Top Producer Seminar Chicago Hilton January 25, 2016 John Nalivka President, Sterling Marketing, Inc.
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
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
Corn Price - Omaha- Council Bluffs Dollars per bushel 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0 28-Nov-92 12-Sep-98 26-Jun-04 10-Apr-10 6-Jan-90 21-Oct-95 4-Aug-01 19-May-07 2-Mar-13 Week Ending 1/23/16
Crude Oil Price Cushing, OK Dollars per barrel 160 140 120 100 80 60 40 20 0 1/2/01 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
Dollar Index Trade Weighted Major Currencies 1973=100 100 +24% since June 1, 2014 95 90 85 80 75 70 65 6/9/10 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
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
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
Per Capita Red Meat & Poultry Consumption Pounds 225 220 215 210 205 200 195 190 185 180 175 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016* Sterling Forecast Jan. 12, 2016
The Cattle Cycle Forage Availability Cattle Prices Herd Expansion Or Liquidation Expectations
U.S. cattle inventory Thousand head 115,000 January 1 Cattle Inventory 2014 87.730 mil. Revised 2014 88.526 mil. 105,000 2015 89.8 mil. + 1% USDA Report 95,000 January 1 Cattle Inventory Sterling Forecasts 85,000 75,000 2016* 91.9 mil. +2.5% 2017* 93.4 mil. +2.0% 2018* 94.5 mil. -1.0% 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019* 1981 1985 1989 1993 1997 2001 2005 2009 2013 2017* Sterling Forecast July 2016
Returns to Cow-Calf Producers Dollars per head 600 500 400 300 200 100 0-100 -200 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016* 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 Sterling Marketing Jan. 12, 2016
Feeder Cattle Price Dollars per cwt 250 225 200 175 150 125 100 2013 2014 2015 2016 2011-2015 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
Feedlot Breakeven Price Dollars per cwt. 180 170 160 150 140 130 120 110 100 90 80 70 60 50 1/6/90 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
Cattle Feeding Margins Dollars per head 2013 2014 2015 2010-2014 Ave. 400 325 250 175 100 25-50 -125-200 -275-350 -425-500 -575-650 -725-800 2/14/15 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
Feedlot Margin Dollars per head 400 300 200 100 0-100 -200-300 -400-500 2014 2015 2010-14 Average -600 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sterling Marketing Forecast Jan. 12, 2016
Feedlot Margin Dollars per head 2015 2016 2010-14 Average 375 300 225 150 75 0-75 -150-225 -300-375 -450-525 -600 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sterling Marketing Forecast Jan. 12, 2016
U.S. cow slaughter falls sharply. Thousand head 7,000 6,500 Total Cow Slaughter 2014-14% 2015* - 4% 2016 + 3 % 6,000 5,500 5,000 4,500 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016* Sterling Forecast Jan. 12, 2016
U.S. Heifer Slaughter Thousand head Slaughter (Y1) Weights (Y2) Pounds 12000 11500 11000 10500 10000 9500 9000 8500 8000 7500 7000 6500 6000 Slaughter 2010-2014 Ave. 2001 2003 2005 2007 2009 2011 2013 2015 2000 2002 2004 2006 2008 2010 2012 2014 825 800 775 750 725-12% 700
U.S. Steer & Heifer Slaughter Thousand head 30,000 29,000 28,000 27,000 26,000 25,000 24,000 23,000 Slaughter 2010-2014 Average Pounds 900 875 850 825 800 775 750 725 700 22,000 675 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015-5%
Wholesale Beef Price Dollars per cwt. 2013 2014 2015 2016 2011-2015 Ave. 270 250 230 210 190 170 150 1/2/16 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
Choice Steer Price Dollars per cwt 2013 2014 2015 2016 2010-2014 Ave. 170 160 150 140 130 120 110 100 1/9/16 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
Wholesale Beef Price Dollars per cwt. 2013 2014 2015 2016 2010-2014 Ave. 270 250 230 210 190 170 150 2/14/15 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
Beef Packer Operating Margins Dollars per head 200 2013 2014 2015 2010-2014 Ave. 150 100 50 0-50 -100-150 1/3/15 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
Beef Packer Margin Dollars per head 150 125 100 75 50 25 0-25 -50-75 2014 2015 2011-15 Average -100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sterling Forecast Jan. 12, 2016
2014 2015 2016 U.S. Commercial Cattle Slaughter Thousand Head 8,500 2014-7% 2015 * - 5% 2016 * + 3% 8,000 7,500 +4% +5% +4% 7,000 +.3% 6,500 6,000 I II III IV Quarter Sterling Forecast Jan. 12, 2016
Combined Steer & Heifer Carcass Weights Pounds 920 2013 2014 2015 2010-2014 Ave. 900 880 860 840 820 800 780 2/14/15 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
2014 2015 2016 U.S. Commercial Beef Production Million pounds 7,000 2014-6% 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
Fed Cattle Slaughter Capacity & Utilization Thousand head 32,000 Capacity Steer & Heifer Slaughter * 30,000 28,000 26,000 24,000 Average Utilization 2000-13 91% 2015* 83% 2016* 86% 22,000 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015* 1991-2013 * Sterling Forecast 1/12/16
Fed Beef Packer Concentration Cargill Meat Solutions 19% 2016 Tyson 28% JBS SA 23% Other 18% National Beef Packing 12%
The Hog Cycle Corn & Hi Protein Feed Prices Lean Carcass Prices Herd Expansion Or Liquidation Expectations PED
Hogs & Pigs Inventory December 1 Thousand head 70,000 65,000 60,000 55,000 50,000 1991 1995 1999 2003 2007 2011 2015 1989 1993 1997 2001 2005 2009 2013
Winter Pig Crop (Mar-May) Thousand head 30,000 +7% 28,000 26,000 24,000 22,000 20,000 1998 2000 2002 2004 2006 2008 2010 2012 2014 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 PEDv
Hog Producer Margins Dollars per head 150 130 110 90 70 50 30 10-10 -30 2013 2014 2015 2016-50 2/14/15 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
2014 2015 2016 Commercial Market Hog Slaughter Thousand head 31,000 30,000 29,000 2014-5% 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
Market Hog Carcass Weights Pounds 220 2012 2013 2014 2015 215 210 205 200 195 2/14/15 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
2014 2015 2016 U.S. Commercial Pork Production Million pounds 7000 2014-2% 2015 + 7% 2016* + 2% 6500 +4% 6000 0% +2% +2% 5500 5000 4500 I II III IV Quarter Sterling Forecast, Jan. 12, 2016
Lean Carcass Value Dollars per cwt 140.00 130.00 120.00 110.00 100.00 90.00 80.00 70.00 60.00 50.00 40.00 2013 2014 2015 2009-2013 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
Pork Cutout Value Dollars per cwt 140 130 120 110 100 90 80 70 60 2013 2014 2015 2016 50 2/14/15 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
Pork Packer Operating Margins Dollars per head 40 2013 2014 2015 2016 30 20 10 0-10 -20-30 2/14/15 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
Market Hog Slaughter Capacity & Utilization Thousand head Slaughter Capacity Hog Slaughter 120,000 115,000 110,000 105,000 100,000 95,000 90,000 85,000 Average Utilization 2000-13 92% 2015 97% 2016* 98% 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Annual Slaughter Capacity = 116 million Daily Slaughter Capacity = 446,000
Pork Packer Concentration 2016 Tyson 19% Smithfield 28% JBS, SA 22% Other 22% Hormel 9%
U.S. Beef Exports Thousand pounds (carcass wt) 300,000 275,000 2013 2014 2015 250,000 225,000 200,000 175,000 150,000 125,000 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
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% 500,000 400,000 82% of total 15% 300,000 200,000 100,000 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
World Beef Export Share - 2014 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%
U.S. Beef Imports Thousand pounds (carcass wt) 350,000 2013 2014 2015 300,000 250,000 200,000 150,000 100,000 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
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 1,000,000 800,000 600,000 400,000 200,000 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
U.S. Pork Exports Thousand pounds (carcass wt) 500,000 2013 2014 2015 450,000 400,000 350,000 300,000 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
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 1,000,000 800,000 600,000 400,000 200,000 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
World Pork Export Share - 2014 U.S. 32% E.U. 32% Total World Pork Exports 6,887,000 Metric Tons 7% China 4% Canada 18% Brazil 8%
U.S. Pork Imports Thousand pounds (carcass wt) 110,000 2013 2014 2015 90,000 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
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% 600,000 500,000 400,000 300,000 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
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.
Supply Chain Relationships Environment Demand Best Practices Producer Consumer Legislation Animal Welfare Processor Global Markets FOOD SAFETY
Changing Consumer Demand Trends or Fads? Natural Organic Buy local Sustainable Production
The Basics of Calf Value Health Value Carcass Growth
ONCE THE PACKAGE IS OFF, QUALITY & CONSISTENCY ARE WHAT DIFFERENTIATES THE PRODUCT FROM OTHER GENERIC COMMODITY BEEF.
NATIONAL WEEKLY DIRECT SLAUGHTER CATTLE-PREMIUMS AND DISCOUNTS For the Week of: 01/18/2016 Value Adjustments Quality Range Simple Avg. Prime 0.00-20.00 11.25 Choice 0.00-0.00 0.00 Select (11.00)- (6.00) (7.00) Standard (56.00)- (10.00) (25.85) CAB 2.00-9.00 4.00 Dairy - Type (10.00)- 0.00 (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)- 0.00 (15.83)
ADDING VALUE REQUIRES ADDED INVESTMENT
It s all about.......