Transcript FarmEcon LLC A source of information on global farming and food systems Thomas E.

FarmEcon LLC
A source of information on global farming
and food systems
Thomas E. Elam, PhD
President
2015 Turkey and
Protein Sector Outlook
Dr. Thomas E. Elam
President
FarmEcon LLC
February 5, 2015
1
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
2015 Animal Protein Sector Drivers
Record 2013/14 corn crops
Corn and soybean stocks rebuilding
Lower and more stable feed costs
2015 pork and poultry production growth, beef declines again
Protein prices adjusting to lower costs
Strong dollar tempering protein export volumes
PEDv to pork production threat has declined
Slow, but positive, domestic meat demand growth
Good time to be launching a demand-growth
strategy
2
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Macroeconomic Outlook
3.0% GDP growth forecast best since 2008
Labor market finally recovering
Per capita real consumer spending growing
More jobs
Higher hourly and weekly pay
Lower fuel prices
Primary driver of per capita meat demand
Important for overall food demand
3
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
U3/U6 Unemployment Rates
U3 – Headline Rate
U6 – Total Rate
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Weekly Wages and Hours
Average Weekly Hours
Index
Average Weekly
Earnings, $1982-84
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Hourly Earnings and Non-Farm Employment
Hourly earnings in 1982-84 dollars
at record level
Total non-farm employment at
record level
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
$2009 Per Capita Personal Consumption Expenditures
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Meat Consumption vs. Potential
230
220
210
200
190
180
170
Actual Total Per Capita Meat and Poultry Consumption (2014 USDA Projection)
Real Consumer Spending-Based Potential Total Meat and Poultry Consumption
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2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
160
1970
Total Meat and Poultry/Person, Lbs. Retail
Weight
240
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Demand Measured by Real Spending
Source: Daily Livestock Report 12-9-14
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Disclaimer
Prices – feed ingredients and meats
Cash, not contract
Current, not future
USDA and Urner Barry national averages
Margins
Based on current feed and turkey markets
Do not reflect contracts on feed or turkey
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Feed Cost Drivers: Corn and Soymeal
(July-Dec 2015 futures prices current as of 2-6-2015)
$9.00
$500
July
$400
$7.00
$6.00
$5.00
$300
$4.00
$200
Dec
$3.00
$2.00
$100
$1.00
$0
$0.00
Soybean meal, Decatur/Central Ill. Truck
Meal Futures
Corn, Central Ill.
Corn Futures
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Corn, $/Bushel, Central IL
$8.00
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Soybean Meal, $/Ton, Central IL
$600
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
2015 Protein Production Outlook
Turkeys up 5-6%
Broilers up 4-5%
Pork up 5-6%
Beef flat to +1%
Milk up 2-3%
Eggs up 2-3%
Wholesale prices reflecting lower costs
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Why did protein
production taking so
long to recover?
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
This
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Takes Longer Than This
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Million Pounds (RTC Poultry, Commercial Red Meat)
Record 2015 Protein Production
100,000
90,000
3.2% Above 2014
6,075
5,626
5,615
5,762
5,889
5,729
5,755
35,510
36,911
37,201
36,643
37,425
38,136
39,523
25,965
26,304
26,195
25,996
25,791
24,323
24,291
22,996
22,437
22,758
23,270
23,200
22,858
24,103
2009
2010
2011
2012
2013
2014
2015F
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Pork
Beef
Broilers
Turkey
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Total Meat and Poultry Exports
FAS GATS, Meats and Products
8,000,000
7,000,000
Metric Tons
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
Poultry Meat
Pork
Beef
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
2015 Protein Price Forecasts
Commodity
USDA Choice Beef Cutout, Cents/Lb
UB Hog Cutout, Cents/Lb
USDA GA Dock Whole Broilers, Cents/Lb
UB Chicken BSBM, Cents/Lb
UB Chicken Leg Quarters, Cents/Lb
UB Turkey Tom Breast Meat, Cents/Lb
UB Turkey Thigh Meat, Cents/Lb
UB Frozen Hens 12 Lb, Cents/Lb
Eggs, Midwest, Grade A Large, Cents/Doz
2010 2011 2012
155
81
86
151
36
219
122
92
111
180
93
87
129
45
251
137
104
120
190
84
94
141
50
207
123
110
123
2013
195
89
104
161
49
185
130
104
128
2014
236
106
110
169
45
343
168
112
147
2015f
%
14/15
250
85
105
145
42
240
120
106
125
6%
-20%
-5%
-14%
-7%
-30%
-29%
-5%
-15%
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
2015 TURKEY
OUTLOOK
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Current Cost/Price Situation
Production growing at a rapid clip
No sign of a slowdown, 2015 forecast to be second highest
production on record (2008 was the record)
Year-end whole bird inventory still historically low
12/31/2014 stocks only 60 million pounds
Down 7 million from low 2013 level
Total turkey stocks 81% of 2013
Whole bird prices have weakened seasonally
Not likely to see repeat of 2014 strength
More normal pattern, similar to 2013
Reflecting very low stocks, parts prices still historically high
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
2013 Ending Stocks Reflect Lower Production
and Much Improved Q4 Disappearance
700,000
000 Pounds
600,000
500,000
400,000
300,000
200,000
100,000
Whole Birds
Other Turkey
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Export Growth by Product
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Export Growth by Region
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Average Export Value Sets New Record
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Turkey Feed Cost Forecast Summary
Item
Corn Price, Central Ill. ($/Bu.) + $0.60
Soybean Meal Price ($/ton , 47%) +$25
Meat and Bone Meal, Duluth/Ton +$20
Grease, Duluth/Ton +$20
Turkey feed cost (¢/lb, Live)
Turkey feed cost (¢/lb, RTC)
Lowest Turkey feed cost (¢/lb, RTC)
Highest Turkey feed cost (¢/lb, RTC)
Turkey feed cost (¢/lb, RTC) Range
2008
$5.40
$362
$358
$571
30.8¢
38.9¢
27.8¢
48.1¢
20.2¢
2009
$4.05
$376
$361
$438
26.1¢
33.1¢
30.3¢
38.4¢
8.1¢
2010
$4.52
$337
$328
$581
27.3¢
34.6¢
30.9¢
43.4¢
12.6¢
2011
$7.20
$364
$371
$884
39.0¢
49.4¢
42.4¢
52.0¢
9.6¢
2012
$7.50
$461
$422
$777
41.0¢
51.9¢
44.7¢
60.0¢
15.3¢
2013
$6.48
$489
$452
$710
38.3¢
48.5¢
39.1¢
53.8¢
14.7¢
2014
$4.50
$479
$487
$611
31.6¢
40.0¢
34.1¢
45.6¢
11.5¢
27
2015f
$4.75
$400
$320
$701
30.3¢
38.3¢
na
na
na
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
2014 USDA Turkey Poult Placements
Above 2013 but Below 2011-12
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
2015 Turkey Forecast Overview
(Production, Use and Stocks in Million Pounds)
2010
2011
2012
2013
2014
2015f
Pct.
Change
262
192
211
296
237
193
-18.6%
Production
5,569
5,715
5,889
5,729
5,755
6,075
5.6%
Total Supply (Inc Imports)
5,831
5,928
6,124
6,047
6,021
6,296
4.6%
582
703
798
759
804
800
-0.5%
5,082
5,015
5,030
5,051
5,024
5,221
3.9%
Item
Beginning Stocks
Exports
U.S. Consumption
Per Capita (Lbs.)
Total Use
Ending Stocks
16.4
16.1
16.0
16.0
15.8
16.2
2.5%
5,664
5,718
5,828
5,810
5,828
6,021
3.3%
192
211
296
237
193
275
42.5%
UB 12 Lb Hen Price, $/lb.
$0.923
$1.043
$1.096
$1.042
$1.120
$1.060
-5.4%
UB 16 lb Tom Price, $/lb.
$0.920
$1.043
$1.101
$1.036
$1.120
$1.060
-5.4%
UB Breast Meat, $/lb
$2.195
$2.505
$2.067
$1.850
$3.430
$2.400
-30.0%
UB Thigh Meat, $/lb
$1.217
$1.366
$1.232
$1.298
$1.684
$1.200
-28.7%
UB MST, $/lb
$0.280
$0.304
$0.353
$0.380
$0.409
$0.275
-32.7%
58.8¢
58.2¢
49.6¢
47.8¢
82.4¢
62.5¢
-24.2%
Margin over Feed, ¢/lb
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
2015 Turkey Estimates @ +1 Lb Per Cap
(Production, Use and Stocks in Million Pounds)
Hint: Do this again in 2016 and it gets really ugly unless demand grows 10%
2010
2011
2012
2013
2014
2015 +1
Lb PC
262
192
211
296
237
193
-18.6%
Production
5,569
5,715
5,889
5,729
5,755
6,263
8.8%
Total Supply (Inc Imports)
5,831
5,928
6,124
6,047
6,021
6,476
7.5%
582
703
798
759
804
825
2.6%
5,082
5,015
5,030
5,051
5,024
5,377
7.0%
Item
Beginning Stocks
Exports
U.S. Consumption
Per Capita (Lbs.)
Total Use
Ending Stocks
16.4
16.1
16.0
16.0
15.8
Pct.
Change
16.8
6.3%
5,664
5,718
5,828
5,810
5,828
6,202
6.4%
192
211
296
237
193
273
41.6%
UB 12 Lb Hen Price, $/lb.
$0.923
$1.043
$1.096
$1.042
$1.120
$0.900
-20%
UB 16 lb Tom Price, $/lb.
$0.920
$1.043
$1.101
$1.036
$1.120
$0.900
-20%
UB Breast Meat, $/lb
$2.195
$2.505
$2.067
$1.850
$3.430
$1.900
-45%
UB Thigh Meat, $/lb
$1.217
$1.366
$1.232
$1.298
$1.684
$1.000
-41%
UB MST, $/lb
$0.280
$0.304
$0.353
$0.380
$0.409
$0.250
-39%
58.8¢
58.2¢
49.6¢
47.8¢
82.4¢
50.0¢
-39%
Margin over Feed, ¢/lb
30
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Could we expand the consumer base?
31
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Or maybe get a chicken
company to sell turkey????
32
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
U.S. Market RTC Turkey Consumption
Per Capita
18.0
Feed costs +
High stocks!
17.5
17.0
16.5
16.0
15.5
2015f
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
14.5
2001
15.0
2000
Pounds
P
r
o
f
i
t
a
b
l
e
U
n
p
r
o
f
i
t
a
b
l
e
33
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Record-High 2014 Wholesale Value
(USDA Cash Cutout and Whole Birds)
34
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Urner Barry Hen Price
2015 Following Typical Seasonal Pattern
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FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Urner Barry Hen Price
2015 January + Minimal 12 Year Seasonal
130
125
UB Hens, 12-14 Lbs.
120
115
2015
110
2014
2013
105
2012
100
2011
95
90
85
80
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
36
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
2015 Feed Cost Outlook
37
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
2014 Crops Further Boost Feed Supplies
Another record U.S. corn crop
2014/15 ethanol mandates likely to be
reduced
Corn stocks forecast near 2 billion bu.
Soybean stocks forecast near-record level
South American crops got off to a good start
Lower and more stable feed costs
38
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Corn Price Model Forecast
Regression for Season Average Corn Price and 1990-2011 Feedgrain Supply/Use Ratio
Variable
Intercept
Stocks/Use Ratio
Stocks/Use Ratio2
Ethanol Production, Over 4 Billion Gallons
Ethanol Price, Omaha Blender, over $2/Gallon
Coefficient
4.40
-22.9
54.7
0.21
1.64
Standard Error
0.61
7.99
25.52
0.029
0.58
t Stat
7.21
-2.87
2.15
7.16
2.83
Data sources: USDA, World Outlook Board, U.S. Department of Energy, and Nebraska Energy Board
2014/2015 Assumptions:
Feedgrains Stocks/Use Ratio = 13.86%
Ethanol Production = 12.5 Billion Gallons
Ethanol Price = $2.00 per Gallon
Predicted 2014/2015 corn average farm price received = $4.08 per bushel
39
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Feedgrain Stocks and Corn Prices
40
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
2015 Corn/Soymeal Price Outlook
Corn prices strengthen seasonally through March/April
Soymeal prices likely to decline as South America crop
becomes available in April/May
Larger corn carryover will buffer summer weather
U.S. weather drives Jun-Dec prices
3-4 million acre swap, corn moves to soybeans
Ethanol mandate may be reduced, but still a major corn
price supporting force
Price volatility lower, but summer weather still critical
41
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
2015 Summary:
2014 margins kicked off mid-year start of expansion
for poultry and pork
2014-2015 record total protein production
Steady total protein export demand forecast
Domestic demand growth pace picking up
Feed costs very likely to remain far lower than recent
record highs, but still a long term issue
42
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
2015 Summary:
Turkey production up, lower prices ahead
More meat impact than whole birds
Good margins encourage 2016 expansion
Beef prices will hit another record high
Beef producers pricing their product out of the market
By 2015 or 2016 beef likely to be #3 U.S. meat
Pork disease issues much improved, expansion well underway
Chicken will lead the charge on volume increases
New record high share of consumption
Pricing already softening
Limits on breeder flock expansion ending in 2015
Egg production hits more new records, weaker prices ahead
43
FarmEcon LLC
A source of information on global
farming and food systems
Thomas E. Elam, PhD
President
Questions?
Comments?
44