Lee Schulz, Department of Economics, Iowa State University

(515) 294-3356; lschulz@iastate.edu

SWINE MARKET

OUTLOOK

2017 IOWA PORK REGIONAL

CONFERENCESFebruary 20-24, 2017

U.S. Corn Supply and Use

Source: USDA/WAOB

2013 2014 2015 2016 2017

Area Planted (mil. acres) 95.4 90.6 88.0 94.0 90.0

Yield (bu./acre) 158.1 171.0 168.4 174.6 170.8

Production (mil. bu.) 13,829 14,216 13,602 15,148 14,060

Beg. Stocks (mil. bu.) 821 1,232 1,731 1,737 2,320

Imports (mil. bu.) 36 32 67 55 50

Total Supply (mil. bu.) 14,686 15,479 15,401 16,940 16,430

Feed & Residual (mil. bu.) 5,040 5,280 5,131 5,600 5,500

Ethanol (mil. bu.) 5,124 5,200 5,206 5,350 5,325

Food, Seed, & Other (mil. bu.) 1,369 1,401 1,429 1,445 1,440

Exports (mil. bu.) 1,920 1,867 1,898 2,225 1,950

Total Use (mil. bu.) 13,454 13,748 13,664 14,620 14,215

Ending Stocks (mil. bu.) 1,232 1,731 1,737 2,320 2,215

Season-Average Price ($/bu.) 4.46 3.70 3.61 3.40 3.30

U.S. Soybean Supply and Use

Source: USDA/WAOB

2013 2014 2015 2016 2017

Area Planted (mil. acres) 76.8 83.3 82.7 83.4 85.5

Yield (bu./acre) 44.0 47.5 48.0 52.1 47.9

Production (mil. bu.) 3,358 3,927 3,926 4,307 4,050

Beg. Stocks (mil. bu.) 141 92 191 197 420

Imports (mil. bu.) 72 33 24 25 30

Total Supply (mil. bu.) 3,570 4,052 4,140 4,528 4,500

Crush (mil. bu.) 1,734 1,873 1,886 1,930 1,935

Seed & Residual (mil. bu.) 107 146 122 128 130

Exports (mil. bu.) 1,638 1,842 1,936 2,050 2,100

Total Use (mil. bu.) 3,478 3,862 3,944 4,108 4,165

Ending Stocks (mil. bu.) 92 191 197 420 336

Season-Average Price ($/bu.) 13.00 10.10 8.95 9.50 9.35

Corn Yields

Top: 2016 Yield

Bottom: Change from last year

Units: Bushels/acre

Source: USDA/NASS

Soybean Yields

Top: 2016 Yield

Bottom: Change from last year

Units: Bushels/acre

Source: USDA/NASS

South American Weather

Source: NOAA, Climate Prediction Center

World Corn Production

Source: USDA/WAOB

World Soybean Production

Source: USDA/WAOB

Corn Export Sales

Source: USDA/FAS

Change in Corn Export Sales

Source: USDA/FAS

Soybean Export Sales

Source: USDA/FAS

Change in Soybean Export Sales

Source: USDA/FAS

3.60

3.99

4.07

Current Corn Futures

Source: CME Group

9.8910.07

9.65

Current Soybean Futures

Source: CME Group

2016/17 Crop Margins @ Actual Yields

Source: Iowa State University

2017/18 Crop Margins

Source: Iowa State University

Relative Changes in Pork & Hog PricesIA/MN CASH/

PORK TOTAL WTD FORMULA

RETAIL PORK AVG BASE 10-12 LB

PRICE CUTOUT LEAN HOG PIG

$/lb $/cwt $/cwt $/head

2008 $2.94 $69.23 $65.12 $33.99

2009 $2.92 $58.04 $57.04 $32.15

2010 $3.11 $81.01 $72.51 $41.76

2011 $3.43 $93.82 $86.56 $38.09

2012 $3.47 $84.60 $83.54 $38.45

2013 $3.64 $92.71 $86.83 $42.42

2014 $4.02 $110.19 $100.82 $59.32

2015 $3.85 $79.27 $69.31 $38.10

2016 $3.75 $78.51 $63.76 $36.55

YR/YR Change (%)

2009 -0.6% -16.2% -12.4% -5.4%

2010 6.6% 39.6% 27.1% 29.9%

2011 10.3% 15.8% 19.4% -8.8%

2012 1.0% -9.8% -3.5% 0.9%

2013 5.1% 9.6% 3.9% 10.3%

2014 10.3% 18.9% 16.1% 39.8%

2015 -4.1% -28.1% -31.3% -35.8%

2016 -2.7% -1.0% -8.0% -4.1%

Source: USDA/ERS, USDA/AMS

Source: CME Group

0

20

40

60

80

100

120

140

160

2008 2009 2010 2011 2012 2013 2014 2015 2016

Mil. Pounds

US PORK EXPORTS TO MAJOR MARKETSCarcass Weight, Monthly

Japan South Korea Hong Kong China-Mainland

Data Source: USDA-ERS & USDA-FAS

Livestock Marketing Information Center02/08/17

Source: Trade Atlas

Source: CME Group

2013 = +$6.21 [-$25.60 to +$24.57]

2014 = +$61.85 [+$13.15 to +$107.25]

2015 = +$7.93 [-$18.40 to +$26.25]

2016 = -$1.26 [-$35.52 to +$32.92]

2017f = +$11.09 [-$9.00 to +$25.93]

Closeout Total Cost Lean Hog Price Net Return Net Return

Month Year $/carcass cwt $/carcass cwt $/carcass cwt $/head

2013 87.34 90.41 3.07 6.21

2014 75.34 105.89 30.54 61.85

2015 64.70 68.61 3.91 7.93

Jan-Mar 2016 61.24 60.41 -0.83 -1.68

Apr-Jun 2016 62.01 73.08 11.07 22.42

Jul-Sep 2016 62.91 63.62 0.71 1.43

Oct-Dec 2016 60.21 46.77 -13.44 -27.22

2016 61.59 60.97 -0.62 -1.26

Jan-Mar 2017f 60.72 66.84 6.12 12.40

Apr-Jun 2017f 63.17 72.44 9.27 18.77

Jul-Sep 2017f 65.13 73.90 8.78 17.77

Oct-Dec 2017f 65.13 62.88 -2.25 -4.56

2017f 63.54 69.02 5.48 11.09

Jan-Mar 2018f 65.32 63.40 -1.92 -3.89

Apr-Jun 2018f 65.97 70.86 4.89 9.90

Historical and Projected Iowa Farrow to Finish Returns (as of 2/17/17)(http://www2.econ.iastate.edu/estimated-returns/)

* Projected using basis adjusted futures prices.

Source: USDA/NASS. Urner Barry pre-report estimates

USDA Quarterly Hogs and Pigs Report – United StatesDecember 23, 2016

2016 as % Pre-Report Pre-Report Actual -

2015 2016 of 2015 Range Estimate Estimate

Inventories on Dec 1 *

All hogs and pigs 68,919 71,500 103.7 100.7 - 102.0 101.7 2.0

Kept for breeding 6,002 6,090 101.5 99.8 - 100.6 100.2 1.3

Market 62,917 65,410 104.0 100.8 - 102.5 102.0 2.0

Under 50 pounds 20,008 20,882 104.4 100.3 - 102.2 101.4 3.0

50-119 pounds 17,262 18,037 104.5 100.6 - 103.0 101.8 2.7

120-179 pounds 13,370 13,911 104.0 100.5 - 103.0 102.0 2.0

180 pounds and over 12,276 12,580 102.5 101.4 - 104.1 102.8 -0.3

Farrowing **

Sep – Nov sows farrowed 2,929 3,043 103.9 100.0 - 101.0 100.4 3.5

Dec – Feb intentions 2,927 2,968 101.4 97.0 - 100.4 99.6 1.8

Mar – May intentions 2,968 2,997 101.0 99.5 - 102.0 100.5 0.5

Sep – Nov Pig Crop * 30,848 32,333 104.8 100.9 - 102.1 101.5 3.3

Sep – Nov Pigs per Litter 10.53 10.63 100.9 100.7 - 101.6 101.1 -0.2

* 1,000 head ** 1,000 litters

H-N-09

12/23/16

5.0

5.5

6.0

6.5

7.0

7.5

1991 1994 1997 2000 2003 2006 2009 2012 2015

Mil. Head

DECEMBER 1 HOG BREEDING HERDU.S. Inventory

Data Source: USDA-NASS

Livestock Marketing Information Center

Source: Swine Health Monitoring Project

Number of sows 2,275,939

Number of farms 789

Source: Swine Health Monitoring Project

Number of sows 2,829,183

Number of farms 1026

Source: USDA/AMS & APHIS

Source: USDA/AMS

National Direct Delivered Feeder Pig Report:

Week Ending February 17, 2017

Weekly Summary of prices on a delivered farm to farm basis

H-N-10

12/23/16

40

45

50

55

60

65

70

1991 1994 1997 2000 2003 2006 2009 2012 2015

Mil. Head

DECEMBER 1 MARKET HOGSU.S. Inventory

Data Source: USDA-NASS

Livestock Marketing Information Center

Source: USDA/AMS

Source: USDA/ERS

Retail (57.9%), ‘14 = 53.3%, ‘15 = 62.1%, ‘16 = 60.0%, ‘17 = 57.5%

Farmer (29.3%), ‘14 = 32.8%, ‘15 = 22.7%, ‘16 = 21.4%, ’17 = 22.1%

Packer (13.6%), ‘14 = 13.9%, ‘15 = 15.1%, ‘16 = 18.6%, ‘17 = 20.4%

Source: Steve Meyer. Published in National Hog Farmer Magazine, July 19, 2016.

Source: Seaboard Triumph Foods plans to expand for second shift at Sioux City plant, February 17, 2017

U.S. Packing Capacity Under ConstructionNew pork packing Fall 2016 Summer/Fall 2017 Summer/Fall 2018

plants Daily Annual Daily Annual Daily Annual

Pleasant Hope, MO 2,500 625,000 2,500 625,000 2,500 625,000

Windom, MN 4,000 1,000,000 4,000 1,000,000 4,000 1,000,000

Sioux City, IA 12,000 3,000,000 24,000 6,000,000

Coldwater, MI 10,000 2,500,000 10,000 2,500,000

Wright County, IA 10,000 2,500,000

Total 6,500 1,625,000 28,500 7,125,000 50,500 12,625,000

Head per week 31,250 137,019 242,788

% of '15 avg = 2.195 mil 1.4% 6.2% 11.1%

% of '15 max = 2.507 mil 1.2% 5.5% 9.7%

Source: USDA/AMS. * Steve Meyer, EMI.

Source: USDA/AMS

Source: USDA/AMS

2013 = +$4.77 [-$14.80 to +$22.07]

2014 = +$39.48 [+$1.62 to +$84.64]

2015 = -$14.32 [-$30.32 to +$4.70]

2016 = -$13.10 [-$45.69 to +$17.05]

2017f = +$1.74 [-$16.04 to +$20.19]

BE BE

Place Market Net LH SEW BE LH SEW

Mo-Yr Mo-Yr Return* FCOG** Price Price* FCOG** Price Price*

2013 4.77 54.86 90.41 36.78 56.71 88.06 41.55

2014 39.48 46.53 105.89 54.90 61.83 86.39 94.38

2015 -14.32 40.48 68.61 48.83 34.93 75.69 34.51

Jul-Sep 2015 Jan-Mar 2016 -5.76 37.84 60.41 30.46 35.61 63.25 24.70

Oct-Dec 2015 Apr-Jun 2016 9.31 38.60 73.08 39.09 42.21 68.48 48.40

Jan-Mar 2016 Jul-Sep 2016 -19.23 38.97 63.62 47.51 31.51 73.11 28.28

Apr-Jun 2016 Oct-Dec 2016 -36.73 37.27 46.77 35.28 23.04 64.91 -1.45

2016 -13.10 38.17 60.97 38.08 33.09 67.44 24.98

Jul-Sep 2016 Jan-Mar 2017f 8.24 38.10 66.84 28.82 41.29 62.77 37.06

Oct-Dec 2016 Apr-Jun 2017f 10.52 39.62 72.44 33.93 43.70 67.24 44.46

Jan-Mar 2017 Jul-Sep 2017f 1.68 40.88 73.90 42.50 41.53 73.07 44.18

Apr-Jun 2017 Oct-Dec 2017f -13.47 40.56 62.88 36.15 35.34 69.53 22.68

2017f 1.74 39.79 69.02 35.35 40.47 68.15 37.10

Jul-Sep 2016 Jan-Mar 2018f -8.95 40.67 63.40 32.40 37.21 67.82 23.45

Oct-Dec 2016 Apr-Jun 2018f 3.14 41.18 70.86 34.11 42.39 69.31 37.25

Historical and Projected Iowa Wean to Finish Returns (as of 2/17/17)(http://www2.econ.iastate.edu/estimated-returns/)

Net return and SEW price is $/head and all other values are $/carcass cwt. ** FCOG = Feeding cost of gain. f Projected using basis adjusted futures prices.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2002 2004 2006 2008 2010 2012 2014 2016

Percent

HOGS SOLD BY TRANSACTIONNationalMonthly

NegotiatedPurchases

OtherMarketFormulaSwine orPork MktFormulaOtherPurchase

Packer Sold

PackerOwned

Data Source: USDA-AMS

Livestock Marketing Information Center

Negotiated: Cash or spot market purchase by a packer of livestock from a producer under

which the base price for livestock is determined by seller-buyer interaction and agreement

on a delivery day. The livestock are scheduled for delivery to the packer no more than 14

days after the date on which the livestock are committed to the packer.

Other Market Formula: A purchase of swine by a packer in which the pricing mechanism is

a formula price based on any market other than the market for swine, pork, or a pork

product. The term “other market formula purchase” includes a formula purchase in a case in

which the price formula is based on one or more futures or options contracts.

Swine or Pork Market Formula: A purchase of swine by a packer in which the pricing

mechanism is a formula based on a market for swine, pork, or a pork product, other than a

future or option for swine, pork, or a pork product. E.g., WCB + $1.75 or Cutout - $9.00.

Other Purchase Arrangement: A purchase of swine by a packer that is not a negotiated

purchase, swine or pork market formula, or other market formula, and does not involve

packer-owned swine. E.g., COP, Corn price matrix.

HOGS SOLD BY TRANSACTION

Data Source: USDA/AMS

Data Source: USDA/AMS

Year Negotiated

Other Mkt

Formula

Swine/pork

Mkt Formula

Other Purchase

Arrangement

Total

Wtd Avg

2002 $45.41 $49.24 $45.10 $53.36 $47.73

2003 $51.85 $54.31 $51.13 $55.84 $52.77

2004 $69.82 $61.15 $68.33 $67.11 $67.18

2005 $66.94 $61.98 $65.46 $64.77 $64.96

2006 $62.69 $59.41 $61.99 $62.52 $61.63

2007 $61.89 $64.85 $61.72 $64.10 $62.70

2008 $63.64 $69.37 $63.21 $68.04 $65.12

2009 $55.18 $63.79 $54.78 $61.59 $57.04

2010 $72.61 $71.24 $72.69 $72.82 $72.51

2011 $87.70 $83.86 $87.23 $86.49 $86.56

2012 $83.47 $83.55 $82.53 $85.73 $83.54

2013 $86.94 $84.04 $86.53 $88.53 $86.83

2014 $102.95 $94.50 $102.85 $100.31 $100.82

2015 $67.51 $71.42 $68.00 $71.93 $69.31

2016 $60.91 $64.48 $62.31 $67.01 $63.80

2017YTD $65.08 $64.27 $65.86 $68.76 $66.52

IOWA/MINNESOTA DAILY DIRECT PRIOR DAY HOG REPORT

BASED ON PLANT DELIVERED, LM_HG204, Annual Average Price

Data Source: USDA/AMS

M-S-03A

02/05/17

0

20

40

60

80

100

120

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Bil. Pounds

Tho

usa

nd

s

COMMERCIAL MEAT & POULTRY PRODUCTIONBy Type of Meat, Annual

Beef Pork Lamb & Veal Chicken Turkey

Beef: + 2015.Q4

Pork: + 2015.Q1

Total Poultry: +2012.Q4

Data Source: USDA-NASS, Compiled & Analysis by LMIC

Livestock Marketing Information Center

Year Comm’l % Chg. Avg Carcass % Chg. Comm’l Pork % Chg.

Quarter Slaughter Year Ago Weight Year Ago Production Year Ago

2015 (1,000 hd) (lbs) (mil. Lbs)

I 28,724 5.9 215 0.8 6,162 6.5

II 27,850 8.9 213 -1.1 5,925 7.6

III 28,477 11.4 210 -1.3 5,958 9.8

IV 30,375 6.2 213 -0.9 6,457 5.3

Year 115,425 8.0 213 -0.6 24,501 7.3

2016

I 29,259 1.9 213 -0.9 6,230 1.1

II 28,111 0.9 213 -0.2 5,962 0.6

III 29,317 2.9 208 -0.6 6,099 2.4

IV 31,516 3.8 211 -0.6 6,647 2.9

Year 118,203 2.4 211 -0.6 24,939 1.8

2017

I 29,903 2.2 213 0.1 6,374 2.3

II 29,137 3.6 212 -0.3 6,175 3.6

III 29,555 0.8 209 0.1 6,165 1.1

IV 32,305 2.5 212 0.2 6,839 2.9

Year 120,900 2.3 211 0.0 25,553 2.5

2018

I 30,376 1.6 214 0.2 6,486 1.8

II 29,591 1.6 212 0.1 6,276 1.6

III 29,852 1.0 209 0.2 6,238 1.2

IV 33,232 2.9 212 0.1 7,039 2.9

Year 123,051 1.8 212 0.1 26,039 1.9

LMIC Pork Production and Price Quarterly Forecasts (2/17/17)Sources: USDA/NASS; USDA/AMS Livestock Market News; Projections and Forecasts by LMIC

‘Shortage’ is a loaded term in economic thinking…

Data Source: USDA/ERS, BLS

Data Source: USDA/ERS, BLS

Source: USDA/AMS

NATIONAL RETAIL REPORT - BEEF

THIS WEEK LAST WEEK LAST YEAR

Feature rate 74.3% 76.3% 81.3%

Special rate 9.2% 16.5% 15.9%

NATIONAL RETAIL REPORT - PORK

THIS WEEK LAST WEEK LAST YEAR

Feature rate 87.8% 84.5% 71.4%

Special rate 17.0% 19.3% 19.1%

NATIONAL RETAIL REPORT - CHICKEN

THIS

WEEK

LAST

WEEK

LAST

YEAR

Feature rate 64.9% 75.4% 72.3%

Special rate 8.2% 17.4% 6.8%

NATIONAL RETAIL REPORT - TURKEY

THIS

WEEK

LAST

WEEK

LAST

YEAR

Feature rate 42.3% 30.0% 27.3%

Special rate 1.8% 0.9% 1.8%

Advertised Prices at Major Retail Supermarket Outlets

02/17 thru 02/23

H-P-12

04/10/16

90

91

9293

9495

9697

9899

0001

0203

0405

06 0708 09

10

1112

13

14

15

2.50

2.70

2.90

3.10

3.30

3.50

3.70

3.90

45 46 47 48 49 50 51 52 53

$ Per Pound

Pounds Per Capita

PORK PRICE-QUANTITY RELATIONSHIPAnnual, Retail Weight, Deflated Retail Price

Data Source: Bureau of Economic Analysis & USDA-ERS, Compiled and Analysis by LMIC

Livestock Marketing Information Center

2016

50.1 lbs per capita & -4.0% Pork Price

= -3.0% Demand Change

2016: Per Capita Consumption = +0.7% (Year‐over‐Year)

Real Pork Prices = ‐4.0%

IF Real All Fresh Beef Prices ‐1.0% = 0% Demand Change

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

Hog Production Costs by Country (Euro/kg hot weight)

Source: InterPig

Source: Policy Analysis Computing & Information Facility In Commerce

Source: Policy Analysis Computing & Information Facility In Commerce

Dec-16/Nov-16 Dec-16/Dec-15 Year-to-Date

Country Percent Percent 1,000 lbs Percent

Japan -21% -6% -62,218 -5%Mexico 8% 23% 50,480 3%Canada -2% 6% 8,488 2%South Korea 20% 14% -87,182 -18%China (Mainland) -12% 67% 245,965 98%Hong Kong 5% -26% 22,267 18%Australia 21% 10% 10,562 6%Philippines -16% -1% 3,560 5%China (Taiwan) 101% 10% -18,565 -49%Colombia -21% 164% 9,820 9%Honduras -41% 12% 10,879 17%Dominican Republic 10% 29% 9,134 14%Guatemala -44% -3% 2,162 6%Chile -65% 113% 5,675 14%

Other Countries 8% 28% 13,111 7%

Total -3% 15% 224,138 4%

U.S. Pork Exports, Jan-Dec 2016

Source: USDA/ERS

(Volume excluding by-

products & variety meats)

USDA Long‐term Pork Projections, February 2017http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1192

Exports

2016 to 2021: +13%

2016 to 2026: +25%

Item Units 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Beginning stocks Mil. lbs. 559 590 625 635 635 635 640 645 650 660 670 680

Commercial production Mil. lbs. 24,501 24,946 25,800 25,653 26,009 26,447 26,788 27,156 27,330 27,685 28,055 28,443

Chg from previous yr Percent 7.3 1.8 3.4 -0.6 1.4 1.7 1.3 1.4 0.6 1.3 1.3 1.4

Farm production Mil. lbs. 16 16 16 16 16 16 16 16 16 16 16 16

Total production Mil. lbs. 24,517 24,961 25,816 25,669 26,025 26,463 26,804 27,172 27,346 27,701 28,071 28,459

Imports Mil. lbs. 1,116 1,106 1,095 1,000 1,040 1,058 1,072 1,086 1,093 1,107 1,122 1,138

Total supply Mil. lbs. 26,192 26,657 27,536 27,304 27,700 28,156 28,516 28,903 29,089 29,468 29,863 30,277

Exports Mil. lbs. 5,009 5,179 5,440 5,445 5,566 5,778 5,843 5,946 6,082 6,200 6,330 6,458

Ending stocks Mil. lbs. 590 625 635 635 635 640 645 650 660 670 680 690

Total consumption Mil. lbs. 20,593 20,853 21,461 21,224 21,499 21,738 22,028 22,307 22,347 22,598 22,853 23,129

Per capita, retail weight Pounds 49.7 49.9 51.0 50.0 50.3 50.4 50.7 51.0 50.7 50.9 51.1 51.4

Chg from previous yr Percent 8.5 0.5 2.2 -2.0 0.5 0.3 0.6 0.5 -0.6 0.4 0.4 0.5

Prices:

Hogs, farm $/cwt 53.53 49.10 43.60 42.67 43.57 44.63 46.60 47.91 49.73 50.67 51.56 52.41

National base, live equiv $/cwt 50.23 45.65 40.00 40.64 41.50 42.50 44.38 45.63 47.36 48.26 49.11 49.91

National base, lean equiv $/cwt 66.97 60.87 53.33 54.18 55.33 56.67 59.17 60.84 63.15 64.35 65.48 66.55

Feed price ratio: Hog-corn Ratio 14.5 13.6 13.2 12.9 13.0 13.3 13.5 13.7 14.0 14.1 14.1 14.4

Hog inventory,

December 1, previous yr 1,000 head 67,776 68,919 69,925 69,900 70,429 71,080 71,586 72,132 72,390 72,918 73,467 74,043

Hog Inventory

2016 to 2021: +4%

2016 to 2026: +7%

Lean Hog Prices, $/cwt

2017 to 2021

Avg = $59.91 Min = $53.33, Max = $66.55

Commercial Prod.

2016 to 2021: +7%

2016 to 2026: +14%

Thank You!More information available at:

Iowa Farm Outlook & News www.econ.iastate.edu/ifo/

Ag Decision Maker www.extension.iastate.edu/agdm/

ISU Estimated Livestock Returnswww.econ.iastate.edu/estimated-returns/

ISU Livestock Crush Marginswww.econ.iastate.edu/margins/

http://www.iowabeefcenter.org/ http://www.ipic.iastate.edu/