supply FlockUSDA, first of month, quarterly
49
50
51
52
53
54
55
56
57
58
59
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
mil
lio
n h
en
s
May 2016 forward forecast
Supply flock: +1.9% in ’15 but +0.5 & 0.6% next 2 yrs
US Broiler Average LiveweightUSDA, annual
3.8
4.0
4.2
4.4
4.6
4.8
5.0
5.2
5.4
5.6
5.8
6.0
6.2
6.4
1980 1984 1988 1992 1996 2000 2004 2008 2012 2016
po
un
ds
Apr 2016 forward forecast
Weight growth slowing to <1% this year . . .
US Broiler RTC ProductionAnnual
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
36
38
40
42
44
1980 1985 1990 1995 2000 2005 2010 2015
bil
lio
n p
ou
nd
s
Apr 2016 forward forecast
Output growth slowing: 2.6% to 1.1% to 0.6% in ‘17
Annual US Broiler Meat Exportsmillion pounds, paws excluded
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
mil
lio
n p
ou
nd
s
Apr 2016 forward forecast
Exports will rebound – but remain short of ‘14
US Broiler Per Capita Availabilityretail weight basis
57
59
61
63
65
67
69
71
73
75
77
79
81
83
85
87
89
91
93
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
po
un
ds p
er
cap
ita
Apr 2016 forward forecast
Small increase in PC supply in ‘16 – none in ’17 & ‘18
EMI Wogs
50
55
60
65
70
75
80
85
90
95
100
105
110
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
cen
ts p
er
po
un
d
65
70
75
80
85
90
cen
ts p
er
po
un
d
EMI Wog 2.5-4.0 lbs left axis, recently 6.4-7.5 mp/wk
EMI Wog, marinated right axis, recently 18.2-19.8 mp/wk
May 2016 forward forecast
Steady prices for whole birds . . .
EMI B/S Breast Meatmonthly wtd average wholesale price
90
100
110
120
130
140
150
160
170
180
190
200
210
220
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
cen
ts p
er
po
un
d
EMI B/S Breast, Small
EMI B/S Breast, Med
EMI B/S Breast, Jumbo
May 2016 forward forecast
Some growth for breast meat prices . . .
EMI Frozen Leg Quarters
10
15
20
25
30
35
40
45
50
55
60
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
cen
ts p
er
po
un
d
EMI Frozen LQ, regular
EMI Frozen LQ, jumbo
May 2016 forward forecast
And continued trouble for leg quarters . . .
Calculated Average Spot Market Returns IndexDeboning Tom Turkeys
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
40
45
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ind
ex
20
00
-20
02 B
as
e
EMI Analytics analysis of
USDA and industry data,
May 2016 forward forecast
--Cost structure is industry average cost & production mix
--Revenue calculations are wholesale spot market
--Results will not reflect individual firms, and are best used as a trend indicator
‘15 HPAI losses have made turkey PROFITABLE!
Quarterly Turkey Poult Placements
USDA
1%
-1%
-6%
-11%
-10%-10%
-7%
-3%
-6%
2%3%3%
4%
-2%
1%1%
5%5%
-2%
-1%
-7%
-12%
-5%
-7%
-3%
6%
3%4%
0%
-5%
-7%
-1%
2%
4%
7%
3%3%
1%
0%
-3%
-15%
-10%
-5%
0%
5%
10%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
% c
ha
ng
e
April 2016 forward forecast
Quite logical reaction: Higher output!
Total Turkey RTC Production
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
6,500
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016
mil
lio
n p
ou
nd
sUSDA, annual
April 2016 forward forecast
Total turkey output +4% in ‘16, +3.5% in ‘17 . . .
Monthly US Turkey Exports
30
35
40
45
50
55
60
65
70
75
80
85
90
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
millio
n p
ou
nd
s
2013 2014 2015 2016© EMI Analytics, All Rights Reserved
And exports have NOT RECOVERED AT ALL . . .
Whole Turkeys, FOB Basis,USDA
Monthly
60
70
80
90
100
110
120
130
140
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Cen
ts p
er
Po
un
d
USDA National Toms (16-24 lb), FOB Basis
USDA National Hens (8-16 lb), FOB Basis
May 2016 forward forecast
Some pressure on whole birds – more in ‘17 . . .
Turkey Tom Breast Meat,USDA
Monthly
100
150
200
250
300
350
400
450
500
550
600
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ce
nts
pe
r P
ou
nd
USDA Tom Breast Meat, frozen
USDA Tom Breast Meat, fresh
May 2016 forward forecast
BIG pressure on breast meat – impact on hams?
EMI Analytics
Beef and Pork Outlook
Steve R. Meyer, Ph.D.Vice President, Pork Analytics
Weather is still a key factor for beef . . .
. . . And conditions are great! – better even in CA!
Record low national poor/very poor ratings
Cow/calf profits: Tremendous incentive to grow!
Beef cow numbers are back above 30 million . . .
. . . After falling from 33 to 29 million!
And feeder cattle supplies have FINALLY increased
May COF: Higher numbers, sales & more current!
7.5%
1.1 – 7.1 in
April
1.3%7-5.3%
Fed slaughter has gained steadily on ’15 levels. . .
. . . Weights are at ‘15 levels – still BIG!!!
Higher slaughter & weights = higher output . . .
. . . We expect Q3 and Q4 to be +3.1 & +3.8%
Beef summary and prices . . .
Beef prod up ~4% in ‘16 – same in ‘17
Ch. cutout is holding near $220 – implies $138 with cash steers at $128 last week
- Cutout supported by middle meats
- Ribeyes retest March highs, Strip Loins retest spring ’15 highs near $9
- Round and chuck items supported by trim-mings – but well below last year’s levels
May placements expected to be +7-9%, marketings remain brisk – more current
HOGS & PORK
Higher corn, SBM – Costs up $4+ from April
. . . But still the lowest since 2010
‘17 still looks good in spite of cost increases . . .
. . . With ‘17 roughly breakeven at present
April exports were down but due to April ‘15! . . .
. . . We are now finished with goofy yr/yr comps.
ALL China/HK – up 95% yr/yr, YTD now +136% . . .
. . . ALL others down in April except Canada (+5%)
More of the same – GOOD! – for PEDv. . .
Data from 1022 sow farms, 25 of 28 large systems reporting, 2.578 mil. sows!
ZERO breaks wk of 5/27, EWMA now BELOW the epidemic threshold
Our outlook still contains NO PEDv ADJUSTMENTS
March H&P – The numbers were slightly bullish . . .
Inventories on March 1
All hogs and pigs 67,399 67,644 100.4 100.3 0.1
Kept for breeding 5,982 5,980 100.0 100.6 -0.6
Kept for marketing 61,418 61,664 100.4 100.3 0.1
Under 50 lbs. 19,454 19,382 99.6 100.7 -1.1
50-119 lbs. 17,129 17,263 100.8 100.1 0.7
120-179 lbs. 13,580 13,744 101.2 99.9 1.3
180 lbs. and over 11,255 11,274 100.2 100.2 0.0
Farrowings 0.0
Dec-Feb sows farrowed 2,895 2,873 99.2 98.3 0.9
Mar-May Intentions 2,854 2,839 99.5 100.1 -0.6
June-Aug Intentions 3,017 2,912 96.5 100.3 -3.8
Dec-Feb Pig Crop 29,627 29,582 99.8 100.1 -0.3
Dec-Feb pigs per litter 10.23 10.30 100.6 101.8 -1.2
*Thousand head ** Thousand Litters 1Source: Urner Barry
Category 2015 2016
'16 as
Pct of
'15
Pre-
Report
Est's1
Actual
minus
Est.
USDA QUARTERLY HOGS & PIGS REPORT
March 25, 2016
We still believe USDA missed the BH low . . .
. . . Profits, anecdotal evidence of expansion
And the state data raise serious questions . . .
March '15 Dec '15 Mar '16 March '15 Dec '15
Colorado 140 145 150 10 5
Illinois 490 490 500 10 10
Indiana 280 270 260 -20 -10
Iowa 1030 1030 980 -50 -50
Kansas 175 175 175 0 0
Michigan 110 110 110 0 0
Minnesota 570 560 560 -10 0
Missouri 400 395 385 -15 -10
Nebraska 420 420 420 0 0
North Carolina 890 870 880 -10 10
Ohio 180 190 185 5 -5
Oklahoma 440 470 480 40 10
Pennsylvania 100 100 110 10 10
South Dakota 165 175 190 25 15
Texas 100 105 110 10 5
Utah 75 75 75 0 0
Other States 417 422 410 -7 -12
United States 5982 6002 5980 -2 -22
STATE BREEDING HERD INVENTORIESChange versus:
USDA’s farrowing intentions are probably good . . .
. . . But USDA’s yr/yr changes are BAD – revisions
A more useful representation of farrowings . . .
2016 1.0% 1.940 11,702 11,499
2017 0.5% 1.935 11,701
2018 -1.0% 1.930 11,613
*Assume Sep-Nov farrowings are same as '15
Litter
Rate/Brdg
Annual
Farrowings
Brdg Herd
Growth
USDA
Report*
We still believe USDA’s Dec-Feb pigs/litter is low
. . . Green line = “normal”; we are splitting for now
Higher Canadian imports continue . . .
. . . Especially for feeder/weaner pigs post-MCOOL
Slaughter has been very close to our forecasts . . .
. . . Tight capacity this fall – much better in ‘17
Pork inventories are finally back to normal . . .
How much capacity growth and WHEN?
Daily Hd Ann Hd Daily Hd Ann Hd Daily Hd Ann Hd
Pleasant Hope, MO 2,500 625,000 2,500 625,000 2,500 625,000
Windom, MN 4,000 1,000,000 4,000 1,000,000 4,000 1,000,000
Sioux City,IA 12,000 3,000,000 12,000 3,000,000
Coldwater, MI 10,000 2,500,000 10,000 2,500,000
Prestage Plant* 10,000 2,500,000
Total 6,500 1,625,000 28,500 7,125,000 38,500 9,625,000
Head per week 31,250 137,019 185,096
Pct of '15 avg = 2.195 mil. 1.4% 6.2% 8.4%*Timing of this plant is in doubt. It may not be on line until 2019. 6/6/2016
Fall 2016 Fall 2017 Fall 2018
U.S PACKING CAPACITY UNDER CONSTRUCTION
Not much help for ‘16 – but big growth afterward
Slaughter forecasts from March report . . .
Mil. Hd % Chnge Mil. Hd % Chnge Mil. Hd % Chnge Mil. Hd % Chnge
2013 Year 112.124 -1.0%
2014 Q1 27.131 -2.6%
Q2 25.575 -4.5%
Q3 25.558 -7.6%
Q4 28.612 -4.0%
Year 106.876 -4.7%
2015 Q1 27.650 1.9% 27.398 1.0% 27.405 1.0% 28.723 5.9%
Q2 27.186 6.3% 27.358 7.0% 27.237 6.5% 27.848 8.9%
Q3 27.839 8.9% 27.779 8.7% 28.446 11.3% 28.474 11.4%
Q4 30.500 6.6% 30.400 6.2% 30.098 5.2% 30.369 6.7%
Year 113.176 5.9% 112.935 5.7% 113.186 5.9% 115.414 8.0%
2016 Q1** 29.240 1.8% 29.597 3.0% 28.860 0.5% 28.989 0.9%
Q2 27.971 0.4% 27.918 0.3% 27.870 0.1%
Q3 28.759 1.0% 28.749 1.0% 28.720 0.9%
Q4 30.648 0.9% 30.222 -0.5% 31.248 2.9%
Year* 116.618 1.5% 116.519 1.0% 116.827 1.2%
2017 Q1 29.099 0.4% 29.433 1.5% 29.830 2.9%
*Annual total uses actuals to-date plus forecasts for the rest of the year. ** 1 more day in qtr vs. yr. agoRed figures are analysts' last FORECAST for the given quarter (Q1 done in Dec, Q2 done in Mar, etc.)
Blue figures are estimated using USDA data 3/29/2016
ISU LMIC EMI ACTUAL
March 2016 Hogs & Pigs -- Commercial Slaughter Forecasts
Price forecasts – It appears exports will carry us!
. . . I added $3-$4 for both Q3 and Q4
ISU LMIC EMI CME
Ia-Mn
Producer-Sold
Neg'd Base
National Wtd
Avg. Base Price
National Net
Neg'd Price,
Wtd. Avg.
CME Lean Hog
Futures/Index
2014 Year 102.50 100.31 102.95 104.99
2015 Q1 64.35 68.67 66.03 68.59
Q2 71.59 73.56 73.22 74.36
Q3 73.43 74.60 74.92 74.64
Q4 58.95 61.91 59.80 62.77
Year 67.08 69.69 68.49 70.09
2016 Q1 60.20 62.18 59.84 62.85
Q2 72 - 76 73 - 75 72 - 74 75.30
Q3 73 - 77 73 - 76 77 - 81 83.81
Q4 62 - 66 62 - 66 60 - 64 68.03
Year 67 - 70 68 - 71 67 - 70 72.50
2017 Q1 61 - 65 61 - 66 58 - 62 68.23
Blue figures are estimated using USDA data 6/7/16
Green figures are revisions since the latest USDA Hogs and Pigs report.
March 2016 Hogs & Pigs -- Price Forecasts
Cuts: Recent strength has pushed cutout value
Risks
Negative: Major export disruption – small prob, HUGE impact
Neg. or Pos.: PEDv/HPAI – not likely now Positive: If PRRS/PEDv were worse? Negative: Slower demand growth
- Domestic: Prefs? Wages/incomes?- Exports: CHINA/HK, $US
Negative: Packing capacity crunch in Q4? Negative: Pork prices if plants are full in ‘18?