What Next? Dennis DiPietre, Ph.D. K-State Swine Day - - PowerPoint PPT Presentation
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
Dennis DiPietre, Ph.D. KnowledgeVentures, LLC USA
K-State Swine Day Manhattan, KS 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
The Inevitable Question on Every Journey!
A Significant Reduction of Supply
Source: AASV.com
Slowing of New Cases is Not the Same as Recovery
Source: CARD, ISU and USDA
PEDv Productivity Hit Causes P/L Declines to 2009 Levels
$- $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00 $100.00 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
Live Hog Price/CWT Monthly Avg 2004-2014
$- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 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
Corn Price/Bu 2004-2014
Ethanol Distillers Demand Tipping Point Drought
Record Harvest and Upward Demand Trend Collapse to Flat Line
$- $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00 $100.00 $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 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
Corn Price/Bu and Live Hog Price/CWT 2004-2014
Live Hogs Corn
10 20 30 40 50 60 70 80 90 100 110 120
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
Estimated Net Returns/Hd Farrow to Finish (ISU)
Monthly Estimated Returns, Farrow to Finish (ISU) 2004-2014
Total profit (loss), $/hd
Sources: USDA AMS and Iowa State Univeristy
20 30 40 50 60 70 80 90 Price/CWT and Temperature (F) in Des Moines IA Week of Year
Update on US Weekly Average Live Weight, Carcass Price and Temperature Changes
Avg Week Temp F JUNE, JULY, AUGUST
Source: USDA Market News and Univ of Dayton (Temps), Pig333.com (DiPietre)
250 255 260 265 270 275 280 285 290 Price/CWT and Temperature (F) in Des Moines IA Week of Year
Update on US Weekly Average Live Weight, Carcass Price and Temperature Changes
Avg Live Weight JUNE, JULY, AUGUST
Source: USDA Market News and Univ of Dayton (Temps) Pig333.com (DiPietre)
250.0 255.0 260.0 265.0 270.0 275.0 280.0 285.0 290.0
40 60 80 100 120 140 Avg Live Weight lbs Price/CWT and Temperature (F) in Des Moines IA Week of Year
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 JUNE, JULY, AUGUST
Source: USDA Market News and Univ of Dayton (Temps) Pig333.com (DiPietre)
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
2 4 6 8 10 12 14 16 18 20 22 24 26 28 30
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
Value of the Hog Corn Ratio
Monthly Hog Corn Ratio
with Associated Live Hog Price/Cwt and Corn Price/Bu
Hog/Corn Ratio
Sources: USDA AMS and Iowa State Univeristy
2 4 6 8 10 12 14 16 18 20 22 24 26 28 30
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
Value of the Hog Corn Ratio
Monthly Hog Corn Ratio
with Associated Live Hog Price/Cwt and Corn Price/Bu
Hog/Corn Ratio
Sources: USDA AMS and Iowa State University, Pig333.com
Level of Hog/Corn Ratio Traditionally Associated with an Expansion Signal
$0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30
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
Month and Year
Total Profit (Loss), $/HD Farrow to Finish, Includes Manure Credit (ISU)
Value of the Hog Corn Ratio
Monthly Hog Corn Ratio
with Associated Live Hog Price/Cwt and Corn Price/Bu
Hog/Corn Ratio Total profit (loss), $/hd
Sources: USDA AMS and Iowa State University, Pig333.com
Level of Hog/Corn Ratio Traditionally Associated with an Expansion Signal
$0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30
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
Month and Year
Total Profit (Loss), $/HD Farrow to Finish, Includes Manure Credit (ISU)
Value of the Hog Corn Ratio
Monthly Hog Corn Ratio
with Associated Live Hog Price/Cwt and Corn Price/Bu
Hog/Corn Ratio Total profit (loss), $/hd
Sources: USDA AMS and Iowa State University, Pig333.com
Level of Hog/Corn Ratio Traditionally Associated with an Expansion Signal
5.50 5.60 5.70 5.80 5.90 6.00 6.10 6.20 6.30
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
Hog Corn Ratio US Hogs Kept for Breeding (Dec 1 USDA, Million Head)
SEPT 1
USDA, Hogs and Pigs Report
5.50 5.60 5.70 5.80 5.90 6.00 6.10 6.20 6.30
10 15 20 25 30
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
Hogs Keep for Breeding (USDA), 000,000
Hog Corn Ratio US Hogs Kept for Breeding (Dec 1 USDA, Million Head) and Corresponding Dec 1 Hog/Corn Ratio Value
SEPT 1
5.50 5.60 5.70 5.80 5.90 6.00 6.10 6.20 6.30
10 15 20 25 30
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
Hogs Keep for Breeding (USDA), 000,000
Hog Corn Ratio US Hogs Kept for Breeding (Dec 1 USDA, Million Head) and Corresponding Dec 1 Hog/Corn Ratio Value
SEPT 1
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
Rate of Change of Corn Yields Worldwide
Where Research and Private Investment is Raising Corn Yields to Support Increased Production of Swine
World Soybean Production
Conclusion
Export Stopping Disease is the Ultimate Set Back for US Pork
Source: Lisa Beckton, DVM, PORK
New Outbreaks in Lithuania And along the Polish border
DENSITY OF WILD BOAR POPULATIONS
Source: Agroregeneration.blogspot.com Source: The PigSite.com
DENSITY OF LOW BIO-SECURITY PIG OPERATIONS
Source: The PigSite.com
DENSITY OF WILD BOAR POPULATIONS
Source: The PigSite.com
RISK Factors
Along a Rational Path Matching Net Export Growth