1. Ron Plain D. Howard Doane Professor of Agricultural Economics University of Missouri-Columbia http://web.missouri.edu/~plainr/ Hog & Pork Outlook Louisville, August 15-16 2011 Midwest/Great Plains & Western Outlook Conference

2. Annual U.S. Pork Production, 1930-2011 2011 U.S. pork production expected to be on trend

3. Cost of Production

4. Corn, Average Price Received, Monthly, 1987-2011 Source: USDA/NASS

5. Cost of Slaughter Hog Production Iowa State University Calculations, 1987-2011 Source: John Lawrence, Iowa State University

6. Corn Price & Cost of Hog Production Monthly, 1987-2011 Source: John Lawrence, Iowa State University

7. Corn Price & Cost of Hog Production Monthly, 1987-2011 Source: Shane Ellis, Iowa State University $6.70 corn implies hog cost at $68/cwt live or $89/cwt car.

8. Iowa Farrow to Finish Profits, 1997-2011 Source: Shane Ellis, Iowa State University

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

11. International Trade

13. U.S. Meat Exports, 2000-2011

15. U.S. Pork Imports & Exports, 2000-2011

16. U.S. Pork Imports & Exports as % of U.S. Pork Production, 2006-2011

17. U.S. Pork Exports, 2006-2011

18. Frozen Pork & U.S. Pork Exports, 2000-2011

20. Meat Demand

21. Source: USDA/ERS

24. Forecast Change in Meat Production --Percent Change-- Type 2010-112011-12 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

25. Change in Retail Meat Demand Base Elasticity = - 0.75 Source: Ron Plain, University of Missouri

26. Change in Pork Demand Base Elasticity = - 0.75 Source: Ron Plain, University of Missouri

27. Change in Pork Export Demand Base Elasticity = - 0.5 Source: Ron Plain, University of Missouri

28. Change in Hog Demand Base Elasticity = - 0.2 Source: Ron Plain, University of Missouri

29. Retail Boneless Pork Prices Retail Prices, Monthly, 2001-2011 Source: USDA/ERS

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

31. U.S. Unemployment Rate, Seasonally Adjusted, 1996-2011 Source: Bureau of Labor Statistics

32. Average Duration of Unemployment

33. 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 1980. Needless to say, this is not good for domestic meat demand.

34. Inventory Surveys

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

38. Which is important? More sows or fewer litters?

39. Daily Hog Slaughter by Quarter

40. Breeding Herd by Quarter

41. Hog Slaughter & Breeding Herd by Quarter Correlation = 0.20

42. Sows Farrowed by Quarter

43. Sows Farrowed & Hog Slaughter by Quarter Correlation = 0.78

44. U.S. Sows Farrowed by Quarter

45. Canada Sows Farrowed by Quarter

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

47. Slaughter

48. 2011 sow slaughter is down 0.2% Source: USDA/AMS

49. 2011 slaughter of U.S. sows is up 2.8% Source: USDA/AMS

50. Source: USDA/AMS & Ron Plain

51. Estimated Gilt Retention & Sow Loss, 2010-11 GG Cattle & Hog Fax Source: Ron Plain, University of Missouri

52. Source: USDA/AMS

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

54. 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

55. Source: Ron Plain

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

57. Productivity Growth

58. U.S. Pigs Per Litter by Quarter

59. Source: USDA/AMS

61. Weekly Pork Production Source: USDA AMS

62. Prices

63. U.S. Retail Pork Prices, 2000-2011

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

65. Source: USDA/AMS

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

67. Source: USDA Prior Day Purchased reports

68. Source: USDA/AMS

69. Pork Cutout and Hog Price, Weekly, 2009-2011 Source: USDA/AMS

70. Hog Base Price as Percent of Pork Cutout, Weekly, 2008-2011 Source: USDA/AMS

71. My Forecast

72. Commercial Hog Slaughter Forecast Million Head * actual 2010 2011 2012 Qtr 1 27.630* 27.486* 27.450 Qtr 2 26.074* 26.113* 26.300 Qtr 3 26.930* 27.250 27.100 Qtr 4 29.626* 29.250 29.980 Year110.260*110.099110.830 ------Change------ 10-11 11-12. - 0.5% - 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

73. Iowa-Minn Hog Price Forecast Negotiated Base Price Per Carcass Hundredweight 2009 2010 2011 2012 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

74. Iowa-Minn Live Hog Price Forecast Negotiated Live Base Price Equivalent 2009 2010 2011 2012 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%

75. U.S. Hog Net Carcass Price, Monthly Average, 2002-2011 Thru Feb 2013 all hog futures contracts are above $80 per cwt

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

77. Any Questions?

78. Omaha Corn Prices, Weekly, 2008-2011 Source: USDA/AMS

79. Frozen Pork, 2000-2011, Start of the Month

80. U.S. Pork Exports, 2000-2011

81. Change in Domestic Beef Demand Base Elasticity = -0.75 Source: Ron Plain, University of Missouri

82. Sows Farrowed & Breeding Herd by Quarter

83. Sows Farrowed, Breeding Herd & Hog Slaughter by Quarter

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

88. MPR Negotiated Carcass Hog Prices, WCB minus ECB, Weekly, 2009-10 Source: USDA/AMS Prior Day Purchased

89. U.S. Pork Exports, Jan-May 2011 Change From Year Ago Country 000 lbs Percent Japan 80,639 14.8% Mexico 10,799 2.6% S. Korea 157,270 147.3% Canada 18,135 10.4% China & HongKong 49,624 37.4% Australia 17,748 25.6% Russia 39,504 125.3% TOTAL 315,257 17.9% Source: USDA/ERS

90. 2010 hog imports were down 10%

91. Source: USDA/ERS