2005 Hog Market Situation and Outlook

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2005 Hog MarketSituation and Outlook
Presented by
John D. Lawrence Iowa State University
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Hog Outlook Overview

• Amazing demand
• Record large supplies
• Breeding herd stable???
• Duties on Canadian hogs and pigs
• Profits through Labor Day or more

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Overview Dec 31, 2004

• Total meat supply -3.0
• Pork supply 2.6
• Slaughter 2.0
• Sow slaughter
• 3.7 1st half, -.4 2nd half
• Pork in Cold Storage -0.4
• Exports 26 through November
• Mexico 64, Japan 11

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Amazing Demand

• Pork production is up 2.6
• Prices are UP approximately 30
• Does it hold at 2004 levels or fall back to 2003
  levels?

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Pork Trade Jan-Nov

• Imports Share v. 2003
• Total -7.4
• Canada 80.6 -8.7
• Exports
• Total 26.6
• Japan 43.2 11.2
• Mexico 24.7 64.3
• Canada 10.6 24.0
• China (PRCTAI) 8.9 66.0
• Russia 3.1 298.3
• Other 21.6 24.7

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Dec. 04 Hogs and Pigs Inventory
Mil Hd Chg All Hogs 60.50 0.09 Breeding
Herd 5.97 -0.7 Market Hogs 54.53 0.2 Under
60 19.64 -0.7 60-119 13.44 1.5 120-179 11.29
1.6 180 10.17 -1.4
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Dec. 04 Hogs and Pigs Inventory
Mil Hd Chg Pig Crop     Jun-Aug 26.01 0.1 S
ept-Nov 25.56 0.3 Farrowing Intentions   Dec-Feb
2.855 0.7 Mar-May 2.868 -0.07
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Production and Price Forecast

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Canadian Duties

• Approximately 14 of value on live animals
  exported to US
• Slaughter hogs 18-19
• Feeder pigs 7-8
• Weaned pig 4-5
• Seller will pay most in end
• Results
• More Canadian slaughter long term
• More Canadian pigs short term

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Implications Greater Risk than Reward on Demand
Side

• At or near record prices in 2004
• Demand
• Higher we are the harder we fall?
• Reached a new plateau?
• Wont continue to bail out supply
• Beef trade negative for pork
• Cattle from Canada
• Beef to Japan

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Implications Record Production and Expansion

• New packer capacity by fall 05
• North American expansion moderate

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Risk Management

• Futures and options
• Basis estimates
• Livestock Gross Margin
• Available end of each month
• Livestock Revenue Protection
• Available from close until 900am

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LGM Jan 25, DEC. - MAY INSURANCE PERIOD
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LRP Coverage Prices and Rates Jan 25 
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Hog Outlook Overview

• How long will demand carry the day
• Large supplies
• Breeding herd ???
• Lower feed cost
• Canadian duties