Top Producer Seminar Chicago Hilton January 25, 2016

Transcription

1 Top Producer Seminar Chicago Hilton January 25, 2016 John Nalivka President, Sterling Marketing, Inc.

2 Companies that target their products at the circumstances in which customers find themselves rather than at the customers themselves, are those that can launch predictably successful products. The Innovators Solution Clayton M. Christensen Michael E. Raynor

3 Key points Red meat supply is increasing Consumer demand for red meat will relatively strong but consumers want food safety and quality assurances Packer / processors will look at strategies to balance capacity with supply Globalization and trade will become increasingly prominent Understanding and developing supply chain relationships will be increasingly important

4 Corn Price - Omaha- Council Bluffs Dollars per bushel Nov Sep Jun Apr-10 6-Jan Oct-95 4-Aug May-07 2-Mar-13 Week Ending 1/23/16

5 Crude Oil Price Cushing, OK Dollars per barrel /2/01 12/24/02 12/16/04 12/7/06 12/18/08 12/31/10 1/11/13 1/22/15 1/4/00 12/28/01 12/19/03 12/12/05 12/13/07 12/24/09 1/6/12 1/17/14 1/19/16

6 Dollar Index Trade Weighted Major Currencies 1973= % since June 1, /9/10 4/19/11 2/27/12 1/4/13 11/14/13 9/24/14 8/4/15 1/4/10 11/12/10 9/22/11 8/1/12 6/11/13 4/21/14 2/27/15 1/7/16 Source: Board of Governors, Federal Reserve

7 Regional Cattle Inventory - Share of U.S. Inventory January 1, 2015 WASHINGTON 2012 Drought OREGON CALIFORNIA NEVADA IDAHO ARIZONA UTAH MONTANA WYOMING COLORADO NEW MEXICO NORTH DAKOTA SOUTH DAKOTA NEBRASKA OKLAHOMA MINNESOTA IOWA Central Plains 20,830,000 KANSAS (0%) 24 % MISSOURI ARKANSAS WISCONSIN ILLINOIS MICHIGAN INDIANA KENTUCKY TENNESSEE OHIO WV VIRGINIA NORTH CAROLINA SOUTH CAROLINA NEW YORK PENN VT NH NEW JERSEY RI CONN DELAWARE MARYLAND MAINE MASS MISS ALABAMA GEORGIA TEXAS LOUISIANA FLORIDA

8 Regional Cattle Inventory - Share of U.S. Inventory January 1, 2015 WASHINGTON 2011 Drought OREGON CALIFORNIA NEVADA IDAHO ARIZONA UTAH MONTANA WYOMING COLORADO NEW MEXICO NORTH DAKOTA SOUTH DAKOTA NEBRASKA KANSAS So. Plains OKLAHOMA 19,150,000 (0%) 22% MINNESOTA IOWA MISSOURI ARKANSAS WISCONSIN ILLINOIS MISS MICHIGAN INDIANA KENTUCKY TENNESSEE ALABAMA OHIO GEORGIA WV VIRGINIA NORTH CAROLINA SOUTH CAROLINA NEW YORK PENN VT NH NEW JERSEY RI CONN DELAWARE MARYLAND MAINE MASS TEXAS LOUISIANA FLORIDA

9

10 Per Capita Red Meat & Poultry Consumption Pounds * 2016* Sterling Forecast Jan. 12, 2016

11 The Cattle Cycle Forage Availability Cattle Prices Herd Expansion Or Liquidation Expectations

12 U.S. cattle inventory Thousand head 115,000 January 1 Cattle Inventory mil. Revised mil. 105, mil. + 1% USDA Report 95,000 January 1 Cattle Inventory Sterling Forecasts 85,000 75, * 91.9 mil. +2.5% 2017* 93.4 mil. +2.0% 2018* 94.5 mil. -1.0% * * Sterling Forecast July 2016

13 Returns to Cow-Calf Producers Dollars per head * Sterling Marketing Jan. 12, 2016

14 Feeder Cattle Price Dollars per cwt Average 75 1/8/16 2/12/16 4/22/16 7/1/16 3/18/16 5/27/16 8/5/16 9/9/16 11/18/16 10/14/16 12/23/16

15 Feedlot Breakeven Price Dollars per cwt /6/90 12/12/92 10/24/98 9/4/04 11/18/95 9/29/01 Week Ending This is a problem! 8/11/07 7/17/10 6/22/13 5/28/16

16 Cattle Feeding Margins Dollars per head Ave /14/15 4/25/15 7/4/15 1/10/15 3/21/15 5/30/15 9/12/15 11/21/15 8/8/15 10/17/15 12/26/15

17 Feedlot Margin Dollars per head Average -600 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sterling Marketing Forecast Jan. 12, 2016

18 Feedlot Margin Dollars per head Average Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sterling Marketing Forecast Jan. 12, 2016

19 U.S. cow slaughter falls sharply. Thousand head 7,000 6,500 Total Cow Slaughter % 2015* - 4% % 6,000 5,500 5,000 4, * 2016* Sterling Forecast Jan. 12, 2016

20 U.S. Heifer Slaughter Thousand head Slaughter (Y1) Weights (Y2) Pounds Slaughter Ave % 700

21 U.S. Steer & Heifer Slaughter Thousand head 30,000 29,000 28,000 27,000 26,000 25,000 24,000 23,000 Slaughter Average Pounds , %

22 Wholesale Beef Price Dollars per cwt Ave /2/16 2/6/16 4/16/16 6/25/16 9/3/16 11/12/16 3/12/16 5/21/16 7/30/16 10/8/16 12/17/16 Beef Cutout Value, Adjusted for Beef Grade

23 Choice Steer Price Dollars per cwt Ave /9/16 2/13/16 4/23/16 7/2/16 3/19/16 5/28/16 8/6/16 9/10/16 11/19/16 10/15/16 12/24/16

24 Wholesale Beef Price Dollars per cwt Ave /14/15 4/25/15 7/4/15 1/10/15 3/21/15 5/30/15 9/12/15 11/21/15 8/8/15 10/17/15 12/26/15 Beef Cutout Value, Adjusted for Beef Grade

25 Beef Packer Operating Margins Dollars per head Ave /3/15 2/7/15 4/18/15 6/27/15 3/14/15 5/23/15 8/1/15 9/5/15 11/14/15 10/10/15 12/19/15

26 Beef Packer Margin Dollars per head Average -100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sterling Forecast Jan. 12, 2016

27 U.S. Commercial Cattle Slaughter Thousand Head 8, % 2015 * - 5% 2016 * + 3% 8,000 7,500 +4% +5% +4% 7, % 6,500 6,000 I II III IV Quarter Sterling Forecast Jan. 12, 2016

28 Combined Steer & Heifer Carcass Weights Pounds Ave /14/15 4/25/15 7/4/15 1/10/15 3/21/15 5/30/15 8/8/15 9/12/15 11/21/15 10/17/15 12/26/15

29 U.S. Commercial Beef Production Million pounds 7, % 2015 * - 2% 2016 * + 4% 6,500 +5% +5% 6,000 +5% +2% 5,500 5,000 I II III IV Quarter Sterling Forecast Jan. 12, 2016

30 Fed Cattle Slaughter Capacity & Utilization Thousand head 32,000 Capacity Steer & Heifer Slaughter * 30,000 28,000 26,000 24,000 Average Utilization % 2015* 83% 2016* 86% 22, * * Sterling Forecast 1/12/16

31 Fed Beef Packer Concentration Cargill Meat Solutions 19% 2016 Tyson 28% JBS SA 23% Other 18% National Beef Packing 12%

32 The Hog Cycle Corn & Hi Protein Feed Prices Lean Carcass Prices Herd Expansion Or Liquidation Expectations PED

33 Hogs & Pigs Inventory December 1 Thousand head 70,000 65,000 60,000 55,000 50,

34 Winter Pig Crop (Mar-May) Thousand head 30,000 +7% 28,000 26,000 24,000 22,000 20, PEDv

35 Hog Producer Margins Dollars per head /14/15 4/25/15 7/4/15 1/10/15 3/21/15 5/30/15 9/12/15 11/21/15 8/8/15 10/17/15 12/26/15

36 Commercial Market Hog Slaughter Thousand head 31,000 30,000 29, % 2015 * + 8% 2016 * + 1% +2% 28,000 27,000 26,000 25,000 +1% +1% +1% 24,000 23,000 22,000 I II III IV Quarter Sterling Forecast, Jan. 12, 2016

37 Market Hog Carcass Weights Pounds /14/15 4/25/15 7/4/15 1/10/15 3/21/15 5/30/15 8/8/15 9/12/15 11/21/15 10/17/15 12/26/15

38 U.S. Commercial Pork Production Million pounds % % 2016* + 2% % % +2% +2% I II III IV Quarter Sterling Forecast, Jan. 12, 2016

39 Lean Carcass Value Dollars per cwt Ave. 2/14/15 4/25/15 7/4/15 9/12/15 11/21/15 1/10/15 3/21/15 5/30/15 8/8/15 10/17/15 12/26/15

40 Pork Cutout Value Dollars per cwt /14/15 4/25/15 7/4/15 1/10/15 3/21/15 5/30/15 8/8/15 9/12/15 11/21/15 10/17/15 12/26/15

41 Pork Packer Operating Margins Dollars per head /14/15 4/25/15 7/4/15 1/10/15 3/21/15 5/30/15 8/8/15 9/12/15 11/21/15 10/17/15 12/26/15

42 Market Hog Slaughter Capacity & Utilization Thousand head Slaughter Capacity Hog Slaughter 120, , , , ,000 95,000 90,000 85,000 Average Utilization % % 2016* 98% Annual Slaughter Capacity = 116 million Daily Slaughter Capacity = 446,000

43 Pork Packer Concentration 2016 Tyson 19% Smithfield 28% JBS, SA 22% Other 22% Hormel 9%

44 U.S. Beef Exports Thousand pounds (carcass wt) 300, , , , , , , ,000 Beef Exports Year to Date Percent Change - 12% 2015* -12% 2016* +5% 100,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sterling Marketing Forecast Jan. 12, 2016

45 Top U.S. Beef Export Markets Jan - Nov 2015 Thousand pounds (carcass wt) 2014 (Y1) 2015 (Y1) Pct of Total (Y2) 700,000 25% 600,000 20% 500, ,000 82% of total 15% 300, , ,000 Japan - 19% Mexico - 17% Canada - 12% So Korea + 6% Hong Kong - 24% 10% 5% 0 Mexico So Korea Taiwan Japan Canada Hong Kong ND PHP Dom Rep Chile Italy UAE Bahamas Kuwait Egypt Vietnam Germany Indonesia China 0

46 World Beef Export Share U.S. 12% Brazil 19% Australia 19% Canada 4% Total World Beef Exports 10,003,000 Metric Tons India 21% Other 20% New Zealand 6%

47 U.S. Beef Imports Thousand pounds (carcass wt) 350, , , , , ,000 Beef Imports Year to Date Percent Change + 20% 2015* +14% 2016* -16% 50,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sterling Marketing Forecast Jan. 12, 2016

48 Top U.S. Beef Import Sources - Jan - Nov 2015 Thousand pounds (carcass wt) 2014 (Y1) 2015 (Y1) Pct of Total (Y2) 1,400,000 40% 1,200,000 1,000, , , , ,000 87% of total Australia + 25% New Zealand + 15% Canada + 5% Mexico + 29% 35% 30% 25% 20% 15% 10% 5% 0 New Zealand Australia Canada Mexico Brazil Uruguay Costa Rica Nicaragu a Ho nduras 0

49 U.S. Pork Exports Thousand pounds (carcass wt) 500, , , , ,000 Pork Exports Year to Date Percent Change + 1% 2015* + 2% 2016* + 4% 250,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

50 Top U.S. Pork Export Markets Jan Nov 2015 Thousand pounds 2014 (Y1) 2015 (Y1) Pct of Total (Y2) 1,600,000 35% 1,400,000 1,200,000 1,000, , , , ,000 76% of total Mexico + 13% Japan - 2% Canada - 3% So. Korea + 32% 30% 25% 20% 15% 10% 5% 0 Japan So Korea Mexico Canada China Aus Hong Kong Dom Rep Colombia Philippines Hon Chile Guatem China Panama NZ Singapore Bahamas 0

51 World Pork Export Share U.S. 32% E.U. 32% Total World Pork Exports 6,887,000 Metric Tons 7% China 4% Canada 18% Brazil 8%

52 U.S. Pork Imports Thousand pounds (carcass wt) 110, ,000 70,000 50,000 Pork Imports Year to Date Percent Change + 12% 2015* + 10% 2016* - 10% 30,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

53 Top U.S. Pork Import Sources Jan - Nov 2015 Thousand pounds 2014 (Y1) 2015 (Y1) Pct of Total (Y2) 800,000 80% 700,000 70% 600, , , ,000 90% of total Canada + 12% Poland + 18% Demark - 8% 60% 50% 40% 30% 200,000 20% 100,000 10% 0 0 Canada Poland Denmark Mexico Italy Ireland

54 Trans-Pacific Partnership Key Elements of the Agreement Pertaining to U.S. Beef and Pork Industries The detail in the agreement is not currently available but these are key point concerning the U.S. beef and pork industries. Sharply reduces and eliminates tariffs on U.S. beef sold into TPP countries. New and commercially meaningful market access through significant tariff reductions or preferential tariff rate quotas. Elimination of export subsidies. Discourages export restrictions as a means to prop up domestic market. Ensures food safety, animal health, and plant health measures are developed and implemented transparently and in a science-based manner based on risk, as we do in the United States.

55 Supply Chain Relationships Environment Demand Best Practices Producer Consumer Legislation Animal Welfare Processor Global Markets FOOD SAFETY

56 Changing Consumer Demand Trends or Fads? Natural Organic Buy local Sustainable Production

57

58 The Basics of Calf Value Health Value Carcass Growth

59 ONCE THE PACKAGE IS OFF, QUALITY & CONSISTENCY ARE WHAT DIFFERENTIATES THE PRODUCT FROM OTHER GENERIC COMMODITY BEEF.

60 NATIONAL WEEKLY DIRECT SLAUGHTER CATTLE-PREMIUMS AND DISCOUNTS For the Week of: 01/18/2016 Value Adjustments Quality Range Simple Avg. Prime Choice Select (11.00)- (6.00) (7.00) Standard (56.00)- (10.00) (25.85) CAB Dairy - Type (10.00) (3.21) Bullock/Stag (55.00)- (15.00) (32.78) Hardbone (56.00)- (16.00) (34.17) Dark Cutter (56.40)- (20.00) (35.78) Over 30 Months of Age (40.00) (15.83)

61 ADDING VALUE REQUIRES ADDED INVESTMENT

62 It s all about