Agricultural Commodity Outlook: Grain, Forage & Cattle Markets

Agricultural Commodity Outlook: Grain, Forage & Cattle Markets Stephen R. Koontz Professor & extension economist Department of Agricultural & Resource Economics Colorado State University Stephen.Koontz@ColoState.Edu http://webdoc.agsci.colostate.edu/koontz Greeley, Colorado January, 2017 1

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Outline Commodity Price Outlook Weather Corn Wheat Hay Cattle Macro & General Economic Conditions What s happened, why, & what likely next? 3

A Long Term Perspective Summary Huge increase in demand for corn. Weather related production short falls (i.e., below trend yields) attempting to satisfy this demand. Strong & changing, mainly through growth, world economies. For long enough things looked different (i.e., there was bad long term forecasting). The rising tide for corn floated the boats for all crop commodities & swamped the boats for protein commodities. 4

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95/75 = 1.2667. So foreign buyers of U.S. commodities face a 26⅔% increase in prices before even they get a chance to buy the commodities. It s not as bad as in the early-2000 s or the entire 1980s. But it s worse than the Great Recession and Future interest rates? 6

Summary Plentiful supplies of almost all crop & many livestock commodities. No clear source of strong demand growth. Strong dollar & increasing U.S. interest rates. It s not the 1980 s missing the inflation & debt but there are similarities. Weaker prices & margins for crop production. What are reasonable expectations for future commodity prices? And actions to take? 7

GL_GR111 Greeley, CO Mon Jan 23, 2017 USDA-CO Dept of Ag Market News CO/NE/WY Elevator Afternoon Grain Bids Cash grain bids to farmers delivered to country elevators for Corn, Wheat and Soybeans per bushel; and Sorghum, Millet, and Sunflowers per cwt. as of 3:00 pm. January 23, 2017. US 1 Hard Red Winter Wheat Ordinary Protein: 2 higher. Northcentral Colorado range 3.25 Greeley 3.25 Bennett/Roggen/Byers 3.25 Northeast Colorado range 2.90-3.44 Fleming/Haxtun/Holyoke/Amherst/ Julesburg/Paoli/Peetz 3.06-3.44 Yuma/Wray/Brush/Akron/Otis/Anton 2.90-2.95 Eastcentral Colorado range 3.05-3.30 Cheyenne Wells 3.30 Limon/Seibert/Burlington/Genoa/Hugo/Arriba/ Flagler/Bethune/Stratton 3.05 Southeast Colorado range 2.95-3.25 Lamar/Holly/Vilas/Campo/Wiley/Springfield Southwest NE and Southeast WY range 3.04-3.39 Venango/Chappell/Big Springs/Brule 3.04-3.39 Kimball/Pine Bluffs/Sidney/Brownson/Potter 3.05-3.09 US 2 Yellow Corn: steady to 1 lower. Northcentral Colorado range 3.45-3.69 Greeley/Eaton 3.69 Roggen/Byers 3.45 Northeast Colorado range 3.02-3.38 Fleming/Haxtun/Holyoke/Amherst/ Julesburg/Paoli/Peetz 3.14-3.20 Yuma/Wray/Brush/Otis/Anton 3.02-3.38 Eastcentral Colorado range 2.99-3.20 Cheyenne Wells 3.20 Limon/Seibert/Burlington/Genoa/Hugo/Arriba/ Flagler/Bethune/Stratton 2.99-3.00 Southeast Colorado range 3.00-3.25 Lamar/Holly/Vilas/Campo/Wiley/Springfield Southwest NE and Southeast WY range 3.15-3.30 Venango/Chappell/Big Springs/Brule/ 3.15-3.23 Kimball/Pine Bluffs/Sidney/Potter 3.20-3.30 Colorado wheat is trading for $3.00-$3.25/bu. & corn is trading for $3.20-$3.45/bu. White Millet Colorado/SW NE/SE WY range 5.00-6.00 mostly 5.00 Sunflowers Colorado/SW NE/SE WY range 15.50-17.00 Source: USDA-CO Dept of Ag Market News Service, Greeley, CO Tammy Judson, Market Reporting Assistant (970)353-9750 24 Hour Market Report (970)353-8031 Greeley.LPGMN@ams.usda.gov www.ams.usda.gov/lsmarketnews GL_LS795 Greeley, CO Fri Jan 20, 2017 USDA-CO Dept of Ag Market News Colorado Auction Feeder Cattle Summary Receipts: 9675 Last Week: 21681 Last Year: 9856 Compared to last week: Feeder steers under 500 pounds were 1.00 to sharply lower on a good test. Feeder steers over 500 pounds were steady to 1.00 to 9.00 higher on a good test. Feeder heifers under 500 pounds were unevenly steady trending higher on a good test. Feeder heifers over 500 pounds were mostly 1.00 to 10.00 higher on a good test. Several auctions from this week were stock show specials which mainly featured high quality weaned cattle on multiple vaccination programs and provided a very good market test. The feeder supply consisted of approximately 58 percent steers and 42 percent heifers. Feeder cattle over 600 pounds made up approximately 54 percent of the supply. Combined weighted average report for 4 Colorado auctions this week included: La Junta Livestock Commission, Sterling Livestock, Winter Livestock and Centennial Livestock Auction. Feeder Steers: Medium and Large 1 365-400 lbs 177.50-200.00; 450-500 lbs 160.00-183.00; 500-550 lbs 154.00-178.00, fancy 165.00-180.00; 550-595 lbs 144.00-163.00, fancy 160.00-171.50; 600-645 lbs 139.00-156.00; 650-700 lbs 132.50-147.00; 700-750 lbs 130.50-142.00, fancy 135.50-146.00; 750-800 lbs 125.00-137.00, fancy 137.75-141.00; 805-840 lbs 123.50-132.00, fancy 133.00; 855-895 lbs 125.00-130.25; 900-940 lbs 125.25-129.25; 957 lbs 123.50; 1067 lbs 118.00. Medium and Large 1-2 400-450 lbs 156.00-177.50; 460-500 lbs 147.00-172.00; 520-550 lbs 144.00-158.00; 555-600 lbs 122.00-152.25; 605-650 lbs 136.50-145.50; 650-695 lbs 129.00-137.00; 717 lbs 127.00; 773 lbs 124.00. Feeder Heifers: Medium and Large 1 355-395 lbs 151.00-155.00; 435-450 lbs 144.00-164.00; 450-500 lbs 135.00-161.00, fancy 169.50; 500-550 lbs 135.00-159.00, fancy 146.00-160.00; 550-600 lbs 125.00-146.75; 600-645 lbs 125.00-138.00; 650-700 lbs 124.00-135.50; 700-750 lbs 120.00-132.50, fancy 133.50; 750-780 lbs 122.00-128.00; 820-845 lbs 119.00-123.85; 850-900 lbs 117.50-119.00, fancy 123.25; 927 lbs 115.75. Medium and Large 1-2 360-400 lbs 148.00-154.00; 420-445 lbs 140.00-148.00; 450-500 lbs 135.00-145.00; 500-545 lbs 126.00-142.00; 555-600 lbs 131.00-134.50; 643 lbs 126.00; 663 lbs 124.00; 715-750 lbs 115.00-117.50; 802 lbs 117.00. Source: USDA-CO Dept of Ag Market News Service, Greeley, CO Lindsay Brunet, Market Reporter 970-353-9750 Greeley.LPGMN@ams.usda.gov www.ams.usda.gov/mnreports/gl_ls795.txt http://marketnews.usda.gov/portal/lg A 5-6 cwt steer calf is $140-$150/cwt. 8

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Weekly Corn Contract $8.00 $5.00 The trading range for corn is $3.00-$4.50/bu. Except 14

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NOV 2017 Soybean Contract DEC 2017 Corn Contract 16

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DEC 2016 Corn Contract Forecast $3.25-3.50/bu 21

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DEC 2015 Corn Contract Blue is the right trading range & green can happen again but not for long DEC 2017 Corn Contract 23

Corn Outlook Market price is very much aligned with where fundamentals say it should be. Acres? Yields? Soybeans? Cash flow & debt? Demand? Trade? Storage? Price outlook $3.50 $3.85/bu. And we ve had the four big crops. 17/18 @ $3.75 $4.00/bu. But could be $4.35 or $2.85. Weekly KC Wheat Contract 24

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JUL 2017 KC Wheat Contract 29

JUL 2017 Wheat Contract JUL 2016 KC Wheat Contract 30

JUL 2015 KC Wheat Contract Wheat Outlook World production & usage: large stocks. U.S. production & use: large stocks. Acres this year? Graze out? World weather? Soft trade & strong dollar. Forecasts: JUL 2017 @ $4.75 with range $4.50 5.00/bu. Aligned with fundamentals & cash much lower. 31

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Mil. Tons 190 US ALL HAY SUPPLY & DISAPPEARANCE Crop Year 180 170 160 150 140 130 120 110 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Hay Supply Disap. Data Source: USDA NASS, Compiled & Forecasts by LMIC G-NP-20 10/12/16 33

Mil. Tons 120 US ALL HAY STOCKS December 1 110 100 90 80 70 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Data Source: USDA NASS, Compiled & Forecasts by LMIC G-NP-22 10/12/16 Mil. Tons 30 US ALL HAY STOCKS May 1 (Beginning of Crop Year) 25 20 15 10 5 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Data Source: USDA NASS, Compiled & Forecasts by LMIC G-NP-21 10/12/16 34

PERCENT CHANGE ALL HAY ACRES (2014-2015) U.S. Total: 5% Data Source: USDA-NASS 1/12/2016 PERCENT CHANGE NEW SEEDLINGS ACRES (2014-2015) U.S. Total: 0.5% Data Source: USDA-NASS 1/12/2016 35

GL_GR310 Greeley, CO Thu Jan 19, 2017 USDA-CO Dept of Ag Market News Colorado Hay Report Compared to the last week reported, prices were steady to higher with activity light and demand high in all classes. Producers are reporting an increase in interest and demand for hay in relation to the severity of the winter thus far. All prices reported are FOB at the stack or barn unless otherwise noted. Prices reflect load lots of hay. Northeast Colorado Areas Alfalfa Large Squares: Supreme 150.00, Good 125.00 DEL, 180.00 small lot. Ground and Delivered: 100.00. Grass Small Squares: Premium 245.00 (7.00 per bale) small lot. Southeast Colorado Areas Grass Small Squares: Premium 227.00 (6.50 per bale), retail. San Luis Valley Area Alfalfa Large Squares: Supreme 165.00; Supreme/Premium 150.00; Premium/Good 140.00; Good/Fair 135.00; Fair 120.00. Southwest Colorado Areas Grass Small Squares: Premium 200.00 (7.00 per bale). Orchard Grass Small Squares: Premium 265.00 (12.00 per bale). Mountains and Northwest Colorado Areas Grass Large Squares: Premium 115.00; Fair 80.00. Forage Outlook Plentiful except for high quality. Good quality hay: Alfalfa $150 $180/T. Grass $85 $100/T. Low quality hay: <$65 $95/T. Small bales 36

USDA Quarterly Cattle Price Forecasts Date Fed Cattle 7 800# Feeder 5 600# Calf 2016: VI $107 108 $128 130 $138 139 2017: I $113 115 $127 129 $139 142 2017: II $111 114 $129 133 $142 148 2017: III $106 110 $128 134 $138 145 2017: VI $107 112 $126 133 $133 142 2018: I $108 114 $124 132 $134 145 2018: II $107 114 $127 136 $137 149 2018: III $103 111 $123 133 $134 147 2018: VI $104 113 $122 133 $130 144 Weekly Live Cattle Contract This market is looking for a bottom trading range $90-120/cwt. $170 37

Monthly Live Cattle Contract Weekly Feeder Cattle Contract This market will drift lower trading range $110-150/cwt. $240 38

Monthly Feeder Cattle Contract Cattle Outlook Fed cattle market has/will trend down: Domestic demand was strong & is weakening. International demand & trade are weak. Big expansion in competing meats. Feeder cattle & calf prices will weaken for the next several years if: Herd building continues. Red meat & poultry production expand. 39

Mil. Head 11.5 11.3 11.1 10.9 10.7 10.5 10.3 10.1 9.9 9.7 CATTLE ON FEED US Total, Monthly JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2010/14 2015 2016 Data Source: USDA NASS C-N-10 12/23/16 40

Mil. Head 2.1 FED CATTLE MARKETINGS US Total, Monthly 2.0 1.9 1.8 1.7 1.6 1.5 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2010/14 2015 2016 Data Source: USDA NASS C-M-11 12/23/16 Mil. Head 2.5 FEEDLOT PLACEMENTS US Total, Monthly 2.3 2.1 1.9 1.7 1.5 1.3 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2010/14 2015 2016 Data Source: USDA NASS C-N-08 12/23/16 41

Mil. Head 4.6 4.4 4.2 4 3.8 3.6 3.4 3.2 3 2.8 CATTLE ON FEED OVER 120 DAYS US Total, Monthly JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2010/14 2015 2016 Data Source: USDA NASS, Compiled & Analysis by LMIC C-N-12 12/23/16 JUN 2017 Live Cattle Contract 42

MAR 2017 Feeder Cattle Contract Thou. Head 100 90 80 70 60 50 40 30 20 10 0 SATURDAY CATTLE SLAUGHTER Federally Inspected, Weekly JAN APR JUL OCT Avg. 2010 14 2015 2016 Data Source: USDA AMS & USDA NASS C-S-03 12/30/16 43

Thou. Head 380 360 340 320 300 280 260 240 220 200 STEER SLAUGHTER Federally Inspected, Weekly JAN APR JUL OCT Avg. 2010 14 2015 2016 Data Source: USDA AMS & USDA NASS C-S-17 12/30/16 Thou. Head HEIFER SLAUGHTER Federally Inspected, Weekly 200 180 160 140 120 100 JAN APR JUL OCT Avg. 2010 14 2015 2016 Data Source: USDA AMS & USDA NASS C-S-13 12/30/16 44

Pounds 1390 1370 1350 1330 1310 1290 1270 1250 1230 1210 LIVE WEIGHT STEER AND HEIFER Texas/Oklahoma Panhandle Area, Weekly JAN APR JUL OCT Avg. 2010 14 2015 2016 Data Source: USDA AMS & USDA NASS C-S-26 12/30/16 Thou. Head 90 BEEF COW SLAUGHTER Federally Inspected, Weekly 80 70 60 50 40 30 JAN APR JUL OCT Avg. 2010 14 2015 2016 Data Source: USDA AMS & USDA NASS C-S-34 12/30/16 45

Mil. Pounds 2300 COMMERCIAL BEEF PRODUCTION Monthly 2200 2100 2000 1900 1800 1700 JAN MAR MAY JUL SEP NOV Avg. 2010 14 2015 2016 Data Source: USDA NASS M-S-02 11/23/16 Mil. Pounds 2250 COMMERCIAL PORK PRODUCTION Monthly 2150 2050 1950 1850 1750 1650 JAN MAR MAY JUL SEP NOV Avg. 2010 14 2015 2016 Data Source: USDA NASS, Compiled & Analysis by LMIC M-S-05 11/23/16 46

Cents Per Pound 650 RETAIL BEEF PRICE All Fresh, Monthly 600 550 500 450 400 JAN MAR MAY JUL SEP NOV Avg. 2010 14 2015 2016 Data Source: Bureau of Labor Statistics & USDA ERS M-P-11 12/15/16 Cents Per Pound 410 400 390 380 370 360 350 340 330 320 RETAIL PORK PRICE Monthly JAN MAR MAY JUL SEP NOV Avg. 2010 14 2015 2016 Data Source: Bureau of Labor Statistics & USDA ERS M-P-05 12/15/16 47

Cents Per Pound 205 RETAIL CHICKEN PRICE Broiler Composite, Monthly 200 195 190 185 180 175 JAN MAR MAY JUL SEP NOV Avg. 2010 14 2015 2016 Data Source: Bureau of Labor Statistics & USDA ERS M-P-12 12/15/16 Cents Per Pound 650 600 550 500 450 400 350 300 250 200 150 100 50 RETAIL PRICE COMPARISON Monthly Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Data Source: Bureau of Labor Statistics & USDA ERS Pork Composite Broiler All Fresh Beef 48

$ Per Cwt. 180 170 160 150 140 130 120 110 100 90 SLAUGHTER STEER PRICES 5 Market Weighted Average, Weekly JAN APR JUL OCT Avg. 2010 14 2015 2016 Data Source: USDA AMS 12/19/16 $ Per Cwt. 300 280 260 240 220 200 180 160 140 120 MED. & LRG. #1 STEER CALF PRICES 500 600 Pounds, Southern Plains, Weekly JAN APR JUL OCT Avg. 2010 14 2015 2016 Data Source: USDA AMS, Compiled & Analysis by LMIC C-P-54 12/19/16 49

$ Per Cwt. 130 SLAUGHTER COW PRICES Southern Plains, 85 90% Lean, Weekly 120 110 100 90 80 70 60 50 JAN APR JUL OCT Avg. 2010 14 2015 2016 Data Source: USDA AMS C-P-35 12/19/16 Index Value 120 RETAIL ALL FRESH BEEF DEMAND INDEX Annual, Using CPI 1990=100 100 80 100 96 91 91 86 86 82 79 75 75 77 80 81 85 88 83 85 85 80 77 75 77 79 81 86 92 60 40 20 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Data Source: Bureau of Labor Statistics, USDA ERS, Compiled & Analysis by LMIC 50

Index Value 120 RETAIL ALL FRESH BEEF DEMAND INDEX First Quarter, Using CPI 1990=100 100 80 100 95 94 86 87 83 86 91 93 92 87 80 75 77 80 83 83 85 85 82 81 76 74 77 79 80 80 60 40 20 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Data Source: Bureau of Labor Statistics, USDA ERS, Compiled & Analysis by LMIC Index Value 120 RETAIL ALL FRESH BEEF DEMAND INDEX Second Quarter, Using CPI 1990=100 100 80 100 96 90 83 84 80 80 75 77 77 79 86 91 90 83 84 84 80 73 76 74 75 78 80 84 90 88 60 40 20 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Data Source: Bureau of Labor Statistics, USDA ERS, Compiled & Analysis by LMIC 51

Index Value 120 RETAIL ALL FRESH BEEF DEMAND INDEX Third Quarter, Using CPI 1990=100 100 80 10099 91 89 86 84 75 73 75 77 82 82 83 85 92 87 83 87 93 88 83 78 74 75 76 78 79 60 40 20 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Data Source: Bureau of Labor Statistics, USDA ERS, Compiled & Analysis by LMIC Index Value 120 RETAIL ALL FRESH BEEF DEMAND INDEX Fourth Quarter, Using CPI 1990=100 100 80 100 94 93 94 93 88 87 85 81 76 74 76 79 80 85 87 87 88 89 83 82 75 78 78 82 83 60 40 20 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Data Source: Bureau of Labor Statistics, USDA ERS, Compiled & Analysis by LMIC 52

Cattle & Beef Going Forward? Weak domestic demand. Strong dollar & weak trade. Herd expansion, increased future production, & normal feeding costs. Pressured by pork & poultry prices. 1000 MT 6 US EXPORTS OF BEEF MUSCLE CUTS Weekly 5 4 3 2 1 0 1/4/14 7/5/14 1/10/15 7/11/15 1/9/16 7/9/16 Canada Japan Mexico Korean Rep. Data Source: USDA AMS & USDA APHIS 12/30/16 53

1000 MT 21 TOTAL U.S. EXPORTS OF BEEF MUSCLE CUTS Weekly 19 17 15 13 11 9 7 1/5/13 7/6/13 1/4/14 7/5/14 1/10/15 7/11/15 1/9/16 7/9/16 Data Source: USDA FAS 12/30/16 Mil. Pounds 375 350 325 300 275 250 225 200 175 150 125 US BEEF AND VEAL IMPORTS Carcass Weight, Monthly JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2010 14 2015 2016 Data Source: USDA ERS & USDA FAS I-N-15 01/09/17 54

Mil. Pounds 270 US BEEF AND VEAL EXPORTS Carcass Weight, Monthly 250 230 210 190 170 150 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2010 14 2015 2016 Data Source: USDA ERS & USDA FAS I-N-16 01/09/17 Mil. Pounds 200 US NET BEEF IMPORTS Carcass Weight, Monthly 150 100 50 0 50 100 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2010 14 2015 2016 Data Source: USDA ERS & USDA FAS, Compiled & Analysis by LMIC I-N-31 01/09/17 55

Mil. Pounds 70 US BEEF EXPORTS TO JAPAN Carcass Weight, Monthly 60 50 40 30 20 10 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2010 14 2015 2016 Data Source: USDA ERS & USDA FAS I-N-37 01/09/17 Bil. $ 10 9 8 7 6 5 4 3 2 1 0 US BEEF INDUSTRY EXPORT VALUES Annual 1989 1992 1995 1998 2001 2004 2007 2010 2013 Live Cattle Beef & Veal Hides & Skins Variety Meats Tallow & Greases Data Source: USDA FAS, Compiled & Analysis by LMIC I-N-70 02/17/16 56

Bil. $ 10 9 8 7 6 5 4 3 2 1 0 US BEEF INDUSTRY IMPORT VALUES Annual 1989 1992 1995 1998 2001 2004 2007 2010 2013 Live Cattle Beef & Veal Hides & Skins Variety Meats Tallow & Greases Data Source: USDA FAS, Compiled & Analysis by LMIC I-N-71 02/09/16 Bil. $ 4 US BEEF INDUSTRY NET EXPORT VALUES Annual 3 2 1 0 1 2 3 1989 1992 1995 1998 2001 2004 2007 2010 2013 Live Cattle Beef & Veal Hides & Skins Tallow, Grease & Var Meat Total Data Source: USDA FAS, Compiled & Analysis by LMIC I-N-72 02/22/16 57

Bil. Pounds 3.5 US BEEF AND VEAL NET IMPORTS Carcass Weight, Annual 3.0 2.5 2.0 1.5 1.0 0.5 0.0 0.5 1.0 1993 1996 1999 2002 2005 2008 2011 2014 2017 Data Source: USDA ERS & USDA FAS, Compiled & Analysis by LMIC I-N-28 12/28/16 Pounds US RED MEAT & POULTRY CONSUMPTION Per Capita, Retail Weight, Annual 200 150 100 50 0 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Beef Pork Total Chicken Turkey Data Source: USDA-NASS, Compiled & Analysis by LMIC M-C-01 01/12/17 58

Nominal Dollars 800 US EXPENDITURES FOR MEAT & POULTRY Per Capita, By Type of Meat, Annual 700 600 500 400 300 200 100 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Beef Pork Broiler Turkey Data Source: Bureau of Economic Analysis & USDA-ERS, Compiled & Analysis by LMIC M-C-16A 01/12/17 Mil. Head 46 45 44 43 42 41 40 39 38 37 36 JANUARY 1 TOTAL COW INVENTORY U.S., Annual 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 Data Source: USDA NASS C-N-02A 02/01/16 59

Mil. Head 140 TOTAL CATTLE INVENTORY BY CYCLE U.S., January 1 130 120 110 100 90 80 70 60 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1938 49 1949 58 1958 67 1967 79 1979 90 1990 04 2004 14 2014 16 Data Source: USDA NASS C-N-40 02/01/16 $ Per Cow ESTIMATED AVERAGE COW CALF RETURNS Returns Over Cash Cost (Includes Pasture Rent), Annual 500 400 300 200 100 0 100 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Data Source: USDA & LMIC, Compiled by LMIC C-P-66 12/29/16 60

$ Per Cow 1000 900 800 700 600 500 400 300 200 100 0 ESTIMATED AVERAGE COW CALF COSTS Total Cash Cost Plus Pasture Rent, Annual 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Data Source: USDA & LMIC, Compiled by LMIC 12/29/16 Cattle Outlook Expansion this year & next? Reasonable feed costs. Worst case scenario softening demand & strong competing meat production hard fall last two years & stop? Best case scenario need to see increased trade. 61

Input Market Outlook Summary Soft everything. Even land valuations Common non ag risks moderating except Softening fuel costs with no volatility Fertilizer Chemicals Supply industries remain operating undercapacity & unwilling to take risk. We haven t had this much cheap energy in a while. Let s see what happens. $150 Weekly Crude Oil Contract $35 $40-$60 62

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Percent Change 2.00 1.50 1.00 0.50 0.00 0.50 1.00 1.50 2.00 QTRLY GROSS DOMESTIC PRODUCT (GDP) Real Dollar (2005) Change from Previous Quarter 2.50 2001 2003 2005 2007 2009 2011 2013 2015 Data Source: Bureau of Economic Analysis, Compiled & Analysis by LMIC 12/20/16 66

Bil. Dollars 15000 TOTAL DISPOSABLE PERSONAL INCOME Quarterly 14000 13000 12000 11000 10000 9000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Current Dollars 2009 Dollars Data Source: Bureau of Economic Analysis 12/20/16 2009 Dollars Calculated Dollars 44000 PER CAPITA DISPOSABLE PERSONAL INCOME Quarterly 42000 40000 38000 36000 34000 32000 30000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Current Dollar 2009 Dollar Data Source: Bureau of Economic Analysis 2009 Dollars Calculated 12/20/16 67

Percent 11.0 U.S. UNEMPLOYMENT RATE Seasonally Adjusted, Quarterly 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Data Source: Bureau of Labor Statistics, Compiled & Analysis by LMIC 12/20/16 Index 120 Domestic U.S. Consumer Confidence Monthly, Index year 1966 = 100 110 100 90 80 70 60 50 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 Data Source: Thomson Reuters/University of Michigan 10/14/16 68

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Weekly S&P500 Contract 72

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Summary & Bottom Line Corn acres & this year s weather. Prices pulled by soybeans. Forage firm through winter & weaker next summer. Wheat crop conditions similar to last year acres & yields? worldwide & dollar? Cattle more numbers, big weights, weak demand, lower prices trade? Summary & Recommendations Many markets trending downwards. Little fundamental strength. Aggressive selling of any rallies. Watch resistance planes & sell before reached. Hand to mouth purchases. Watch support planes & expect to be pressured. Interest rates & dollar 74

Contact and Link Information Stephen.Koontz@ColoState.Edu http://webdoc.agsci.colostate.edu/koontz 75