1. Agricultural Economic Outlook
Iowa Division of Banking Annual Meeting
Des Moines, Iowa
June 9, 2015
Chad Hart
Associate Professor/Crop Markets Specialist 1 1

2. U.S. Meat Production & Prices
Source: USDA-WAOB 2 2

3. Overarching Pork Industry
Economic Outlook
Supplies
Increasing; Breeding herd expansion ongoing
Increase in com slght depends on inv, wts, PEDv & PRRS
Demand
Strength “lost” in supply story
+ Yr-over-Yr for 10 straight quarters
+5% in Q1.2014, +8% Q2, +7% Q3, +11% Q4, & 18% Q1:2015
Combined: “excitement & uncertainty”

4. Hog Crush Margin
The Crush Margin is the return after the pig, corn and soybean meal costs.
Carcass weight: 200 pounds Pig price: 50% of 5 mth out lean hog futures
Corn: 10 bushels per pig Soybean meal: 150 pounds per pig
Source: ISU Extension

5. Data Source: USDA-NASS, Compiled & Analysis by LMIC
Livestock Marketing Information Center

6. 2013 = +$ [-$25.60 to +$24.57]
2014 = +$ [+$13.15 to +$107.25]
~2015 = +$ [-$3.23 to +$39.26]
~Jan-Aug 2016 = +$18.43 [+$7.76 to +$29.96]

7. USDA Quarterly Hogs and Pigs Report – United States
March 27, 2015
2015 as %
Pre-Report
Actual -
2014
2015
of 2014
Range
Estimate
Inventories on Mar 1 *
All hogs and pigs
61,494
65,934
107.2
106.8
0.4
Kept for breeding
5,851
5,982
102.2
103.5
-1.3
Market
55,643
59,953
107.7
0.5
Under 50 pounds
17,336
18,959
109.4
108.6
0.8
pounds
15,487
16,509
106.6
-0.2
pounds
12,538
13,290
106.0
106.1
-0.1
180 pounds and over
10,281
11,195
108.9
107.0
1.9
Farrowing **
Dec – Feb sows farrowed
2,763
2,829
102.4
103.7
Mar – May intentions
2,810
2,870
102.1
103.1
-1.0
Jun – Aug intentions
2,991
2,927
97.9
102.7
-4.8
Dec – Feb Pig Crop *
26,326
28,758
109.2
0.0
Dec – Feb Pigs per Litter
9.53
10.17
106.7
105.3
1.4
* 1,000 head
** 1,000 litters
Data Source: USDA/NASS

8. Data Source: USDA/NASS

9. Data Source: USDA/NASS

10. Data Source: USDA/NASS

11. LMIC Pork Production and Price Quarterly Forecasts (6/1/15)
Sources: USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC
Year
Comm’l
% Chg.
Avg Carcass
Comm’l Pork
Quarter
Slaughter
Year Ago
Weight
Production
2014 I
27,131
-2.6
213
2.7
5,784
0.2 II
25,575
-4.4
215
4.4
5,504
-0.2
III
25,558
-7.6
212
4.3
5,424
-3.5 IV
28,612
-4.0
1.7
6,131
-2.3
106,876
-4.6
214
3.3
22,843
-1.5
2015
28,723
5.9
0.8
6,161
6.5
27,435
7.3
-1.3
5,832
6.0
27,739
8.5
210
-1.1
5,824
7.4
30,542
6.7
6,541
114,439
7.1
-0.5
24,358
6.6
2016
29,536
2.8
-0.4
6,327
27,211
-0.8
5,797
-0.6
27,764
0.1
211
0.3
5,845
0.4
30,237
-1.0
6,491
114,748
24,460

12. 2015-YTD
0.13% (vs. 2014)
Data Source: USDA/AMS

13. LMIC Pork Production and Price Quarterly Forecasts (6/1/15)
Sources: USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC
Year
lbs Per Capita
% Chg.
Nat’l Wtd
Quarter
Consumption
Year Ago
Avg Base Price
2014 I
11.3
-1.0
91.44
12.8 II
11.0
-2.6
111.84
25.2
III
11.1
-2.3
110.03
15.5 IV
13.0
2.2
90.13
8.6
46.4
-0.8
100.86
16.1
2015
12.4
9.1
68.55
-25.0
12.0
9.3
73-75
-33.8
11.9
6.6
74-77
-31.4
13.2
1.8
63-67
-27.9
49.5
6.5
70-72
-29.7
2016
12.6
1.7
65-70
-1.5
11.6
-3.2
77-83
8.1
-2.4
78-85
7.9
12.9
-2.1
67-75
9.2
48.7
73-77
5.6

14. % of U.S. Inventory 2014 2015 IL 8.5% 8.2% IA 17.3% 17.2% MN 9.4% 9.5%MO
6.1%
6.7% NE
6.8%
7.0% NC
14.9% OK
7.3%
7.4%
Data Source: USDA/NASS

15. % of U.S. Inventory 6.7% 6.9% 5.5% 5.6% 33.2% 32.3% 12.5% 12.1% 3.6%
2014
2015 IL
6.7%
6.9% IN
5.5%
5.6% IA
33.2%
32.3% MN
12.5%
12.1% MO
3.6%
4.0% NE
4.7%
4.4% NC
Data Source: USDA/NASS

16. How Much Expansion? USDA & FAPRI Projections
Yr-over-Yr
FAPRI
2015: +2.0%
2016: +6.9%
2017: +4.2%
2018: +0.6%
: +14.0%
Yr-over-Yr
USDA
2015: +1.0%
2016: +2.3%
2017: +0.8%
2018: +0.8%
: +8.1%

17. Overarching Beef Industry
Economic Outlook
Tight beef & cattle supplies +
Attractive beef-to-feed price ratios +
Strong retail meat demand +
Initiated (slow???) herd expansion =
Record:
Prices throughout industry
Cash at-stake (so ROI may not be record)
Opportunity/Threat ... in the eye of the beholder...

18. Cattle Crush Margin
The Crush Margin is the return after the feeder steer and corn costs.
Live weight: pounds Feeder weight: 750 pounds
Corn: 50 bushels per head
Source: ISU Extension

19. Data Source: USDA-NASS, Compiled & Analysis by LMIC
Livestock Marketing Information Center

20. Quarterly Cattle & Beef Forecasts (LMIC: 6/1/2015)
Change
Average
Commercial
from
Dressed
Beef
Year
Slaughter
Year Ago
Weight
Production
Quarter
(1,000 hd)
(%)
(lbs)
(mil lbs)
2013 I
7,781
-3.1
794
1.4
6,175
-1.7 II
8,325
0.2
782
0.4
6,513
0.6
III
8,321
-0.1
0.5
6,609 IV
8,035
-3.0
799
0.7
6,423
-2.3
32,462
-1.5
792
25,720
-0.7
2014
7,374
-5.2
796
0.3
5,868
-5.0
7,837
-5.9
789
0.9
6,184
-5.1
7,632
-8.3
810
1.9
6,179
-6.5
7,326
-8.8
822
2.8
6,021
-6.3
30,170
-7.1
804
1.5
24,252
-5.7
2015
6,967
-5.5
813
2.2
5,664
-3.5
7,430
3.1
6,044
7,553
-1.0
823
1.7
6,216
7,353
824
6,061
29,303
-2.9
819
1.8
23,985
-1.1
2016
7,073
821
1.0
5,810
2.6
7,532
815
6,142
1.6
7,617
0.8
829
6,313
7,379
6,114
29,601
24,379

21. Quarterly Cattle & Beef Forecasts (LMIC: 6/1/2015)
Live Sltr.
Change
Steer Price
from
Feeder Steer Price
Year
5-Mkt Avg
Year Ago
Southern Plains
Quarter
($/cwt)
(%)
7-800#
5-600#
2014 I
146.34
16.6
171.77
209.30 II
147.82
18.3
193.16
227.67
III
158.49
29.6
225.93
263.14 IV
165.59
26.6
239.81
285.63
154.56
22.8
207.67
246.44
2015
162.43
11.0
215.87
276.14
8.6
-1.9
-4.6
2.9
2016
-2.4
-0.9
0.0
-0.6

22. Data Source: USDA-AMS, Compiled and Analysis by LMIC
Livestock Marketing Information Center

23. 2014 Slaughter -17.9% (vs. 2013) -27.3% (vs. 2008-12)
2015-YTD Slaughter
-15.7% (vs. 2014)
-14.9% (vs )
Beef Cow Culling Rates
2005 = 7.9%
= 9.4%
= 11.3%
2013 = 10.5%
2014 = 8.8%
Data Source: USDA-AMS & USDA-NASS
Livestock Marketing Information Center

24. Data Source: USDA/AMS

25. (still lowest level since 1962)
CHANGE IN BEEF COWS NUMBERS JANUARY 1, 2014 TO JANUARY 2015 (1000 Head) ― U.S. Total:
National Cow Herd:
2.1% vs 2014
(still lowest level since 1962)
Livestock Marketing Information Center
Data Source: USDA-NASS

26. Data Source: USDA/NASS

27. How Much Expansion? USDA & FAPRI Projections
Yr-over-Yr
FAPRI
2015: +1.8%
2016: +3.1%
2017: +1.6%
2018: +0.7%
: +2.6%
Yr-over-Yr
USDA
2015: -0.4%
2016: +0.2%
2017: +2.6%
2018: +4.2%
: +16.5%

28. How Much Expansion? USDA & FAPRI Projections

29. How Much Expansion? USDA & FAPRI Projections

30. How Much Expansion? FAPRI Projections

31. Data Source: USDA/NASS

32. 2013 Profits = -$100.77
2014 Profits = +$197.24
~2015 Profits = -$91.18
~Jan-Oct 2016 Profits = -$113.18
Oct-03 Profit = $378
Total Cost: = $920
ROI = 41%
Oct-14 Profit = $269
Total Cost: = $1,857
ROI = 15%

33. U.S. Corn Supply and Use 2011 2012 2013 2014 2015 Area Planted
(mil. acres)
91.9
97.3
95.4
90.6
89.2
Yield
(bu./acre)
147.2
123.1
158.1
171.0
166.8
Production
(mil. bu.)
12,360
10,755
13,829
14,216
13,630
Beg. Stocks
1,128
989
821
1,232
1,851
Imports 29
160 36 25
Total Supply
13,517
11,904
14,686
15,472
15,506
Feed & Residual
4,557
4,315
5,036
5,250
5,300
Ethanol
5,000
4,641
5,134
5,200
Food, Seed, & Other
1,428
1,397
1,367
1,347
1,360
Exports
1,543
730
1,917
1,825
1,900
Total Use
12,528
11,083
13,454
13,622
13,760
Ending Stocks
1,746
Season-Average Price
($/bu.)
6.22
6.89
4.46
3.65
3.50
Source: USDA-WAOB 33 33

34. Corn Planting Progress
Source: USDA-NASS

35. Corn Emergence
Source: USDA-NASS

36. World Corn Production
Source: USDA-WAOB 36 36

37. Corn Export Shifts
Source: USDA-FAS

38. Corn Export Sales
Source: USDA-FAS

39. Crude Oil Prices
Sources: EIA and CME

40. Strength of the U.S. Dollar
Source: Federal Reserve

41. Corn Grind for Ethanol

42. Current Corn Futures
3.64
3.52
Source: CME Group, 6/1/2015

43. U.S. Soybean Supply and Use
2011
2012
2013
2014
2015
Area Planted
(mil. acres)
75.0
77.2
76.8
83.7
84.6
Yield
(bu./acre)
41.9
40.0
44.0
47.8
46.0
Production
(mil. bu.)
3,094
3,042
3,358
3,969
3,850
Beg. Stocks
215
169
141 92
350
Imports 16 41 72 30
Total Supply
3,325
3,252
3,570
4,091
4,230
Crush
1,703
1,689
1,734
1,805
1,825
Seed & Residual 88
105 97
136
129
Exports
1,365
1,317
1,647
1,800
1,775
Total Use
3,155
3,111
3,478
3,741
3,729
Ending Stocks
500
Season-Average Price
($/bu.)
12.50
14.40
13.00
10.05
9.00
Source: USDA-WAOB 43 43

44. Soybean Planting Progress
Source: USDA-NASS

45. Soybean Emergence
Source: USDA-NASS

46. World Soybean Production
Source: USDA-WAOB 46 46

47. Soybean Export Shifts
Source: USDA-FAS

48. Soybean Export Shifts
Source: USDA-FAS

49. Current Soybean Futures
9.96
8.69
Source: CME Group, 6/1/2015

50. 2014/15 Crop Margins

51. 2015/16 Crop Margins

52. Thoughts for 2015 and Beyond
Supply/demand concerns
Demand has been weakening
Outside markets have not helped
Watching South American crop and U.S. planting progress
Projected negative margins for 2014 and 2015 crops
2014/15
USDA
2015/16
Futures
(6/1/15)
Corn
$3.65
$3.50
$3.64
$3.52
Soybeans
$10.05
$9.00
$9.96
$8.69

53. Thank you for your time. Any questions. My web site: http://www. econ
Thank you for your time! Any questions? My web site: Iowa Farm Outlook: Ag Decision Maker: