Transcript Global Economy - National Pork Board

Global
Pork/Protein
Update
June 16, 2016
Brett Stuart
Outline
• Global Pork Update
– Weak global economy, global commodity deflation
– Key global issues CHINA
• U.S. Pork Situation / Outlook
– ABUNDANT meat & poultry supplies
– The Dilemma
U.S. Beef in the Global Markets
Global Pork Update
Global Economy
Commodity Deflation
Brazil
EU
China
Global Economy
• Wobbly
– IMF reduced 2016 forecasts, again
– Negative interest rates?
– Big economy difficulties
• EU: Greece $300+ bil; Italy and Portugal concerns remain
• Japan: into recession, Abe-nomics, 10-year GDP avg
+0.6%
• China economy slowing
– Developing economy difficulties:
• Brazil recession deepens
• 3rd world debt crisis, U.S. dollar pressure
Source: U.S. Federal Reserve Bank
Source: UN/FAO
Global Food Demand
• +78 million people per year (global growth)
• Global middle class to rise from 2 billion to
4.9 billion by 2030
– Asia driving global food demand
– But also, less-developed nations
globally
– New opportunities for furtherprocessed and consumer-ready
food products
Source: UN/FAO
Source: USDA/FAS
Key Global Pork Issues
• Brazil’s economic/political problems
• Russia now irrelevant to global protein
• EU pork supplies remain large, prices
suppressed
• China pork
• Chinese grain policy shifts (250 mmt stocks)
prices down -30% from a year ago
• Cheaper feed (at least in the U.S.)
• U.S. Expansion – pushing forward – for what
markets?
Brazil Pork
• Recession deepens
• 19% of pork exported
• 2016: production +3%
exports +7%
• 35% of exports: Russia
– New access: China
– Weak currency has
increased export demand
• Feed supplies tight, costs rising
EU Pork Update
• 2014: Russian ban displaced 400,000+ mt of
pork and offal
• 2015: pork production +2% (467,000 mt)
– 2015 Gains: Spain, Denmark, Germany
– 2016 Declines: Poland, France
• Spain is now the #3 pork producer globally
– Exporting 40% of production
• Pork production may decline slightly in 2016
– Producers losing money, but seeking gov’t support
• Is Russia’s ‘plan’ working?
Life with Russia
Life without Russia
Source: BPEX, USDA
Source: BPEX, USDA
Source: BPEX, USDA
Source: China, Hong Kong Customs, AgriTrends Forecasts
Source: GTIS, AgriTrends
The Chinese market is diverse
and complicated
China Pork 2016
• Market RED HOT on tight supplies; liquidation
of 2+ mil sows (but not 13 million)
• Hog prices RECORD HIGH; Piglet prices
skyrocketing
• Imports SURGING (but U.S. constrained)
• Profits now US$160+/head
– Expansion occurring
– But longer lag than U.S.
• Corn policy adjustments: cheaper corn ahead
– 250 mmt (9 bil bu) in storage
Source: BPEX, USDA
Source: Average of various Chinese market reports, AgriTrends
Source: GTIS, China NBS (AgriTrends monthly China Pork report)
Chinese hourly pork consumption = 6,355 mt
(US is 1,083)
China Pork Outlook
What we know
– Prices (piglets, hogs, corn)
– Margins are incredible
– Gov’t regulations have some effect
What we don’t know
– The overall extent of gov’t regulations
– Inventories, sows, expansion
What I think
– Expansion is inevitable; margins are too good
– But could be slower than historical
Source: Canada Customs, pork only, no variety meat
U.S. Pork Situation / Outlook
Supplies
The Dilemma
Source: May WASDE
Source: May WASDE
Source: USDA/FAS, WASDE
New U.S. Hog Plants
?
• Production is expanding
• CDN piglet imports to rise
• Is this a response to rising
demand for pork? Or pigs?
The Dilemma
1. Rising U.S. production
– Soft expansion occurring
– New plants are seeking/encouraging more
production
2. Chinese demand will stall
– Chinese expansion will occur
•
But may be slowed by gov’t reg
Where will the EU, U.S., and Canadian pork go?
U.S. Production
Source: USDA, WASDE forecasts
Source: USDA/ERS, AgriTrends forecasts
Hog Price Forecasts
Bullish
• Short term China
demand
• Summer demand
Bearish
• Medium/Longer
term Chinese
demand
• Expansion
• Beef, poultry
expansion
Source: USDA, CME
Summary
• Current market exuberance – summer
demand and China
• Chinese demand is lapping up add’l world (EU)
supplies
– expansion will occur and prices will drop (2017)
• U.S. production is rising; is demand?
• BUT – don’t forget, market “gravity” is UP, on
a longer-term basis (population and incomes)
39
Denver, Colorado
www.globalagritrends.com
Thank You
Brett Stuart
[email protected]
303-803-8716