Outlook for Livestock and Poultry. Michael Jewison World Agricultural Outlook Board, USDA

Transcription

1 Outlook for Livestock and Poultry Michael Jewison World Agricultural Outlook Board, USDA USDA Agricultural Outlook Forum February 20, 2015

2 About Those Forecasts Everything makes sense in hindsight, a fact that analysts exploit every evening as they offer convincing accounts of the day s events the illusion that we understand the past fosters overconfidence in our ability to predict the future. -Daniel Kahneman Thinking, Fast and Slow 2011

3 Outline What about the U.S. consumer? 2015 outlooks for cattle, hogs and poultry Wild cards to watch

4 Protein Prices Relative to Wages in United States Wage, $/hr $9.44 $12.04 $15.69 $18.07 $20.60 Beef, $/lb % of wage $ % $ % $ % $ % $ % Pork, $/lb % of wage $ % $ % $ % $ % $ % Chicken, $/lb % of wage $ % $ % $ % $ % $ % Eggs, $/dz % of wage N/A $1.11 9% $1.34 9% $ % $ % All values are nominal. Source: Bureau of Labor Statistics Average Hourly Earnings of Total Private Production and Nonsupervisory Employees. USDA/ERS retail meat price spreads.

5 Per Capita Disappearance of Chicken and Eggs Growing, Pork Higher and Beef Down Meat Pounds Per Capita 90 Eggs Per Capita Beef Pork Chicken Eggs 220

6 Total Per Capita Disappearance of Red Meat and Poultry Higher Pounds Per Capita

7 Consumer Confidence and Restaurant Performance Index Confidence 1985= Jan-15 Jul-14 Jan-14 Jul-13 Jan-13 Jul-12 Jan-12 Jul-11 Jan-11 Jul-10 Jan-10 Jul-09 Jan-09 Jul-08 Jan-08 Jul-07 Jan-07 Jul-06 Jan-06 Jul-05 Jan-05 Jul-04 Jan-04 Jul-03 Jan-03 <$50k >$50k RPI Source: Conference Board and National Restaurant Association. Less than $50k category is average of $25-$35k and $35-$50k. RPI

8 Record Crops in 2014 Corn and soybean yields above trends Lower feed prices General improvement in pasture and rangeland conditions in most areas

9 Prices for Corn and Soybean 1997= Meal vs. Inflation Corn Soybean Meal CPI Source: USDA and Bureau of Labor Statistics. Corn price is marketing-year weighted average price received by farmers. Soybean meal is Decatur marketing-year simple average of 48 percent protein meal. Hay is marketing-year weighted average price received by farmers. CPI is seasonally adjusted Consumer Price Index for All Urban Consumers

10 Prices for Cattle, Hogs and 1997= Broilers vs. Inflation Hogs Cattle Broilers CPI Source: USDA and Bureau of Labor Statistics. Livestock prices are annual averages. Cattle price is 5-Area Direct Total for all grades, hogs are National Base, Live equivalent percent lean, broilers are Wholesale National Composite Weighted

11 Livestock and Poultry Price Forecasts for Cattle, $/CWT $126 $155 $157-$167 Hogs, $/CWT live equivalent National Broiler Composite, $/lb $64 $76 $54-$58 $1.00 $1.05 $0.97-$1.03 Turkey, $/lb $1.00 $1.08 $1.02-$1.08 Eggs, N.Y. Wholesale Price, $/dozen $1.25 $1.42 $1.25-$1.34

12 Fund Hog Futures Net Position vs. Total Open Interest Open Interest, 1000 Contracts Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 Open Interest Fund Net Note: Futures only. Fund net position is the total of managed money and other reportables. Fund Net Position, 1000 Contracts

13 Fund Fed Cattle Futures Net Position vs. Total Open Interest Open Interest, 1000 Contracts Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 Open Interest Fund Net Note: Futures only. Fund net position is the total of managed money and other reportables. Fund Net Position, 1000 Contracts

14 Beef Production Forecast Slightly Lower in 2015, Pork and Billion Pounds Poultry Higher Beef Pork Poultry

15 Change in Meat Production 2004 to 2013: Number Slaughtered vs. Weights Billion Pounds Cattle Hogs Broilers Slaughter Weight Note: Cattle and Hogs are on dressed basis, broilers are on ready to cook basis.

16 Change in Meat Production 2013 to 2014: Weights Partially Offset Declines for Beef and Pork Billion Pounds Cattle Hogs Broilers Slaughter Weight Note: Cattle and Hogs are on dressed basis, broilers are on ready to cook basis.

17 February 19, 2013: 56 Percent of Continental U.S. in Drought Source: U.S. Drought Monitor

18 February 11, 2014: 38 Percent of Continental U.S. in Drought Source: U.S. Drought Monitor

19 February 10, 2015: 29 Percent of Continental U.S. in Drought Source: U.S. Drought Monitor

20 $/Cow Cow-Calf Returns $/cow Skyrocket Source: Livestock Marketing Information Center; USDA Beef Heifer Retention January 1 (t+1) 2014 Beef Heifers Held for Replacement, 1000 Head

21 2014 Beef Cow Inventory Increase Year-over-year Change, Million Head 1.5 Largest Since

22 Cattle Herd on January 1, 2015, Expands For First Time Since 2007 Million Head

23 Record U.S. Beef Imports in 2014 Imports, 90% ground Million lbs beef, $/lb Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Beef Imports (t+1) 90 percent lean ground beef

24 Robust Farrow-to-Finish Returns for Hogs in Iowa $/Head Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Source: Iowa State University

25 Rebound in Pigs Per Litter after PEDv Litter Rate Annual Growth Rate = 1.5%

26 Ratio of Broiler Composite Price Relative to NE Composite $lb/1 lb feed Dec-96 Dec-97 Dec-98 Dec-99 Feed Cost Rebounds Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Source: WAOB estimates, 3-month moving average of ratio. Corn price is monthly marketing-year weighted average price received by farmers. Soybean meal is Decatur simple monthly average of 48 percent protein. Assumes 1 lb of feed is 30 percent soybean meal and 70 percent corn. NE Composite is a weighted average of thighs, drumsticks, breasts and wings. Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14

27 Important Factors for 2015 U.S. Dollar strength visà-vis other exporters Lower U.S. exports Expected larger pig crops in the U.S.

28 U.S. Dollar Strength Relative to Competitors a Headwind for Exports Country- Weighted Index Beef Pork Poultry Source: USDA-ERS. Real export-weighted exchange rates for each commodity.

29 Chinese Yuan Strengthening Relative to Euro and Canadian Dollar Index 12/15/14= /15/ /19/ /23/ /27/ /31/2014 1/4/2015 1/8/2015 1/12/2015 1/16/2015 1/20/2015 1/24/2015 1/28/2015 2/1/2015 2/5/2015 2/9/2015 2/13/2015 2/17/2015 CNY/EUR CNY/USD CNY/CAD All values are nominal

30 U.S. Meat Exports Lower in 2015 Beef & Pork, Billion Pounds Broilers, Billion Pounds Beef Pork Broilers

31 Year-over-year % Change 8.0% 6.0% 4.0% 2.0% Much Larger U.S. Pig Crop Expected in % -2.0% % -6.0%