What Next? Dennis DiPietre, Ph.D. K-State Swine Day KnowledgeVentures, LLC Manhattan, KS USA November 2014
Our Economic Current Situation as an Industry ▪ Record Profits ▪ Strong Domestic Demand ▪ Strong and Likely Increasing Export Demand ▪ Record Animal Weights ▪ More Than Adequate (Currently) Slaughter Capacity ▪ Low Cost Feed ▪ Low Cost Fuel ▪ Low Inflation and Low Interest Rates
How Did We Get Here? The Inevitable Question on Every Journey!
PEDv A Significant Reduction of Supply
Slowing of New Cases is Not the Same as Recovery Source: AASV.com
Supply Impacts
PEDv Productivity Hit Causes P/L Declines to 2009 Levels Source: CARD, ISU and USDA
Price and Cost Impacts
$100.00 $40.00 $60.00 $80.00 $90.00 $10.00 $20.00 $30.00 $50.00 $70.00 $- Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 Monthly Avg 2004-2014 May-06 Live Hog Price/CWT Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14
$8.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $9.00 $- Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 Corn Price/Bu 2004-2014 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Ethanol Distillers Demand Tipping Point Sep-08 Jan-09 May-09 Drought Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Flat Line Collapse to Demand Trend and Upward Record Harvest
Corn Price/Bu and Live Hog Price/CWT 2004-2014 $9.00 $100.00 $90.00 $8.00 $80.00 $7.00 $70.00 $6.00 $60.00 Live Hogs $5.00 $50.00 $4.00 $40.00 $3.00 $30.00 $2.00 $20.00 Corn $1.00 $10.00 $- $- Jan-04 Jun-04 Nov-04 Apr-05 Sep-05 Feb-06 Jul-06 Dec-06 May-07 Oct-07 Mar-08 Aug-08 Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12 Mar-13 Aug-13 Jan-14 Jun-14
Estimated Net Returns/Hd Farrow to Finish (ISU) 100 110 120 -80 -60 -70 -50 -40 -30 -20 -10 20 40 60 80 90 10 30 50 70 0 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Monthly Estimated Returns, Farrow to Finish (ISU) Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Total profit (loss), $/hd 2004-2014 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Sources: USDA AMS and Iowa State Univeristy Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14
Market Weights
Update on US Weekly Average Live Weight, Carcass Price and Temperature Changes Avg Week Temp F 90 Price/CWT and Temperature (F) in Des Moines IA 80 70 60 JUNE, JULY, AUGUST 50 40 30 20 10 - Source: USDA Market News and Univ of Dayton (Temps), Week of Year Pig333.com (DiPietre)
Update on US Weekly Average Live Weight, Carcass Price and Temperature Changes Avg Live Weight 290 Price/CWT and Temperature (F) in Des Moines IA 285 280 JUNE, JULY, AUGUST 275 270 265 260 255 250 Source: USDA Market News and Univ of Dayton (Temps) Week of Year Pig333.com (DiPietre)
Update on US Weekly Average Live Weight, Carcass Price and Temperature Changes Avg Week Temp F Producer Sold Net Carcass Price/CWT Avg Live Weight 140 290.0 Price/CWT and Temperature (F) in Des Moines IA 285.0 120 280.0 100 Avg Live Weight lbs 275.0 80 270.0 60 265.0 JUNE, JULY, AUGUST 40 260.0 20 255.0 - 250.0 Source: USDA Market News and Univ of Dayton (Temps) Week of Year Pig333.com (DiPietre)
What’s Next Reviving a 100 Year Old Metric
The Hog/Corn Ratio ▪ Used for 100+ Years as a Gauge of Likely Producer Action ▪ Live Weight Price of Hogs/CWT Divided by Bushel Price for Corn ▪ A Widely Used Metric in Various Forms but Lost Significance in Hogs ▪ Multiple Impacts on Corn Prices (Ethanol esp.) & Cost Structure Changes ▪ Expansion Usually Associated with Values Greater Than 18-20
Value of the Hog Corn Ratio 14 16 18 20 24 26 28 10 12 22 30 0 2 4 6 8 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 with Associated Live Hog Price/Cwt and Corn Price/Bu May-07 Sep-07 Monthly Hog Corn Ratio Jan-08 May-08 Sep-08 Hog/Corn Ratio Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Sources: USDA AMS and Iowa State Univeristy Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14
Monthly Hog Corn Ratio with Associated Live Hog Price/Cwt and Corn Price/Bu 30 Hog/Corn Ratio 28 Level of Hog/Corn Ratio Traditionally 26 Associated with an Expansion Signal 24 22 Value of the Hog Corn Ratio 20 18 16 14 12 10 8 6 4 2 Sources: USDA AMS and Iowa State University, 0 Pig333.com Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14
Monthly Hog Corn Ratio with Associated Live Hog Price/Cwt and Corn Price/Bu 30 $120.00 Hog/Corn Ratio Total profit (loss), $/hd Total Profit (Loss), $/HD Farrow to Finish, Includes Manure Credit (ISU) 28 $100.00 Level of Hog/Corn Ratio Traditionally 26 Associated with an Expansion Signal 24 $80.00 22 $60.00 Value of the Hog Corn Ratio 20 18 $40.00 16 $20.00 14 12 $0.00 10 -$20.00 8 6 -$40.00 4 -$60.00 2 Month and Year Sources: USDA AMS and Iowa State University, Pig333.com 0 -$80.00 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14
Monthly Hog Corn Ratio with Associated Live Hog Price/Cwt and Corn Price/Bu 30 $120.00 Hog/Corn Ratio Total profit (loss), $/hd Total Profit (Loss), $/HD Farrow to Finish, Includes Manure Credit (ISU) 28 $100.00 Level of Hog/Corn Ratio Traditionally 26 Associated with an Expansion Signal 24 $80.00 22 $60.00 Value of the Hog Corn Ratio 20 18 $40.00 16 $20.00 14 12 $0.00 10 -$20.00 8 6 -$40.00 4 -$60.00 2 Month and Year Sources: USDA AMS and Iowa State University, Pig333.com 0 -$80.00 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14
US Hogs Kept for Breeding (Dec 1 USDA, Million Head) 6.30 6.20 6.10 Hog Corn Ratio 6.00 5.90 5.80 5.70 5.60 SEPT 1 5.50 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* USDA, Hogs and Pigs Report
US Hogs Kept for Breeding (Dec 1 USDA, Million Head) and Corresponding Dec 1 Hog/Corn Ratio Value 30 6.30 6.20 25 Hogs Keep for Breeding (USDA), 000,000 6.10 20 Hog Corn Ratio 6.00 15 5.90 5.80 10 5.70 5 5.60 SEPT 1 - 5.50 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
US Hogs Kept for Breeding (Dec 1 USDA, Million Head) and Corresponding Dec 1 Hog/Corn Ratio Value 30 6.30 6.20 25 Hogs Keep for Breeding (USDA), 000,000 6.10 20 Hog Corn Ratio 6.00 15 5.90 5.80 10 5.70 5 5.60 SEPT 1 - 5.50 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
Some Thoughts Going Forward
We Have Re-Discovered the Critical Vulnerability of the US Opportunity to Export Stopping Diseases Increases in Global Sales and Share are 90% of the Future Opportunity in the Next 20 Years for the US Swine Industry
Where Pigs are Produced in the World
Where Research and Private Investment is Raising Corn Yields to Support Increased Production of Swine Rate of Change of Corn Yields Worldwide
World Soybean Production
US Has the Key Future Advantage in Global Production of Pork Conclusion
By Far and Away, a Prosperous Future for Pork Producers Requires Growing Net Exports Export Stopping Disease is the Ultimate Set Back for US Pork
New Outbreaks in Lithuania And along the Polish border Source: Lisa Beckton, DVM, PORK
DENSITY OF LOW BIO-SECURITY PIG OPERATIONS RISK Factors DENSITY OF WILD BOAR POPULATIONS Source: The PigSite.com DENSITY OF WILD BOAR POPULATIONS Source: The PigSite.com Source: The PigSite.com Source: Agroregeneration.blogspot.com
Let’s Expand into the New Global Opportunities Armed with a New Vigilance Along a Rational Path Matching Net Export Growth
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