Ron Plain D. Howard Doane Professor of Agricultural Economics University of Missouri-Columbia Hog & Pork Outlook Louisville, August Midwest/Great Plains & Western Outlook Conference

Annual U.S. Pork Production, U.S. pork production expected to be on trend

Cost of Production

Corn, Average Price Received, Monthly, Source: USDA/NASS

Cost of Slaughter Hog Production Iowa State University Calculations, Source: John Lawrence, Iowa State University

Corn Price & Cost of Hog Production Monthly, Source: John Lawrence, Iowa State University

Corn Price & Cost of Hog Production Monthly, Source: Shane Ellis, Iowa State University $6.70 corn implies hog cost at $68/cwt live or $89/cwt car.

Iowa Farrow to Finish Profits, Source: Shane Ellis, Iowa State University

Monthly Profit Per Pig Source: Shane Ellis, Iowa State University

International Trade

U.S. Meat Exports,

U.S. Pork Imports & Exports,

U.S. Pork Imports & Exports as % of U.S. Pork Production,

U.S. Pork Exports,

Frozen Pork & U.S. Pork Exports,

Meat Demand

Source: USDA/ERS

Forecast Change in Meat Production --Percent Change-- Type Beef - 0.7% - 4.3% Pork +1.0% +1.6% Chicken +1.3% +1.0% Turkey +2.4% +0.4% All Meats +0.7% - 0.4% Source: USDA-OCE WASDE, August 2011

Change in Retail Meat Demand Base Elasticity = Source: Ron Plain, University of Missouri

Change in Pork Demand Base Elasticity = Source: Ron Plain, University of Missouri

Change in Pork Export Demand Base Elasticity = Source: Ron Plain, University of Missouri

Change in Hog Demand Base Elasticity = Source: Ron Plain, University of Missouri

Retail Boneless Pork Prices Retail Prices, Monthly, Source: USDA/ERS

Growth in Real GDP Source: U.S. Commerce Department

U.S. Unemployment Rate, Seasonally Adjusted, Source: Bureau of Labor Statistics

Average Duration of Unemployment

Current Situation The government is broke, unemployment is high, the stock market has collapsed, the economy is barely growing, and consumer confidence is the lowest since May Needless to say, this is not good for domestic meat demand.

Inventory Surveys

Hog Inventory Reports U.S. June Canada April

Which is important? More sows or fewer litters?

Daily Hog Slaughter by Quarter

Breeding Herd by Quarter

Hog Slaughter & Breeding Herd by Quarter Correlation = 0.20

Sows Farrowed by Quarter

Sows Farrowed & Hog Slaughter by Quarter Correlation = 0.78

U.S. Sows Farrowed by Quarter

Canada Sows Farrowed by Quarter

Sows Farrowed-U.S. & Canada Combined

Slaughter

2011 sow slaughter is down 0.2% Source: USDA/AMS

2011 slaughter of U.S. sows is up 2.8% Source: USDA/AMS

Source: USDA/AMS & Ron Plain

Estimated Gilt Retention & Sow Loss, GG Cattle & Hog Fax Source: Ron Plain, University of Missouri

Source: USDA/AMS

Actual & Predicted Change in B&G Slaughter U.S. Weekly F.I. Hog Slaughter, 2011

Hog Slaughter Plant Closings February 2000 AVA Pork-Shamokin, PA June 2000 Farmland-Dubuque, IA July 2001 Excel-Marshall, MO December 2001 AMPAC/Iowa Pork-Chicago, IL January 2003 Hormel-Rochelle, IL May 2004 RC Pork-Downs, KS September 2005 Smithfield-Smithfield, VA March 2006 Bryan Foods-West Point, MS January 2009 Meadowbrook-Rantoul, IL April 2010 Morrell-Sioux City, IA Triumph plans to build in East Moline, someday

Source: Ron Plain

Weekly Gross Pork Packer Margin, 200 Pound Carcass Calculation: Byproduct + Cutout – Negotiated net

Productivity Growth

U.S. Pigs Per Litter by Quarter

Source: USDA/AMS

Weekly Pork Production Source: USDA AMS

Prices

U.S. Retail Pork Prices,

Retail Pork Prices Source: BLS & USDA/ERS Record high

Source: USDA/AMS

Barrow & Gilt Negotiated Base Price Source: USDA Prior Day Slaughter reports $/cwt

Source: USDA Prior Day Purchased reports

Source: USDA/AMS

Pork Cutout and Hog Price, Weekly, Source: USDA/AMS

Hog Base Price as Percent of Pork Cutout, Weekly, Source: USDA/AMS

My Forecast

Commercial Hog Slaughter Forecast Million Head * actual Qtr * * Qtr * * Qtr * Qtr * Year * Change % - 0.1% + 0.2% +0.7% + 1.2% - 0.5% - 1.3% +2.5% - 0.1% +0.7% Note: Q1 10 & Q4 11 & Q3 12 have only 63 slaughter days

Iowa-Minn Hog Price Forecast Negotiated Base Price Per Carcass Hundredweight 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*$95-98 $86-90 Qtr 4$54.98*$65.20*$80-84 $76-80 Year$55.23*$72.67*$86-88 $82-85 * actual price – prior day purchased

Iowa-Minn Live Hog Price Forecast Negotiated Live Base Price Equivalent Qtr 1$43.49*$50.78*$60.00* $61-64 Qtr 2$43.56*$60.07*$69.77* $66-69 Qtr 3$39.09*$60.37*$72-75 $65-68 Qtr 4$41.78*$49.56*$61-64 $58-61 Year$41.97*$55.19*$66-68 $62-65 * actual carcass price x 76%

U.S. Hog Net Carcass Price, Monthly Average, Thru Feb 2013 all hog futures contracts are above $80 per cwt

Major Uncertainties Domestic meat demand Exchange rates & exports Feed costs Governmental policy –Bio fuels –GIPSA –Animal rights

Any Questions?

Omaha Corn Prices, Weekly, Source: USDA/AMS

Frozen Pork, , Start of the Month

U.S. Pork Exports,

Change in Domestic Beef Demand Base Elasticity = Source: Ron Plain, University of Missouri

Sows Farrowed & Breeding Herd by Quarter

Sows Farrowed, Breeding Herd & Hog Slaughter by Quarter

Barrow & Gilt Negotiated Live Price Source: USDA Prior Day Purchased reports $/cwt

MPR Negotiated Carcass Hog Prices, WCB minus ECB, Weekly, Source: USDA/AMS Prior Day Purchased

U.S. Pork Exports, Jan-May 2011 Change From Year Ago Country 000 lbs Percent Japan 80, % Mexico 10, % S. Korea 157, % Canada 18, % China & HongKong 49, % Australia 17, % Russia 39, % TOTAL 315, % Source: USDA/ERS

2010 hog imports were down 10%

Source: USDA/ERS