NPB Swine Educators – Sept. 2013. Meat Sector Economics Update and Outlook. Government shutdown – What is running?. “Essential services” – SS, Medicaid, law enforcement, air traffic control, firefighters Packing plants and processors – meat inspection is “essential”
Meat Sector Economics Update and Outlook
“Essential services” – SS, Medicaid, law enforcement, air traffic control, firefighters
Packing plants and processors – meat inspection is “essential”
Import inspection – generates import data but no one will be at AMS to use it!
Fee-based USDA programs – beef grading, checkoff oversight
About 50% of hogs are priced off negoti-ated hogs or the cutout value
Hogs will still be traded but prices will be negotiated in a vacuum – no information
CRITICAL DAY: October 15 when October futures expires – CME LH Index???
Talk of voluntary reporting to an independent third party – devil is in the details and timing.
Drought has been a game changer whose impacts will be felt for another 2 years
Grains/feed costs – has 2013 weather changed the game again?
Demand – performing well in spite of some lingering macro concerns
Pork and chicken supplies are growing
Beef supplies will not grow for 2 years – but incentives are in place
. . . And MUCH larger impact on feed supplies
. . . as WCB has gotten progressively dryer
Harvest vs. 5yr: SB 3 vs 9, corn 7 vs 15
Record high world production (+11%) and consumption (+6%)
Highest year-end stocks since 2001-02
BUT S/U RATIO IS 5TH LOWEST SINCE ‘75
. . . But still less feed availability than pre-’09
. . . The problem is SHARPLY LOWER gas usage
. . . Record high output, consumption, stocks
World output +6.2% in ‘13-’14
Ending stocks +20%, S/U tied for 3rd high
. . . Primarily due to China’s appetite & means
. . . Average for 2013 YTD has been -0.1%
. . . And is falling due to supplies/costs!
. . . Would not be if demand was, in fact, soft
. . . July was +4.7% yr/yr, YTD RPCE is +2.8%
. . . Aug pork was -0.7% vs. July, -7.8% yr/yr
. . . ~+2% Jan-June and then +4.5% July & Aug
. . . Cow slghtr to fall 10-15% since mid-July
Data Source: USDA-NASS
. . . But we may stabilize the herd this year
. . . But will Mother Nature allow it to do so?
. . . ‘13 will be smallest calf crop since 1949
. . . But can that continue – Zilmax situation?
. . . But are still near record low at 25.56 mil.
. . . And 46% is 450,000 head
Data Source: USDA-AMS & APHIS
. . . Per-cap: -3% in ‘13 and -5.5%+ in ’14 @ 52.6
. . . As competitors lower their prices?
. . . July: 1st positive (+2%) month since Oct
. . YTD: Canada +3%, Mexico +2%, Others +18%
. . . Risk issue for ‘14: MCOOL retaliation
. . . Missed losses or robust prod’ivity growth?
. . Sept slghtr. was -7.4% yr/yr, -3-5% vsfrcst.
. . . Nothing new: Lower vs. 5-yr avg for 2 yrs
. . . Or roughly $32/head lower than in ‘13
. . . Currentness? Prod increase this fall?
. . . How long can the counter-seasonal last?
. . . Then seasonal, then the rally of last 2 wks
. . . For those who have avoided PEDv
. . . 2014 futures are offering opportunity now
. . . And disincentives for current players