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Agricultural Economic Outlook

Agricultural Economic Outlook. Iowa Division of Banking Annual Meeting Des Moines, Iowa June 9, 2015 Chad Hart Associate Professor/Crop Markets Specialist chart@iastate.edu 515-294-9911. U.S. Meat Production & Prices. Source: USDA-WAOB. Overarching Pork Industry Economic Outlook

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Agricultural Economic Outlook

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  1. Agricultural Economic Outlook Iowa Division of Banking Annual Meeting Des Moines, Iowa June 9, 2015 Chad Hart Associate Professor/Crop Markets Specialist chart@iastate.edu 515-294-9911

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

  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-Yrfor 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 = +$6.21 [-$25.60 to +$24.57] 2014 = +$61.85 [+$13.15 to +$107.25] ~2015 = +$17.31 [-$3.23 to +$39.26] ~Jan-Aug 2016 = +$18.43 [+$7.76 to +$29.96]

  7. 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

  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

  14. Data Source: USDA/NASS

  15. Data Source: USDA/NASS

  16. How Much Expansion? USDA & FAPRI Projections http://www.ers.usda.gov/publications/oce-usda-agricultural-projections/oce151.aspx http://www.fapri.missouri.edu/wp-content/uploads/2015/03/FAPRI-MU-Report-01-15.pdf Yr-over-Yr FAPRI 2015: +2.0% 2016: +6.9% 2017: +4.2% 2018: +0.6% 2014-24: +14.0% Yr-over-Yr USDA 2015: +1.0% 2016: +2.3% 2017: +0.8% 2018: +0.8% 2014-24: +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: 1250 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)

  21. Quarterly Cattle & Beef Forecasts (LMIC: 6/1/2015)

  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. 2009-13) Beef Cow Culling Rates 2005 = 7.9% 2006 - 2007 = 9.4% 2008 - 2012 = 11.3% 2013 = 10.5% 2014 = 8.8% Data Source: USDA-AMS & USDA-NASS Livestock Marketing Information Center

  24. Data Source: USDA/AMS

  25. National Cow Herd: 2.1%vs 2014 (still lowest level since 1962) CHANGE IN BEEF COWS NUMBERSJANUARY 1, 2014 TO JANUARY 2015(1000 Head) ― U.S. Total: + 607.7 Livestock Marketing Information Center Data Source: USDA-NASS

  26. Data Source: USDA/NASS

  27. How Much Expansion? USDA & FAPRI Projections http://www.ers.usda.gov/publications/oce-usda-agricultural-projections/oce151.aspx http://www.fapri.missouri.edu/wp-content/uploads/2015/03/FAPRI-MU-Report-01-15.pdf Yr-over-Yr FAPRI 2015: +1.8% 2016: +3.1% 2017: +1.6% 2018: +0.7% 2015-24: +2.6% Yr-over-Yr USDA 2015: -0.4% 2016: +0.2% 2017: +2.6% 2018: +4.2% 2015-24: +16.5%

  28. How Much Expansion? USDA & FAPRI Projections http://www.ers.usda.gov/publications/oce-usda-agricultural-projections.aspx http://www.fapri.missouri.edu/wp-content/uploads/2015/03/FAPRI-MU-Report-01-15.pdf

  29. How Much Expansion? USDA & FAPRI Projections http://www.ers.usda.gov/publications/oce-usda-agricultural-projections.aspx http://www.fapri.missouri.edu/wp-content/uploads/2015/03/FAPRI-MU-Report-01-15.pdf

  30. How Much Expansion? FAPRI Projections http://www.fapri.missouri.edu/wp-content/uploads/2015/03/FAPRI-MU-Report-01-15.pdf

  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-14 Profit = $269 Total Cost: = $1,857 ROI = 15% Oct-03 Profit = $378 Total Cost: = $920 ROI = 41%

  33. U.S. Corn Supply and Use Source: USDA-WAOB

  34. Corn Planting Progress Source: USDA-NASS

  35. Corn Emergence Source: USDA-NASS

  36. World Corn Production Source: USDA-WAOB

  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 Source: USDA-WAOB

  44. Soybean Planting Progress Source: USDA-NASS

  45. Soybean Emergence Source: USDA-NASS

  46. World Soybean Production Source: USDA-WAOB

  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

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