22ND ANNUAL FARMER COOPERATIVES CONFERENCEST. PAUL, MN | NOVEMBER 6, 2019

Agricultural Trade in a Time of Uncertainty

Impacts of the Current Trade Environment on Hog-Pork Markets

Lee Schulz, Dept. of Economics, Iowa State University (515) 294-3356; lschulz@iastate.edu

Records by Quarter – United States: 1866 to Present

Data Source: USDA National Agricultural Statistics Service

Source: USDA Long-term projections

Source: USDA Long-term projections

Calendar year 2019 2020 2024 2029 Total '20-'24 Total '20-'29 %Δ '20-'24 %Δ '20-'29Production Mil. lbs. 27,578 28,680 31,097 32,089 2,417 3,409 8.4% 11.9%Per capita consumption lbs. 51.7 52.1 51.7 49.4 -0.4 -2.7 -0.7% -5.2%Exports Mil. lbs. 6,580 7,300 9,169 10,600 1,869 3,300 25.6% 45.2%USDA November 2019 Long-term projections to 2029.

U.S. Pork long-term projections

Source: Calculated by USMEF

Sep ‘19$49.98 export value$135.32 hog value

36.9%

Statistics Provided By USDA and Compiled by USMEF

2019 Agricultural & Applied Economics

Association’s Bruce Gardner

Memorial Prize for Applied Policy Analysis Award

A Partial Equilibrium Examination of the Impacts on Iowa Hog Markets (Aug-18 thru Jul-19)

Percentage Per unit damage Iowa Estimated EstimatedPrice damage $/cwt $/hd LH Marketings Damage, $ Approach

12.0% $8.96 $18.81 43,459,606 $817,596,562 Supply and Demand Elasticities

12.0% $8.85 $18.59 43,459,606 $807,752,851 Futures: 1/31/18 -> 8/17/18

11.5% $8.47 $17.80 43,459,606 $773,378,116 Futures: 1/31/18 -> 8/17/18;With supply adjustment

11.8% $8.76 $18.40 43,459,606 $799,575,843 Average

Iowa (U.S.) hog industry is a $7.1 ($20.1) billion industry

2019 vs… +19% +11% +5% 2019 vs… +8% +8% +5%

Data Source: USDA, Compiled by USMEF

2019 vs… +9% -11% +4% 2019 vs… +12% -15% -10%

Data Source: USDA, Compiled by USMEF

Source: USDA Foreign Agricultural Service

FRESH, CHILLED, OR FROZEN MUSCLE CUTS OF PORK OUTSTANDING EXPORT SALES AND EXPORTS BY COUNTRY 1000 METRIC TONS, as of October 24, 2019

DESTINATION THIS WEEK YR AGO Diff % THIS WEEK YR AGO Diff % THIS WEEK YR AGO Diff %

All 312.6 169.7 143 84.2% 1245.3 918.1 327 35.6% 1,557.9 1,087.8 470.1 43.2%Mexico 54.0 68.6 -15 -21% 432.4 336.8 96 28% 486.4 405.4 81.0 20%Japan 18.5 10.5 8 76% 160.4 152.0 8 6% 178.9 162.5 16.4 10%S. Korea 29.2 33.7 -5 -13% 128.5 139.0 -11 -8% 157.7 172.7 -15.0 -9%Canada 11.9 10.5 1 13% 72.4 68.0 4 6% 84.3 78.5 5.8 7%

China 159.5 0.2 159 79650% 241.3 21.8 220 1007% 400.8 22.0 378.8 1722%Hong Kong 3.1 6.3 -3 -51% 33.6 48.4 -15 -31% 36.7 54.7 -18.0 -33%Taiwan 0.3 1.7 -1 -82% 10.1 8.5 2 19% 10.4 10.2 0.2 2%Australia 14.1 14.7 -1 -4% 46.9 31.4 16 49% 61.0 46.1 14.9 32%Philippines 2.0 0.6 1 233% 12.2 14.5 -2 -16% 14.2 15.1 -0.9 -6%Chile 2.3 1.4 1 64% 18.8 16.5 2 14% 21.1 17.9 3.2 18%Colombia 7.6 13.7 -6 -45% 43.5 43.0 1 1% 51.1 56.7 -5.6 -10%Dom. Rep. 1.0 2.6 -2 -62% 8.1 11.5 -3 -30% 9.1 14.1 -5.0 -35%Honduras 1.3 0.6 1 117% 6.8 5.9 0.9 15% 8.1 6.5 1.6 25%Panama 1.0 0.4 1 150% 2.1 1.0 1 110% 3.1 1.4 1.7 121%Guatemala 1.5 0.3 1 400% 4.2 2.9 1 45% 5.7 3.2 2.5 78%All Other 5.3 3.9 1 36% 24.0 16.9 7 42% 29.3 20.8 8.5 41%

OUTSTANDING SALES ACCUMULATED EXPORTS TOTAL COMMITMENTS

Data Source: USDA Foreign Agricultural Service

“The information in the export sales report for the week ending Oct. 10, 2019 accurately reflects what was reported to USDA by U.S. exporters. This week’s report includes a significant quantity of pork sales for the current marketing year that may have occurred in previous weeks but were not previously reported to the Foreign Agricultural Service.”

ACCUMULATED EXPORTSWeek ending 10/3/19Pct. Chg. vs. ‘18 = +15.0%

Week ending 10/24/19Pct. Chg. vs. ‘18 = +35.6%

2014 = +$56.07 [+$9.98 to +$93.99]2015 = +$11.33 [-$9.68 to +$28.79]2016 = +$7.13 [-$21.15 to +$33.80]2017 = +$18.94 [+$3.40 to +$43.47]2018 = +$6.48 [-$17.65 to +$29.09]2019f = +$15.01 [-$11.44 to +$41.76]2020f = +$33.28 [+$14.86 to +$58.15]

Lean Hog Price Iowa/So Minn

Yr:Qtr Average($/cwt)

2018:Q1 69.572018:Q2 68.862018:Q3 63.482018:Q4 60.312018 65.562019:Q1 60.172019:Q2 81.442019:Q3 72.572019:Q4 66-702019 69-732020:Q1 72-762020:Q2 82-862020:Q3 86-902020:Q4 74-782020 79-83

Avg Cost/cwt carcass2014 = $75.22 2015 = $64.77 2016 = $61.76 2017 = $60.66 2018 = $62.36 2019f = $63.152020f = $64.11

+$0.79 per pig+$1.76 per pig

Why do U.S. farmers need export markets?

We produce surpluses We only eat high on the hog That’s where the customers are That’s where the economic growth is That’s where the consumption growth is Exports are crucial to farm income