1. Ron Plain Professor of Agricultural Economics University of Missouri-Columbia http://web.missouri.edu/~plainr/ Pork Outlook Midwest/Great Plains & Western Outlook Conference Indianapolis, August 2007

2. Production efficiency Hog cycle Seasonality Cost of production International trade Slaughter capacity Demand Long Run Factors

3. Production Efficiency

4. Pigs Per Litter, 1930-2006 USDA Hogs & Pigs Reports

5. Litters Per Sow Per Year, 1930-2006

6. Average U.S. Hog Carcass Weight, 1930-2006

7. Annual U.S. Pork Production Per Sow, 1930-2006

8. 1930-80 growth rate: 2.027% 1980-06 growth rate 2.793%

9. U.S. Live Hog Imports, 1930-2006

10. U.S. Live Hog Exports, 1930-2006

11. Net U.S. Live Hog Imports, 1930-2006

12. Annual U.S. Pork Production Per Sow, 1930-2006

13. 1930-80 growth rate: 2.027% 1980-06 growth rate 2.793%

14. Average Annual Productivity Growth 1930-801980-06 Pigs/litter+ 0.37%+ 0.89% Litters/sow/year+ 0.49%+ 1.06% Pigs/sow/year+ 0.87%+ 1.96% Dom slght/pig weaned+ 0.53%- 0.12% Dom slght/sow/year+ 1.40%+ 1.84% Slaughter weight+ 0.62%+ 0.62% Dom pork prod/sow/year+ 2.02%+ 2.47% Net hog trade impact+ 0.01%+ 0.32% Pork prod/sow/year+ 2.03%+ 2.79%

15. Hog Cycle

16. U.S. Commercial Hog Slaughter Quarterly Data, 1970-2007

17. Terminal Market Barrow & Gilt Price Quarterly Data 1970-2007

18. Hog Price Flexibility Quarterly Data 1970-2007 % ch T Mkt B&G price / % ch com hog slt In 8 of last 15 quarters, price & slaughter moved in the same direction

19. Seasonality

22. July to November Changes Daily Pork Production 1970s+30% 1980s+24% 1990s+20% 2000- 6+18% Barrow & Gilt Prices 1970s-11% 1980s-13% 1990s-20% 2000- 6-18%

23. Cost of Production

24. Cost of Slaughter Hog Production Iowa State University Calculations, 1987-2007 Source: John Lawrence, Iowa State University

26. Ethanol Capacity Growth Source: Renewable Fuel Association website http://www.ethanolrfa.org/industry/statistics/#B http://www.ethanolrfa.org/industry/statistics/#B

27. Corn Milled for Ethanol Forecast % corn for ethanol: 2000-01: 6% 2005-06: 14% 2006-07: 20% 2007-08: 26%

28. International Pork Trade

29. 2006 was the 15th consecutive record year for U.S. exports

31. Iowa Farrow to Finish Profits, 1994-2006 Source: John Lawrence, Iowa State University 35 consecutive months of profit, longest of record

32. Source: USDA/NASS

33. Source: USDA/ERS

38. Pork Trade Overview The steady decrease in US pork imports and increase in pork exports has caused per capita US pork consumption to decline. Thus, hog producers were able to enjoy three consecutive years with record hog slaughter and profitable prices.

39. U.S. Pork Imports & Exports, 2000-2007 14.3% of 2006 U.S. pork production was exported

40. U.S. Pork Exports, Jan-May 2007 Change from year ago Country 000 lbs Percent Japan+ 48,697 + 11.5% Mexico- 79,081 - 29.1% Canada + 3,186 + 2.5% S. Korea+ 4,049 + 3.1% Russia- 23,402 - 23.2% China & HK+ 30,123 + 45.5% Taiwan- 13,651 - 41.2% TOTAL- 37,029 - 2.9%

41. U.S. Pork Exports, 2000-2007

43. China Pork Trade China is reported to be buying 70,000 MT of U.S. pork to help ease a run up in domestic pork prices (up 67.7% in June) caused by a pork shortage due to high feed prices and blue ear disease. In perspective, 70,000 MT* equals: 94% of 2006 China/HK imports of U.S. pork 5.1% of 2006 U.S. pork exports 0.73% of 2006 U.S. pork production * carcass weight equivalent

44. Fall Price Decline Aug-OctOct-DecAug-Dec 10 yr average-$6.82- $4.63-$11.45 10 yr minimum-$3.09+$2.51-$ 1.16 Futures-$2.62- $1.35-$ 3.97

45. Live Hog Trade

46. Pigs Born in Canada, 1996-07

47. U.S. Pig Crop, 1996-07

48. Growth in U.S.-Canadian Pig Crop 1995-2005 Source: USDA/FAS During the past decade, 74% of the increase in U.S.-Canadian pig production took place in Canada. (million head)

49. Exchange Rate: Can $ Per US $

54. Change in Hog Slaughter: US & Canada Weekly F.I. Hog Slaughter, 2006-07

55. Slaughter Capacity

56. Steve Meyer’s survey indicates 2007 capacity of 425,185

57. Demand

58. Annual U.S. Pork Production, 1930-2006

59. U.S. Per Capita Pork Consumption, 1930-2006

61. Change in Export Pork Demand Base Elasticity = - 0.5

63. Demand Inventory Weights Price Forecast Short Run Factors

64. Record high

65. Change in Pork Demand Base Elasticity = - 0.75

66. Change in Hog Demand Base Elasticity = - 0.2

67. Inventory Reports

68. Pig/Month Accumulated Profits, 1990-2007 Source: John Lawrence, Iowa State University

69. Hog Inventory Reports U.S. June Canada April

70. Sows Farrowed-U.S. & Canada Combined

71. Estimated Gilt Retention & Sow Loss, 2006-2007 GG Cattle & Hog Fax

72. Hog Weights

74. Hog Prices

75. Source: USDA Prior Day Purchased reports

76. Source: USDA Prior Day Slaughtered reports

77. Barrow & Gilt Negotiated Live Price Source: USDA Prior Day Purchased reports

78. Major Unknowns Circovirus vaccine & death losses China & pork exports Weather Slaughter capacity

79. My Forecast

80. Commercial Hog Slaughter Forecast Million Head * actual 2006 2007 2008 Qtr 1 26.208* 26.686* 27.330 Qtr 2 24.839* 25.524* 25.830 Qtr 3 25.810* 26.425 27.165 Qtr 4 27.880* 29.100 29.400 Year104.737*107.734109.725 ------Change------ 06-07 07-08. +1.8% +2.4%. +2.7% +1.2% +2.4% +1.2% +2.8% +1.0% +2.4% +1.4% Note: Q4 07 & Q3 08 have 1 more slaughter day

81. Iowa-Minn Hog Price Forecast Negotiated Base Price Per Carcass Hundredweight 2006 2007 2008 Qtr 1$56.37*$60.65*$64-68 Qtr 2$65.41*$69.60*$67-71 Qtr 3$68.24*$68-70$64-68 Qtr 4$60.76*$61-65$58-62 Year$62.68*$65-67$63-67 * actual price – prior day purchased

82. Iowa-Minn Live Hog Price Forecast Negotiated Base Price Per Live Hundredweight 2006 2007 2008 Qtr 1$41.71*$44.88*$47-50 Qtr 2$48.40*$51.50*$49-52 Qtr 3$50.50*$50-52$47-50 Qtr 4$44.96*$45-48$43-46 Year$46.38*$48-50$46-49 * actual price – 74% of carcass price

83. Forecast Summary Farrowings 0-2% above year-ago Continued 2-3% productivity growth More imports of Canadian hogs/pigs Possible increase in pork exports Stable domestic demand Rising feed cost

84. Any Questions?