Outlook for Hog Profits in 2012

NPB Swine Conference, Sioux Falls, September 29, 2011 Outlook for Hog Profits in 2012 Ron Plain D. Howard Doane Professor of Agricultural Economics University of Missouri-Columbia http://web.missouri.edu/~plainr/

Presentation Outline Meat demand Macro outlook Corn outlook Competing meats Hog outlook

Meat Demand

2002 > May Sep 2003 > May Sep 2004 > May Sep 2005 > May Sep 2006 > May Sep 2007> May Sep 2008> May Sep 2009> May Sep 2010> May Sep 2011> May % change from year ago 10 8 6 4 2 0-2 -4-6 -8 Change in Retail Meat Demand Base Elasticity = - 0.75

2007 > Apr Jul Oct 2008 > Apr Jul Oct 2009 > Apr Jul Oct 2010 > Apr Jul Oct 2011 > Apr Jul Boneless Retail Meat Prices as % of Bologna, Monthly, 2007-2011 Percent Beef Sirloin Pork Chops Chicken Breast 280 260 240 220 200 180 160 140 120 100 80 Source: USDA/ERS

CHOICE MINUS SELECT BEEF PRICES Carcass Cutout Value 600-900 Lbs., Weekly $ Per Cwt. 14 12 10 8 Avg. 2005-09 2010 6 4 2 2011 0 JAN APR JUL OCT Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC C-P-68 09/12/11

2002 > May Sep 2003 > May Sep 2004 > May Sep 2005 > May Sep 2006 > May Sep 2007> May Sep 2008> May Sep 2009> May Sep 2010> May Sep 2011> May % change from year ago 15 Change in Pork Demand Base Elasticity = - 0.75 10 5 0-5 -10-15

2001 > May Sep 2002 > May Sep 2003 > May Sep 2004 > May Sep 2005 > May Sep 2006 > May Sep 2007 > May Sep 2008 > May Sep 2009 > May Sep 2010 > May Sep 2011 > May Cents/lb 500 Retail Boneless Pork Prices Retail Prices, Monthly, 2001-2011 450 Bacon Chops Ham 400 350 300 250 Source: USDA/ERS

The Great Recession

05-1 05-3 06-1 06-3 07-1 07-3 08-1 08-3 09-1 09-3 10-1 10-3 11-1 Percent Change Growth in Real GDP 6 4 2 0-2 -4-6 -8-10 Source: U.S. Commerce Department

$ Per Head AVERAGE RETURNS TO CATTLE FEEDERS Feeding 725 Lb. Steers, S. Plains, Monthly 250 200 150 100 50 0-50 -100-150 -200-250 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: LMIC 2008-09 recession

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Farrow to Finish Profits, 1997-2011 $ Per Head 50 Iowa State University Calculations 30 10-10 -30-50 2008-09 recession -70 Source: Shane Ellis, Iowa State University

1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 Percent Change in Real GDP from Previous Year Seasonally Adjusted, Annual Rate, 1950-2010 10 8 6 4 2 0-2 -4 Source: U.S. Department of Commerce, Bureau of Economic Analysis

Consumer Confidence Job market Home values Stock market Government

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Percent U.S. Unemployment Rate, Seasonally Adjusted, 1996-2011 11 10 9 8 7 6 5 4 3 Source: Bureau of Labor Statistics

The average person looking for work in America has been unemployed for over 40 weeks

Consumer Confidence Job market Home values Stock market Government

Consumer Confidence Job market Home values Stock market Government

Dow Jones Industrial Average

Consumer Confidence Job market Home values Stock market Government

50 54 58 62 66 70 74 78 82 86 90 94 98 02 06 10 14 18 Million $ 300,000 100,000-100,000-300,000-500,000-700,000-900,000-1,100,000-1,300,000-1,500,000-1,700,000 Federal Surplus, 1950-2021 President s Budget, February 2011 Actual Forecast

Debt Ceiling Crisis The debt ceiling agreement calls for the federal debt to increase from $14.3 trillion to $23.3 trillion over the next 10 years rather than from $14.3 trillion to $25.7 trillion as previously planned.

Ever Growing Debt The federal government plans to pay its bills by borrowing more and more money. As long as someone will loan the government enough money, they can pay their bills.

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Percent Federal Funds Rate, monthly average, 1996-2011 7 6 5 4 3 2 1 0 Source: Board of Governors, Federal Reserve System

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Billion $ St Louis Adjusted Monetary Base 3000 2500 2000 1500 1000 500 0 Source: St Louis Federal Reserve Bank

Current Situation The government is broke, the unemployment rate is over 9%, the economy is barely growing, the stock market is down, and the poverty rate is the highest since 1993. This is not good for meat demand.

Corn Outlook

2008 2009 2010 2011 $/Bushel Omaha Corn Prices, Weekly, 2008-2011 8 7 6 5 4 3 2 Source: USDA/AMS

70 73 76 79 82 85 88 91 94 97 00 03 06 09 Million Acres Planted U.S. Corn Acres Planted, 1970-11 95 90 85 80 75 70 65 60 55 2011 is 2 nd largest since 1944

70 73 76 79 82 85 88 91 94 97 00 03 06 09 Bushels U.S. Average Corn Yield, 1970-11 180 160 140 120 100 80 60 40 20 0 Yield is increasing by 2 bu/year

70 73 76 79 82 85 88 91 94 97 00 03 06 09 Billion Bushels U.S. Corn Production, 1970-11 14 12 10 8 6 4 2 0 Production is increasing by 190 million bu/year

90-91 92-93 94-95 96-97 98-99 00-01 02-03 04-05 06-07 08-09 10-11 Billion Bushels 6 5 4 3 2 1 Corn Milled for Ethanol % corn for ethanol: 2000-01: 6% 2005-06: 14% 2007-08: 23% 2009-10: 35% 2011-12: 40% Forecast 0

70-71 72-73 74-75 76-77 78-79 80-81 82-83 84-85 86-87 88-89 90-91 92-93 94-95 96-97 98-99 00-01 02-03 04-05 06-07 08-09 10-11 Dollars Per Bushel U.S. Corn Price, 1970-12 8 7 6 5 4 3 2 1 0

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Billion Dollars Value of U.S. Corn Crop, 1970-11 90 80 70 60 50 40 30 20 10 0

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Billion Dollars Value of U.S. Corn Crop, 1970-11 90 80 70 60 50 40 30 20 10 0 From 1979-2005, the U.S. livestock & poultry industry spent $10 billion annually to buy half the corn crop. This year it will spend $33 billion to buy 37% of the corn.

1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Bil. Bushels 8 Grains, Feed and Residual 7 6 5 4 3 2 1 0 DDGS Wheat Oats Barley Sorghum Corn

1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Pounds U.S. Per Capita Meat Consumption 250 240 230 220 210 200 190 180 170 160 150 2011 per person meat consumption lowest since 1997 Source: USDA/ERS

1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 100 90 80 70 60 50 40 30 20 10 0 U.S. Per Capita Meat Consumption Pounds Pork Beef Broilers Turkey Fish Source: USDA/ERS

Jan-00 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Dollars Per Bushel U.S. Monthly Average Corn Price 7 6 5 4 3 2 Cash futures 1 Thru Dec 2014 all corn futures contracts are above $5.52 per bushel

$ Per Cwt 135 Choice Steer Breakeven Price S. Plains Cattle Feedlots, Monthly 125 Breakeven Projected Breakeven 115 105 95 85 75 2004 2005 2006 2007 2008 2009 2010 2011 Source: LMIC

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Cost of Slaughter Hog Production Iowa State University Calculations, 1987-2011 $ Per Live Cwt 70 65 60 55 50 45 40 35 Marketing Month Source: Shane Ellis, Iowa State University

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 $ per bushel 7 Corn, Average Price Received, Monthly, 1987-2011 6 5 4 3 2 1 0 Source: USDA/NASS

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Corn Price & Cost of Hog Production Monthly, 1987-2011 70 65 60 55 50 45 40 35 30 25 Hog Cost Corn $ 7 6 5 4 3 2 1 0 Source: John Lawrence, Iowa State University

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Corn Price & Cost of Hog Production Monthly, 1987-2011 70 65 60 55 50 45 40 35 30 25 Hog Cost Corn $ $7 corn implies hog cost at $70/cwt live or $92/cwt car. 7 6 5 4 3 2 1 0 Source: Shane Ellis, Iowa State University

1.5 2.5 3.5 4.5 5.5 6.5 Breakeven Hog Price & U.S. Corn Price Iowa State University Calculations, 1990-2010 $ Per Live Cwt 72 67 62 57 52 47 42 37 Corn Price

Outlook for 2012 The futures market is predicting $6.28/bu corn for CY 2012. That should give a hog breakeven price of $66/cwt live or $87/cwt carcass. The futures market is predicting $87.75 hogs for CY 2012. That indicates a profit of $1.50/head

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Iowa Farrow to Finish Profits, 1997-2011 $ Per Head 50 Iowa State University Calculations 30 10-10 -30-50 -70 Source: Shane Ellis, Iowa State University

97&07 98&08 99&09 00&10 01&11 02&12 Monthly Profit Per Pig Dollars 1997-02 2007-11 60 40 20 0-20 -40-60 -80 Source: Shane Ellis, Iowa State University

82-1 84-1 86-1 88-1 90-1 92-1 94-1 96-1 98-1 00-1 02-1 04-1 06-1 08-1 10-1 Correlation of Profit & Lagged Hog Slght 20 10 %ChDaHogSlt Lag 5 Qtr Profit 0-10 -20

Competing Meats

Million Head U.S. Calf Crop, 1950-2011 54 52 50 48 46 44 42 40 38 36 34 2011: 35.5 million head, Down 0.5% 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2011 calf crop is smallest since 1950

Mil. Lbs 1000 BROILER PRODUCTION Federally Inspected, Weekly 950 900 850 800 Avg. 2005-09 2010 750 700 650 2011 JAN APR JUL OCT Livestock Marketing Information Center Data Source: USDA-AMS & USDA-NASS P-S-20 09/08/11

BROILER EGGS SET Weekly Mil. Eggs 220 215 210 205 Avg. 2005-09 200 2010 195 190 185 2011 JAN APR JUL OCT Livestock Marketing Information Center Data Source: USDA-NASS P-S-10 09/08/11

Mil. Lbs 175 TURKEY PRODUCTION Federally Inspected, Weekly 160 145 130 115 Avg. 2005-09 2010 100 85 70 2011 JAN APR JUL OCT Livestock Marketing Information Center Data Source: USDA-AMS & USDA-NASS P-S-21 09/08/11

Forecast Change in Meat Production --Percent Change-- Type 2010-11 2011-12 Beef - 0.3% - 4.4% Pork +0.8% +1.5% Chicken +1.3% +0.2% Turkey +2.4% - 0.7% All Meats +0.8% - 0.9% Source: USDA-OCE WASDE, September 2011

Hog Outlook

International Trade

Tthousand pounds U.S. Meat Exports, 2000-2011 800000 700000 Beef Pork Broiler Turkey 600000 500000 400000 300000 200000 100000 0 Jan- 00 Jul Jan- 01 Jul Jan- 02 Jul Jan 03 Jul Jan- 04 Jul Jan 05 Jul Jan 06 Jul Jan 07 Jul Jan 08 Jul Jan 09 Jul Jan 10 Jul Jan 11 Jul

Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan 07 Jan 08 Jan 09 Jan-10 Jan 11 U.S. Pork Imports & Exports, 2000-2011 Mil. lbs. 600 Monthly Carcass Weight Equivalent 500 400 Imports Exports 300 200 100 0

Jan 06 APR JUL OCT Jan 07 APR JUL OCT Jan 08 APR JUL OCT Jan 09 Apr Jul Oct Jan 10 Apr Jul Oct Jan 11 Apr Jul % of Production 30 U.S. Pork Imports & Exports as % of U.S. Pork Production, 2006-2011 Monthly Carcass Weight Equivalent 25 20 15 10 Imports Exports 5 0

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Head per mo. 800,000 700,000 U.S. Hog Imports from Canada Slaughter Hogs Feeders Pigs 600,000 500,000 400,000 300,000 200,000 100,000 0

Inventory Surveys

Thousand Head U.S. Swine Breeding Herd, 1999-2011 6300 6200 6100 6000 5900 5800 5700 Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10

2011 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Actual & Predicted Change in B&G Slaughter U.S. Weekly F.I. Hog Slaughter, 2011 % change from yr. ago 8 6 Actual USDA Sep Forecast 4 2 0-2 -4

Hog Inventory Reports U.S. Sept Canada July All Hogs & Pigs 101.0 101.4 Kept for Breeding 100.6 98.8 Kept for Marketing 101.0 101.1 Under 50 lbs 100.4 99.5 50-119 lbs. 100.4 101.3 120-179 lbs. 100.7 102.5 180 lbs. and over 103.4 Dec-Feb Farrowings 99.0 97.9 Mar-May Farrowings 98.2 96.5 Jun-Aug Farrowings 98.5 99.9 Sep-Nov Farrowing Intentions 99.8 100.2 Dec-Feb Farrowing Intentions 100.5

Hog Inventory Reports U.S. Sept Canada July All Hogs & Pigs 101.0 101.4 Kept for Breeding 100.6 98.8 Kept for Marketing 101.0 101.1 Which is Under 50 lbs important? 100.4 99.5 50-119 lbs. More sows or 100.4 101.3 120-179 lbs. fewer litters? 100.7 102.5 180 lbs. and over 103.4 Dec-Feb Farrowings 99.0 97.9 Mar-May Farrowings 98.2 96.5 Jun-Aug Farrowings 98.5 99.9 Sep-Nov Farrowing Intentions 99.8 100.2 Dec-Feb Farrowing Intentions 100.5

DJF99 DJF00 DJF01 DJF02 DJF03 DJF04 DJF05 DJF06 DJF07 DJF08 DJF09 DJF10 DJF11 Daily Hog Slaughter by Quarter % change from yr. ago 10 8 6 4 2 0-2 -4-6 -8-10

DJF99 DJF00 DJF01 DJF02 DJF03 DJF04 DJF05 DJF06 DJF07 DJF08 DJF09 DJF10 DJF11 10 8 6 4 2 0-2 -4-6 -8-10 Hog Slaughter & Breeding Herd by Quarter % change from yr. ago Br Herd D Hog Slt Correlation = 0.20

DJF99 DJF00 DJF01 DJF02 DJF03 DJF04 DJF05 DJF06 DJF07 DJF08 DJF09 DJF10 DJF11 DJF 10 8 6 4 2 0-2 -4-6 -8-10 Sows Farrowed & Hog Slaughter by Quarter % change from yr. ago Sows Far D Hog Slt Correlation = 0.78

DJF99 DJF00 DJF01 DJF02 DJF03 DJF04 DJF05 DJF06 DJF07 DJF08 DJF09 DJF10 DJF11 Sows Farrowed-U.S. & Canada Combined % change from yr. ago 6 4 2 0-2 -4-6

DJF99 DJF00 DJF01 DJF02 DJF03 DJF04 DJF05 DJF06 DJF07 DJF08 DJF09 DJF10 DJF11 U.S. Pigs Per Litter by Quarter % change from yr. ago 3 2.5 2 1.5 1 0.5 0-0.5-1

Pounds 277 275 273 271 269 267 265 263 261 259 Barrow & Gilt Live Weights Iowa-Minnesota Weekly Average 2008 2009 2010 2011 257 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Million Pounds Weekly Pork Production 500 480 460 440 420 400 380 360 340 320 2002-09 2010 2011 300 Jan Apr Jul Oct Source: USDA Prior Day Purchased reports

Prices

Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Cents Per Pound U.S. Retail Pork Prices, 2000-2011 360 340 320 300 280 260 240 220 200

$ per cwt. 115 110 105 100 95 90 85 80 75 70 65 60 55 50 45 JAN Hog Cutout Value, Weekly APR Source: USDA/AMS JUL OCT Avg. 2004-08 2009 2010 2011

$ per cwt. 105 100 95 90 85 80 75 70 65 60 55 50 45 JAN National Base Slaughter Hog Price, Weekly APR JUL Source: USDA Prior Day Purchased reports OCT Avg. 2004-08 2009 2010 2011

$ per Head 60 Weekly Gross Pork Packer Margin, 200 Pound Carcass 50 40 30 20 10 Avg 02-09 2010 2011 0 JAN APR JUL OCT Calculation: Byproduct + Cutout Negotiated net

My Forecast

Commercial Hog Slaughter Forecast Million Head 2010 2011 2012 Qtr 1 27.630* 27.486* 27.600 Qtr 2 26.074* 26.113* 26.500 Qtr 3 26.930* 27.320 27.600 Qtr 4 29.626* 29.360 30.380 Year 110.260* 110.279 112.080 ------Change------ 10-11 11-12. - 0.5% +0.4% + 0.2% +1.5% + 1.4% +1.0% - 0.9% +3.5% + 0.0% +1.6% *actual Note: Q1 10 & Q4 11 & Q3 12 have only 63 slaughter days

Iowa-Minn Hog Price Forecast Negotiated Base Price Per Carcass Hundredweight 2009 2010 2011 2012 Qtr 1 $57.23* $66.81* $78.95* $80-84 Qtr 2 $57.32* $79.04* $91.80* $87-91 Qtr 3 $51.43* $79.44* $93.95 $85-89 Qtr 4 $54.98* $65.20* $77-81 $68-72 Year $55.23* $72.67* $85-87 $80-84 *actual price prior day purchased

Iowa-Minn Live Hog Price Forecast Negotiated Live Base Price Equivalent 2009 2010 2011 2012 Qtr 1 $43.49* $50.78* $60.25* $60-64 Qtr 2 $43.56* $60.07* $69.77* $66-70 Qtr 3 $39.09* $60.37* $71.40 $64-68 Qtr 4 $41.78* $49.56* $58-62 $52-56 Year $41.97* $55.19* $65-67 $61-65 *actual carcass price x 76%

Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Dollars Per Cwt U.S. Hog Net Carcass Price, Monthly Average, 2002-2011 110 100 90 80 70 60 50 40 30 Cash Futures Thru February 2013 all hog futures contracts are above $80 per cwt

Major Uncertainties U.S. & World Economy Domestic pork demand Meat exports Exchange rates Corn prices & cost of gain Slaughter capacity

Any Questions?

1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Bil. Bushels 8 7 6 5 4 3 2 1 0 Grains, Feed and Residual

1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 % Change 20 15 10 5 0-5 -10-15 -20-25 Grains, Feed and Residual

Grains Fed to U.S. Livestock & Poultry 1976 2011 Corn 74.3% Sorghum 9.8% Barley 3.6% Oats 9.3% Wheat 2.7% DDGS 0.3% Corn 74.2% Sorghum 0.8% Barley 0.6% Oats 1.4% Wheat 3.6% DDGS 19.4%

$ Per Bu. 8.50 7.50 6.50 5.50 4.50 OMAHA CORN PRICES Weekly Avg. 2004-08 2009 2010 3.50 2011 2.50 JAN APR JUL OCT Livestock Marketing Information Center Data Source: USDA-AMS

$ Per Ton 225 205 185 165 145 125 105 DISTILLER DRIED GRAIN PRICES Chicago, Illinois, Weekly Avg. 2004-08 2009 2010 85 2011 65 JAN APR JUL OCT Livestock Marketing Information Center Data Source: USDA-AMS

$ Per Ton 250 DISTILLERS GRAIN PRICES Illinois - E Cornbelt, Weekly 200 Dried w/ Solubles 150 100 Modified Wet 50 0 Wet Jan-10 Apr Jul Oct Jan-11 Apr Jul Livestock Marketing Information Center Data Source: USDA-AMS 09/08/11

$ Per Ton 400 CENTRAL ILLINOIS SOYBEAN MEAL (48%) PRICES Weekly 375 350 325 300 Avg. 2005-09 2010 275 250 225 2011 200 JAN APR JUL OCT Livestock Marketing Information Center Data Source: USDA-AMS G-P-07 08/26/11

IOWA ETHANOL PRICE Weekly $ Per Gallon 3.10 2.90 2.70 2.50 2.30 2.10 1.90 1.70 1.50 1.30 Jan-10 Apr Jul Oct Jan-11 Apr Jul Livestock Marketing Information Center Data Source: USDA-AMS 09/08/11

2002 Apr Jul Oct 2003 Apr Jul Oct 2004 Apr Jul Oct 2005 Apr Jul Oct 2006 Apr Jul Oct 2007 Apr Jul Oct 2008 Apr Jul Oct 2009 Apr Jul Oct 2010 Apr Jul Oct 2011 Apr Jul % Change Year Ago Change in Domestic Beef Demand 15 Base Elasticity = -0.75 10 5 0-5 -10 Source: Ron Plain, University of Missouri

Percent Percentage of U.S. Consumers Who Eat Animal Proteins 120 100 95% 90% 97% 88% 80 60 40 34% 20 0 Beef Pork Lam b Chicken Fish&Seafood Source: IPSOS Public Affairs, 10-survey average, 2008-10

CHOICE MINUS SELECT BEEF PRICES Carcass Cutout Value 600-900 Lbs., Weekly $ Per Cwt. 14 12 10 8 6 Avg. 2005-09 2010 4 2 2011 0 JAN APR JUL OCT Livestock Marketing Information Center C-P-68 09/12/11 Data Source: USDA-AMS, Compiled & Analysis by LMIC

cents/lb Yen/lb U.S. Pork Prices, cents/lb and Yen/lb 320 340 310 330 300 320 310 290 300 280 290 270 280 260 250 U.S. $ Yen 270 260 250 240 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 240

Million Pounds Frozen Pork, 2000-2011, Start of the Month 700 650 600 550 500 450 400 350 300 Jan 00 JUL Jan 01 JUL Jan 02 JUL Jan 03 Jul Jan 04 Jul Jan 05 Jul Jan 06 Jul Jan 07 Jul Jan 08 Jul Jan 09 Jul Jan 10 Jul Jan 11 Jul

Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan 07 Jan 08 Jan 09 Jan-10 Jan 11 U.S. Pork Exports, 2000-2011 Mil. lbs. 600 Monthly Carcass Weight Equivalent 500 400 300 200 100 0

Frozen Pork (million pounds) Pork Exports (million pounds) Frozen Pork & U.S. Pork Exports, 2000-2011 700 600 600 500 500 400 400 300 300 200 200 100 0 Jan- 00 Jul Jan- 01 Jul Jan- 02 Jul Jan- 03 Jul Jan- 04 Jul Jan- 05 Jul Cold Storage Jan- 06 Jul Jan 07 Jul Jan 08 Jul Jan 09 Exports Jul Jan 10 Jul Jan 11 Jul 100 0

Crop Condition Report, 9/11 U.S. Corn: 53% good/excellent Week ago: 52% good/excellent Year ago: 68% good/excellent U.S. Soybeans: 56% good/excellent Week ago: 56% good/excellent Year ago: 63% good/excellent Source: USDA/NASS

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Billion Gallons 2007 Renewable Fuels Mandate 40 35 30 25 20 15 10 5 0 Corn ethanol Cellulosic Bio-diesel More non-grain Corn for ethanol needs to increase 220 million bushels/year

2002 > May Sep 2003 > May Sep 2004 > May Sep 2005 > May Sep 2006 > May Sep 2007> May Sep 2008> May Sep 2009> May Sep 2010> May Sep 2011> May % change from year ago 110 90 70 50 30 10-10 -30-50 Change in Pork Export Demand Base Elasticity = - 0.5

2002 > May Sep 2003 > May Sep 2004 > May Sep 2005 > May Sep 2006 > May Sep 2007> May Sep 2008> May Sep 2009> May Sep 2010> May Sep 2011> May % change from year ago 18 Change in Hog Demand Base Elasticity = - 0.2 13 8 3-2 -7-12

Been a rough summer, no rain, heat over 100 every day and lots of wind, but I made it so far. How about you?

BROILER CHICKS PLACED Weekly Mil. Birds 180 175 170 Avg. 2005-09 165 2010 160 155 2011 JAN APR JUL OCT Livestock Marketing Information Center Data Source: USDA-NASS P-S-11 09/08/11

Barrow & Gilt Negotiated Base Price $/cwt 100 2002-09 2010 2011 95 90 85 80 75 70 65 60 55 50 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: USDA Prior Day Slaughter reports

2009 Apr Jul Oct 2010 Apr Jul Oct 2011 Apr Jul $/cwt Pork Cutout and Hog Price, Weekly, 2009-2011 120 110 Cutout Carcass 100 90 80 70 60 50 Source: USDA/AMS