Livestock Market Trends

Transcription

1 Livestock Market Trends Farm$mart Agricultural Conference January 18, 2014 John Bancroft Market Strategies Program Lead

2 Today s Discussion 2014 FCC Market Drivers (5) Other Items to Watch Cattle & Hog Price Market Trends Manage the Margin$

3 FCC Top Five Economic Drivers for 2014 Farmland market slowing down Crop prices retreating, may be less aggressive (Source: ) Past rates above rate of inflation and productivity gains Factors to consider are crop supply and value and long term interest rates Trade Comprehensive Economic Trade Agreement (CETA) Trans-Pacific Partnership (TPP) U.S. Country of Origin Labeling (COOL) Free Trade talks with South Korea

4 Expectation that 43% will be exported Value Up 8% 71% U.S. Source: Beef Supply at a Glance, January 4, 2014

5 79% beef imports from the U.S. Source: Beef Supply at a Glance, December 28, 2013

6 Canada Pork Exports & Imports 31% to U.S. Export Value down 1.6 % Imports down 1.5 % with 93% from U.S. Source: Hog Statistics at a Glance, January 4, 2014

7 21% of Production Exported 6,000 U.S. Pork Exports (millions of lbs) USDA Forecasts Jan ,000 4,000 3,000 2,000 1, Data Source: Monthly U.S. Livestock and Meat Trade Data,

8 FCC Top Five Economic Drivers for 2014 U.S. Economy Improves (Source: ) Remains divisive Consumer debt declining since 2008 Labour market showing some signs of improvement U.S. Dollar showing some strengthening Agricultural Equipment Sales Retreat 2006 to ,100 tractors/month 2001 to ,540 tractors/month Lower crop returns and Value of Canadian Dollar

9 FCC Top Five Economic Drivers for 2014 Strength in Red Meat Expectation of healthy returns over the next 2 years Declining versus Stabilized versus Growth (Source: ) Canadian red meat consumption stabilizing and growing meat demand in emerging markets Demand for Meat Consumer Tastes & Preferences Consumer Disposable Income Prices of Competing Meats General Economic Conditions (Domestic & Foreign)

10 Other Items to Watch in Crop 2013 crop size reduced the cost pressure Increased world crop production over time Weather Demand - Comfortable versus tight ending stocks

11 Moving from Tight Supply to Surplus $325 Avg. Huron Corn FOB Farm & Western Ontario Feed Corn ($/tonne) Actual Data Estimated $300 $275 $250 $225 $200 $175 $150 $ Data Source: Actual Data from Daily Ontario Commodity Report and Estimated Data based on basis adjusted closing futures *

12 Supply - Basis Corn Average Monthly Value ($/tonne) Average of Huron FOB Farm & Western Ontario Feed Corn Actual Estimated $280 $270 $260 $250 $240 $230 $220 $210 $200 $190 $180 $170 $160 $150 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

13 Supply - Basis $6.00 Corn -Weekly Average Huron FOB Farm ($/bu) Old Crop Corn ( ) New Crop Corn ( ) $5.75 $5.50 $5.25 $5.00 $4.75 $4.50 $4.25 $4.00 $3.75 $ O N D J F M A M J J A S O N D J F M A M J J A S Pre Plant Growing Season Harvest Storage Phase Data Source: Daily Ontario Commodity Report

14 Tight Supply Exports South America $700 Soybean Meal Weekly Avg. Prices (C$/tonne, Hamilton + $20) $650 $600 $550 $500 $450 $400 $350 $300 $

15 ? $640 Soybean Meal Values ($/tonne) Hamilton + $20/tonne Actual Estimated $620 $600 $580 $560 $540 $520 $500 $480 $460 $440 $420 $400 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

16 Impact on Feed Costs Grow-Finish Feed Cost ($/pig) $115 $110 $105 $100 $95 $90 $85 $80 $75 $70 $65 $60 $55 $50 $45 $40 Actual Estimated Based on Feed Costs used in Hog Finishing Margin Tracker

17 Other Items to Watch in 2014 Meat Demand U.S. pork consumption outpacing the sales of all meat products Spending more $ on meat even with per capita income remaining level Modest population growth and export growth Food safety and farm practice issues tend to impact the demand of middle income countries Data Source: Daily Livestock Report, January 16, 2014

18 in Oct. $5.41 in Nov. U.S. Pork and Beef Retail Average Yearly Price (US$/pound) Pork Beef $6.00 $5.00 $4.81 $4.99 $5.29 $4.33 $4.26 $4.38 $4.00 $3.00 $2.94 $2.92 $3.11 $3.43 $3.47 $3.64 $2.00 $1.00 $ Data Source: :

19 Other Items to Watch in 2014 Codes of Practice for the Care and Handling of Beef Cattle and Pigs in Canada National Farm Animal Care Council's Pig Code Development Committee finalized its updated Code of Practice for the Care and Handling of Pigs in Canada The document has now been submitted for editing Once the updated code has been edited and the final version approved by the committee it will need to be translated at which point it will be ready for public release. Committee expects it will be released by late winter or early spring Code of Practice for the Care and Handling of Beef Cattle has been posted

20 Other Items to Watch in 2014 Canadian Dollar Source: London Free Press, Jan. 11, 2014

21 Long Term Trend of Canadian Dollar Weekly Average Value of the Canadian Dollar ($US) $1.10 $1.05 $1.00 $0.95 $0.90 $0.85 $0.80 $0.75 $0.70 $0.65 Noon Hour Bank of Canada Rate CME Canadian Dollar Futures $0.60 *

22 Impact on Crop Basis $ $ $ $ $ $ $ $ $ $ $ Weekly Average Soybean Basis Basis Adjusted Basis Canadian Dollar O N D J F M A M J J A S O N D J F M A M J J A Growing Season Harvest Storage Phase Adjusted Basis = Local Soybean Price Exchange Rate - Soybean Futures $1.04 $1.02 $1.00 $0.98 $0.96 $0.94 $0.92 $0.90 $0.88 $0.86

23 Other Items to Watch in 2014 Source: Feb. 7, 2013

24 Stabilized? 6,000 Canada - Beef Cow Herd ('000 of Head) - January 1 Jan 1st July 1st 5,500 5,000 4,500 4,000 3,500 3, Data Source: Statistics Canada

25 Dramatic Reduction Stabilized? Trends in the Ontario Beef Cow Herd (1,000 of Head) - Jul. 1 Inventory on July 1, ,300 cows % - 20% + 7% % Data Source: Statistics Canada - Cattle Statistics, X

26 Slight Decline? Ontario - Beef Heifers - July 1 ('000 of Head) Replacement Slaughter Data Source: Statistics Canada

27 Level to Down 1,250 Trends in the Ontario Cattle on Feed (1,000 of Head) - July 1 Cattle on Feed = Heifers for Slaughter + Steers (+ 1 yr) + Calves (< 1 yr) 1,200 1,150 1,100 1,050 1, Data Source: Statistics Canada - Cattle Statistics, X

28 Will Cow Slaughter Slow? With little information available since the January 1, 2013 Cattle report, the state of replacement heifer retention is largely unknown ahead of the January 1, 2014 estimates. Heifers have constituted relatively large shares of feedlot placements and inventories in These high heifer proportions of cattle on feed, combined with the relatively large cow slaughter, will likely result in another year-over-year decline in total cow inventories on January 1, Source: December 2013, USDA Livestock, Dairy, and Poultry Outlook

29 Will Cow Slaughter Slow? Some heifers that had been placed on feed and destined for slaughter could be returned to the country as replacement heifers under the right conditions. As mentioned last month, the anticipated inventory dynamics would push any significant increases in beef production well into the future, likely into 2017 or beyond. Of course, weather especially drought-related could alter any projections. Source: December 2013, USDA Livestock, Dairy, and Poultry Outlook

30 U.S. Beef Production & Exports USDA Beef Production projection for 2014 is down 5.25 % Current USDA Forecast for 2014 Beef & Veal Trade Exports down 8% ; Imports Up 1.4%

31 Relatively level Surprises in Dec. # s U.S. Quarterly Sow Inventory (1,000 of Head) 7,200 7,000 6,800 6,918,000 6,233,000 6,600-14% 5,757,000 6,400 6,200 6,000 5,963, % - 6.8% 5,800 5, Data Source: USDA Hogs & Pigs Reports

32 Level 1,650 1,600 1,550 1,500 1,450 1,400 1,350 1,300 1,250 1,200 1,150 1,100 1,050 Canada - Sow Inventory ('000 of Head) 1,000 J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju Data Source: Hog Statistics, Statistics Canada

33 Level Ontario Sow Inventory ('000 of Head) 280 J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju J Ju Data Source: Hog Statistics, Statistics Canada

34 Productivity Ontario - Yearly Average Pigs Born per Sow Farrowed Data Source: Hog Statistics, Statistics Canada

35 Up 4 th Quarter up 5.7 pounds U.S. Barrow & Gilt Weekly Average Dressed Weight - (lbs.) Data Source:

36 4 th Quarter up 1.71 kilograms Ontario Average Yearly Dressed Weight (kg) Data Source: Ontario Pork Sales Data

37 Wild Card - PED Porcine Epidemic Diarrhea December USDA Hogs and Pigs Report Impact is showing up in pigs weaned/litter, inventories, and hog marketings 1 st half of 2014 down- even-up?

38 Market Price Trends I wish you d wear a hat in there. I ve been looking all over for you!

39 Calves $/cwt. $195 Ontario Weekly Avg. Prices - Large & Medium Frame Steers ( lbs.) Yr Avg ('11 to '13) $185 $175 $165 $155 $145 $135 $125 $115 $105 $ Data Source: OCA Market Information

40 Feeders $/cwt. $170 Ontario Weekly Avg. Prices - Large & Medium Frame Steers ( lbs.) Yr Avg ('11 to '13) $160 $150 $140 $130 $120 $110 $100 $90 $ Data Source: OCA Market Information

41 Market $/cwt. $140 Ontario Weekly Avg. Prices - Large & Medium Frame Steers (1250+lbs.) Year Avg. ('11 to '13) $135 $130 $125 $120 $115 $110 $105 $100 $95 $ Data Source: OCA Market Information

42 Long Term Cattle Price Picture $150 Ontario Weekly Avg. Prices - Large & Medium Frame Steers (1250+lbs.) $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 * - * Data Source: OCA Market Information

43 Up U.S. Early Weaned Pig - Cash Values (US$/pig) $95 $90 $85 $80 $75 $70 $65 $60 $55 $50 $45 $40 $35 $30 $25 $20 $15 $10 $ Year Avg. ('10 to '12) Data Source: National Direct Delivered Feeder Pig Report - NW_LS255

44 Up U.S. 40 Pound Feeder Pig - Cash Base Values (US$/pig) $ Year Avg. ('10 to '12) $90 $80 $70 $60 $50 $40 $30 $20 $ Data Source: National Direct Delivered Feeder Pig Report - NW_LS255

45 Long Term US Hog Prices $110 $105 $100 $95 $90 $85 $80 $75 $70 $65 $60 $55 $50 $45 $40 * Weekly Ontario U.S. Reference Price (U.S.$/cwt.) (U.S. CME Constructed Price) *

46 2014 US Hog Prices A Snapshot of 2014 U.S. Reference Hog Prices (US$/cwt) $ Actual Prices Estimated Prices Year Avg ('11 to '13) $105 $100 $95 $90 $85 $80 $75 $70 $65 $60 $55 $ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

47 Long Term Ontario Hog Prices $200 $190 Ontario 100% Formula Base Yearly Average Prices ($/ckg, 100 index) $ $ $180 $170 $160 $150 $140 $130 $120 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $110 $

48 2014 Ontario Weekly 100% Base Formula Price ($/ckg, 100 index) $ Year Average ('10 to '12) $190 $180 $170 $160 $150 $140 $130 $120 $110 $100 * * Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Base Formula Price =(U.S. Reference Price - $0.56) x 0.74 x CME Canadian Dollar Closing Value

49 2014 A Snapshot of 2014 Ontario Hog Prices (C$/ckg, 100 index) $ Actual Prices Estimated Prices Year Avg. Prices ('11 to '13) $210 $200 $190 $180 $170 $160 $150 $140 $130 $120 $110 $ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

50 Long Term Ontario Hog Prices $220 $210 $200 $190 $180 $170 $160 $150 $140 $130 $120 $110 $100 $90 $80 * Weekly Ontario Hog Price (C$/ckg, 100 index) (CME Constructed Price - $0.56) x 0.74 x x Exchange Rate ) *

51 Market Decision$ Challenge Use market information and intelligence to make informed decisions to achieve your goals! Which is greater the factors that could cause the markets to fall or the factors that could make the markets rise over the next few months Beware of market seasonality What is the potential impact on your risks? i.e. price, margin, cash flow, and financial risks

52 Managing Your Margin$ Key Performance Indicator (KPI)

53 Managing Your Margin$ Margin is the revenue left after pig and feed costs or after cattle and feed Quick indicator of return after accounting for the variables with the greatest risk Monitor hog/cattle and feed markets for current and future sales (forward looking) What is a reasonable margin for your farm Focus on the margin versus the price and cost (trying to take control of some of the marketing emotion)

54 Cost of Production Item Weight (lbs) $/cwt. $/Head $/cwt. Market Steer 1,450 $133 $1,929 $133 Yearling steer 850 $154 $1,307 $90 Feed Tonnes $/tonne Corn Silage 1.21 $40 $49 Corn 1.79 $171 $307 Supplement 0.13 $407 $53 Total Feed Cost $408 $28 Yardage (health, interest, marketing, etc.) $153 $11 Total Costs $1,869 $129 Net Return $59 $4 Data Source: Ontario Beef Producers Weekly Breakeven for Yearly Steers

55 Cattle Margin Tracker$ Cattle Finishing Margin Trend ($/cwt.) $30 Marketed On Feed Estimated $25 $20 $15 $10 $5 $0 -$5 -$10 -$15 -$20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Margin ($/cwt.) = (Market Steer Value - Yearling Steer Value - Feed Cost of Gain Value) cwt.

56 The Ingredient$ 2013 & 2014 Ontario Fed Cattle Prices ($/cwt) Feeder Cattle Price Trend to 900 Pound ($/cwt.) Actual Steer Price Estimated Prices 5 Year Average Prices Actual Prices Estimated Prices 3 Year Average $145 $140 $180 $175 $170 $135 $165 $130 $125 $160 $155 $150 $120 $115 $145 $140 $135 $110 $105 $100 $130 $125 $120 $115 $95 $90 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec $110 $105 $100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec $280 $270 $260 $250 $240 $230 Corn Average Monthly Value ($/tonne) Average of Huron FOB Farm & Western Ontario Feed Corn Actual Estimated $60 $58 $56 $54 $52 $50 $48 Corn Silage Calculated Monthly Value ($/tonne) Corn Value Divided by 8.5 Based on Actual Corn Values Based on Estimated Corn Values $220 $46 $210 $200 $190 $180 $170 $160 $44 $42 $40 $38 $36 $34 $32 $150 Jan Feb Mar AprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AprMay Jun Jul Aug Sep Oct Nov Dec $30 Jan Feb Mar AprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AprMay Jun Jul Aug Sep Oct Nov Dec

57 $/cwt. Fed Cattle Margin Calculator Thank You! Feed Inputs Production Market Yearling Feed Margin Stage Corn ($/bu) Silage ($/tonne) Jan $117 $139 $113 -$11 $6.75 $57 Feb $118 $130 $120 -$8 $6.79 $58 Mar $117 $140 $115 -$13 $6.90 $59 Apr $114 $134 $108 -$9 $6.13 $52 May $121 $128 $105 $2 $6.34 $54 Jun $125 $134 $103 $3 Marketed $6.54 $56 Jul $124 $134 $97 $5 $6.33 $54 Aug $124 $126 $95 $11 $5.93 $50 Sep $119 $130 $93 $5 $5.53 $47 Oct $120 $124 $90 $10 $4.49 $38 Nov $123 $127 $86 $13 $4.13 $35 Dec $121 $132 $80 $11 $4.26 $36 Jan $138 $137 $75 $27 $4.30 $37 Feb $140 $144 $71 $26 $4.38 $37 Mar $138 $147 $68 $23 $4.44 $38 Apr $130 $154 $67 $12 On-Feed $4.48 $38 May $138 $149 $67 $22 $4.53 $38 Jun $136 $156 $68 $16 $4.58 $39 Jul $133 $153 $69 $15 $4.63 $39 Aug $134 $160 $70 $12 $4.69 $40 Sep $129 $163 $70 $4 $4.74 $40 Looking Oct $129 $164 $71 $4 Forward $4.52 $38 Nov $129 $162 $71 $5 $4.52 $38 Dec $130 $162 $71 $6 $4.62 $39

58 Cattle Margin Thank Tracker$ You! $/cwt. Fed Cattle Margin Calculator Production Feed Inputs Market Yearling Feed Margin Stage Corn ($/bu) Silage ($/tonne) Jan $138 $137 $75 $27 $4.30 $37 Feb $140 $144 $71 $26 $4.38 $37 Mar $138 $147 $68 $23 $4.44 $38 Apr $130 $154 $67 $12 On-Feed $4.48 $38 May $138 $149 $67 $22 $4.53 $38 Jun $136 $156 $68 $16 $4.58 $39 Jul $133 $153 $69 $15 $4.63 $39 Aug $134 $160 $70 $12 $4.69 $40 Sep $129 $163 $70 $4 $4.74 $40 Looking Oct $129 $164 $71 $4 Forward $4.52 $38 Nov $129 $162 $71 $5 $4.52 $38 Dec $130 $162 $71 $6 $4.62 $39

59 Farrow to Finish Margin Tracker$ 2014 Farrow to Finish Return over Feed ($/market pig) $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 Marketed Grow Finish Nursery On Sow Gestation Open Sows Jan Feb Mar Apr May June Jul Aug Sept Oct Nov Dec Return over Feed Margin = Market Hog Income - Feed Cost (Farrow to Finish)

60 Hog Finishing Margin Tracker$ $ Hog Finishing (C$ per Market Pig) Margin = Market Hog Value - Feeder Pig Value - Feed Cost Actual Pigs on Feed with Est. Feed & Market Pig Values Est. Feeder Pig, Feed & Market Pig Value $45 $40 $35 $30 $25 $20 $15 $10 $5 $ Jan Feb Mar Apr May June Jul Aug Sept Oct Nov Dec Actual Pigs on Feed Looking Forward

61 The Ingredient$ Ontario Market Hog Price ($/ckg, 100 index) Feeder Pig Formula Value (C$/pig) Actual Estimated Actual Estimated $210 $110 $200 $100 $190 $90 $180 $80 $170 $70 $160 $150 $140 $130 $120 $110 $100 Jan Feb Mar AprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AprMay Jun Jul Aug Sep Oct Nov Dec $60 $50 $40 $30 $20 $10 $0 Jan Feb Mar AprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AprMay Jun Jul Aug Sep Oct Nov Dec Feeder Pig Value = 70% of (Market Hog Value 15 weeks out - Current Week's Feed Cost) $280 $270 $260 $250 $240 $230 $220 $210 $200 $190 Corn Average Monthly Value ($/tonne) Average of Huron FOB Farm & Western Ontario Feed Corn Actual Estimated $640 $620 $600 $580 $560 $540 $520 $500 $480 Soybean Meal Values ($/tonne) Hamilton + $20/tonne Actual Estimated $180 $460 $170 $440 $160 $420 $150 Jan Feb Mar AprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AprMay Jun Jul Aug Sep Oct Nov Dec $400 Jan Feb Mar AprMay Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AprMay Jun Jul Aug Sep Oct Nov Dec

62 Managing Your Margin$ Provides an insight relative to assumptions Feeder pig formula does not account for market supply and demand dynamics Remember futures are a moving target and assumed basis will vary from current basis Remember why you made the decision managing your risk (price, cost, production, cash flow, financial, margin, etc.)

63 Thank You! Access OMAF and MRA Website Agricultural Information Contact Centre Tel: Agricultural Business Management Website Livestock Website