Brett Stuart June 19 2014 Global PorkProtein Update Overview Key Global Protein Trends US PorkProtein Exports Watchlist Key Macro Assumptions 2014 Cheaper Feed Shift downward to US corn at and below 5bushel is ID: 762089
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Brett StuartJune 19, 2014 Global Pork/Protein Update
OverviewKey Global Protein Trends U.S. Pork/Protein ExportsWatchlist
Key Macro Assumptions: 2014Cheaper Feed : Shift downward to U.S. corn at and below $5/bushel is significantAll livestock sectors are seeing improved marginsWhen will broiler production accelerate? The current margins will fuel broiler expansion initially, followed by hog and cattle expansionWe expect corn prices to average well below US$5/bushel for 2014. USDA’s latest WASDE report suggests corn prices averaging US$4.45 to $4.65/bushel in the 2013/2014 crop year, and US$3.85 to $4.55 for the 2014/2015 crop year. These levels completely shift margins and optimism toward expansion.
Source: USDA
Key Macro Assumptions: 2014Economic Growth: We cautiously note that world economies are improving. April 2014 IMF World Economic Outlook: “Global activity has broadly strengthened and is expected to improve further into 2014/2015…. Downside risks identified in previous World Economic Outlook reports have diminished somewhat.”Overall economic growth is one of the two key drivers of protein consumption globally (the other is population growth)Global population is growing at 78 million/yearGlobal GDP growth has averaged US$1.43 trillion/year
Source: USDA, AgriTrends
Key Macro Assumptions: 2014Tightening Global Beef Supplies: The world basically stopped producing additional beef in 2007 and the result has been rapid appreciation in beef pricesFrom 2012 to 2013 Chinese demand sucked up an additional 700,000 metric tons (carcass weight equivalent) further straining tight supplies; Chinese imports will top 1 mmt in 2014The U.S. cowherd is beginning an expansion phase which will tighten supplies here over the next 2-3 yearsBrazil and India are the only producers actively expanding production (but note our article on Indian beef on the back page).
Source: USDA/FAS Global Meat and Broiler Production
Source: GTIS, AgriTrends
Key Macro Assumptions: 2014PED Virus: What began as a game-changer in the U.S. pork sector is now a world phenomenon. PED virus has been reported in 13+ markets and has proven incredibly difficult to contain. U.S. markets have went to stratospheric levels on supply fears and those fears are becoming reality. U.S. gilt/barrow slaughter is now down –3% over the past 9 months and the market gap is rapidly approaching. Considering the PEDv difficulties in the U.S. expectations are for serious challenges in Mexico, Canada, Japan, S. Korea, and abroad. The extent of this swath is unknown but tight supplies will move global prices higher.
Source: USDA Down -2.97 mil head over the past 9 months
PEDv 2014 AssumptionsSlaughter: -5.5% (-5.9 mil pigs) Down -8% Jun-AugProduction: -3.5% (-815 mil lbs)Weights: +4.2 lbs (+7 lbs Jan-May), decline as summer hits and hogs are marketed earlyExports: -1% (-35 mil lbs) Now up 10% YTD, but down -7% from 2012Net U.S. consumption: -4%Per capita consumption drops -2.4 lbs PEDv Now in 13+ countries
Source: Japan ALIC
Source: CME
Source: Various market reports, AgriTrends
China New FSIS RegsDemand and Potential
Source: Average of various Chinese regional reports, AgriTrends
Source: China MOA, AgriTrends
Source: USDA/FAS, beef and pork in carc. wt. equiv. 2014 Imports = 2% of Chinese consumption
Source: USDA/FAS Chinese Self-Sufficiency: Food
China Self-SufficiencyA 1% decline in China’s self sufficiency equals: 2.1 mmt of corn1.45 mmt of rice1.21 mmt of wheat538 kmt of pork135 kmt of broilers58 kmt of beefSource: USDA/FAS, AgriTrends
Global Population Density
U.S. Pork/Protein
Source: USDA
Source: GTIS, Global AgriTrends
Source: USDA/ERS
Source: USDA, AgriTrends
Source: USDA, Global AgriTrends Forecasts Total exports will surpass US$17.5 billion in 2013
Issues / Watchlist
February 18, 2014: Russia Bans EU Pork over ASF in Lithuania
Source: GTIS, AgriTrends
Source: GTIS, AgriTrends
Trade Access Trans-Pacific Partnership (JAPAN)What will Japan be allowed to keep “sensitive”?Rice, dairy, pork, & beef? That’s a long list…Potential for U.S. beef (38.5% duty) and U.S. pork (gate price)
Trade Access MCOOLWTO to notify by summer (?) if U.S. revisions bring it into compliance; if so, its overIf not, retaliation to pressure U.S. congressShort term impacts could be HUGELikely in 2015
Watchlist Tight global beef & tight N. American pork supplies = Higher PricesPEDvNew FSIS certification requirements (pork to China)China beef (and poultry) Global dairy markets cooling?MCOOL – WTO ruling by late summer?ASF / Russian politics (meat and Ukraine) Highest global meat prices ever
Denver, Colorado 37Services Offered: Global market research Specific market reports Email alerts/analysis Monthly newsletter Webinars / presentationsBrett Stuartbstuart@globalagritrends.com303-803-8716www.globalagritrends.com