2008 Market Update:
Clinton Dobson
Livestock Market Analyst
Alberta Agriculture and Rural Development
2008 – Along for a WILD Ride
• Grains and Oilseeds
 Prices, Balance Sheets…Costs
• Livestock
 Prices, trade, major events
• Farm Income
• Coming around the bend…
2
Canadian Canola
2008/09 seeded acreage up 1%
10,000
35%
Production
Stocks/Use
9,000
30%
25%
7,000
6,000
20%
5,000
15%
4,000
3,000
Stocks/Use Ratio
Production (tonnes)
8,000
10%
2,000
5%
1,000
0
0%
1999- 20002000 2001
20012002
2002- 20032003 2004
2004- 20052005 2006
20062007
2007- 20082008 2009
[F]
[F]
3
May /08 Canola Futures
VOLATILITY !!
• eg. up $25 and closes down $30
• $55 on 42T = $2,310
• Impacts option values and margin calls
$13.60/bu
4
Canadian Barley
2008/09 seeded acreage up 1%
14,000
35%
Stocks/Use
12,000
30%
10,000
25%
8,000
20%
6,000
15%
4,000
10%
2,000
5%
0
0%
1999- 20002000 2001
2001- 20022002 2003
2003- 20042004 2005
2005- 20062006 2007
Stocks/Use Ratio
Production (tonnes)
Production
2007- 20082008 2009
[F]
[F]
5
2-Row Malt
Feed Barley
2007/08 PRO - $360/tonne Van
Saudi Arabia, increased
barley import subsidy by
71%
Feed Barley (Elevator Average)
225
200
$/tonne
175
150
125
100
75
J-08
O-07
J-07
A-07
J-07
O-06
J-06
A-06
J-06
O-05
J-05
A-05
J-05
O-04
J-04
A-04
J-04
50
Source: Economics and Competitiveness Divison, AF
6
French Malt Barley Prices
$ 465/tonne = $10/bu
Source: Alberta Grain Commission, March 2008
7
Canadian Wheat
2008/09 seeded acreage up 7%
25,000
40%
Production
Stocks/Use
35%
20,000
25%
15,000
20%
10,000
15%
Stocks/Use Ratio
Production (tonnes)
30%
10%
5,000
5%
0
0%
1999- 20002000 2001
2001- 2002- 20032002 2003 2004
2004- 20052005 2006
2006- 2007- 20082007 2008 2009
[F]
[F]
8
Spring Wheat Nearest Futures
9
World Wheat Ending Stocks
Consumption > Production
250.0
45%
9 yrs
35%
30%
150.0
25%
20%
100.0
Percent
Million tonnes
200.0
40%
15%
10%
50.0
5%
0.0
60
9
1
96
/1
0%
1
65
9
1
96
/1
6
70
9
1
97
/1
1
75
9
1
97
/1
6
80
9
1
98
/1
1
85
9
1
98
/1
Ending Stocks
6
90
9
1
99
/1
1
95
9
1
99
/1
6
00
0
2
00
/2
1
05
0
2
00
/2
6
Stocks Use Ratio
10
Canada – Stocks to Use Ratio
40%
35%
Very low Ending
Stocks to Use Ratio
30%
25%
20%
15%
10%
5%
Wheat (except Durum)
Canola
Barley
0%
19992000
20002001
20012002
20022003
20032004
20042005
20052006
20062007
200720082008 [F] 2009 [F]
Source: Agriculture and Agri-Food Canada
11
Costs…
12
0
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
Jul-01
90
Jan-01
100
Jul-00
Jan-00
Jul-99
Jan-99
Jul-98
Jan-98
Jul-97
Jan-97
Cents/litre
AB Diesel Prices are on the rise
May /07 - $0.72/litre
Sept /07 - $0.75/litre
$0.86/litre
80
DIESELFUEL
70
60
50
40
30
20
10
13
Fertilizer prices also move higher
1000
FERT46
FERT11-51
FERT82
$884/tonne
900
Dec 31, 06 vs Dec 31, 07
800
up 39%
11-51-0
up 42%
82-0-0
up 24%
$620/tonne
600
$571/tonne
500
400
300
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
200
Jan-97
$/tonne
700
46-0-0
14
And so do ocean freight rates
15
Renewable Fuels - US Ethanol
16
Grains and Oilseeds Summary
• Several years of declining carryout.
• Market tightness, causes major buyers to
increase purchases.
• Increasing demand – biofuels, China
• Weather problems
• Volatility – impacts risk management
17
Livestock
•
•
•
•
•
•
•
Feed grains prices and overall value
Exchange rate
Market access
Disease and productivity
Capacity utilization
Substitutes…pork and chicken
Profits, consumer confidence
18
US $ Declines
CDN $
1.1
CDN $
1.05
1 CDN $ in US$
1
0.95
0.9
0.85
0.8
0.75
Source: Economics and Competitiveness Divison, AF
J-08
O-07
J-07
A-07
J-07
O-06
J-06
A-06
J-06
O-05
J-05
A-05
J-05
O-04
J-04
A-04
J-04
0.7
19
Consumer Confidence is dwindling
Feb
March
20
AAA Cutout
Canadian AAA Cutout
205
2005
2006
2007
2008
195
185
165
155
145
135
52
49
46
43
40
37
34
31
28
25
22
19
16
13
10
7
4
125
1
$/cwt
175
21
Current meat supply is large
US Beef, Pork and Poultry Production
2,000
2001-05
2007
08 vs 07  7%
1,900
Weekly Production (million lbs)
2008
1,800
1,700
1,600
1,500
1,400
1
Source: LMIC
3
5
7
9
11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53
22
US, Forecasted Year over Year Growth
Year over Year % Change
12.0%
Beef
Pork
Broiler
The Circovirus Vaccine Works !!!
10.0%
8.0%
08 / 07 % Change
6.0%
4.0%
2.0%
0.0%
Q3 06
Q4 06
Q1 07
Q2 07
Q3 07
Q4 07
Q1 08
Q2 08
Q3 08
Q4 08
-2.0%
-4.0%
-6.0%
Source: USDA
Feb 27, 2008
23
Feeder Steer Comparison
Kansas vs Alberta Steer Price
Weekly Average 8-900 pound Steer Price
$165
Kansas Steers (US$)
Alberta Steers (Cdn$)
$150
$135
($ per cwt.)
$120
$105
$90
$75
$60
Source: Canfax; Livestock Marketing Information Center, USDA
Jun-08
Jan-08
Aug-07
Apr-07
Nov-06
Jun-06
Jan-06
Aug-05
Mar-05
Nov-04
Jun-04
Jan-04
Aug-03
Mar-03
Oct-02
Jun-02
Jan-02
Aug-01
Mar-01
Oct-00
Jun-00
Jan-00
Aug-99
Mar-99
Oct-98
May-98
Jan-98
$45
24
Feeder cattle prices
Northern Alberta 5-600 lb. Feeders
Weekly Steer Price
$1.70
5-Year Avg (1999-2003)
2006
2007
2008
C$ per cwt.
$155
$1.55
$140
$1.40
$125
$1.25
$110
$1.10
$95
$0.95
$80
$0.80
1/1
1/29
2/26
3/26
4/23
5/21
6/18
7/16
8/13
9/10
10/8
Source: Canfax (ave. of midpoint of the range); Economics & Competitiveness Division,
11/5
C$ per pound
$170
12/3
25
Feeder Steer vs Barley Price
500 - 600 lbs. Feeder Steer Price vs. Barley Price
215
210
205
200
195
190
185
180
175
170
165
160
Dollars Per CWT
155
150
145
140
135
130
125
120
115
110
105
100
95
90
85
80
75
01/07/1994 12/02/1994
11/24/1995
11/15/1996
11/07/1997
10/30/1998
10/22/1999
10/13/2000
10/05/2001
Central Alberta
Data Source: CANFAX
09/27/2002
09/19/2003
09/10/2004
09/02/2005
08/25/2006
08/17/2007
BARLEY HIGH
Created by ChartOverNet© Economics and Competitiveness Division, AF
26
Feed Grain Comparison
27
AB/SK Feeder Placements
AB/SK Feeder Placements
400
2001-05
2006
2007
2008
350
Monthly Placements
300
January was very cold
250
200
150
100
50
0
Jan
Source: Canfax
Mar
May
Jul
Sep
Nov
July – Dec down 13%
28
Feeder Cattle Exports
Canadian Feeder Cattle Exports the US
25,000
2000-02
2006
2007
2008
Corn $ < Barley $
Weekly Exports
20,000
Despite the lower US$ that
makes Canadian Cattle more
Expensive
15,000
10,000
5,000
0
1
3
5
7
9
11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
Source: APHIS, LMIC
29
2007 Fall-run
Alberta Feeder Cattle Marketings
Fall-run Volume & Feeder Prices
120000
7-Dec
23-Nov
9-Nov
26-Oct
0
12-Oct
$80
28-Sep
20000
14-Sep
$90
31-Aug
40000
17-Aug
$100
3-Aug
60000
20-Jul
$110
6-Jul
80000
22-Jun
$120
8-Jun
100000
25-May
$130
11-May
C$ per cwt.
$140
1997-2006
to date
Price
Price
no. of head
Avg. Sales
2007 Sales
5-w t Steer
8-w t Steer
Source: Canfax; Economics & Competitiveness Division, AF
30
Fed Cattle Exports
Canadian Fed Cattle Exports the US
30,000
2000-02
2006
2007
2008
25,000
Weekly Exports
20,000
15,000
10,000
5,000
0
1
3
5
Source: APHIS, LMIC
7
9
11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
31
Alberta Fed Steer Prices
Alberta Fed Cattle - Direct Cash Sales
Weekly Average Steer Price
10-Year Avg (1994-2003)
2006
2/26
6/18
2007
2008
$130
C$ per cwt.
$110
$90
$70
$50
1/1
1/29
3/26
4/23
5/21
7/16
8/13
9/10
10/8
11/5
12/3
12/3
Source: Canfax; Economics & Competitiveness Division, AF
32
Fed Steer Basis
Alberta/Nebraska Fed Steer Basis (Cash to Cash)
2006
2007
2008
$0
Cdn $ per cwt
-$5
-$10
-$15
-$20
-$25
1
Source: Canfax
5
9
13
17
21
25
29
33
37
41
45
49
33
Canadian Fed Cattle Slaughter
Canadian Fed Cattle Slaughter
65,000
1998-02
2007
2008
60,000
Weekly Slaughter
55,000
50,000
45,000
40,000
35,000
30,000
1
3
5
7
9
11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
Source: Canadian Beef Grading Agency
34
Slaughter Cow Exports
Canadian Slaughter Cow Exports the US
7,000
2000-02
2006
2007
2008
6,000
Rule 2: Nov 19th
border opens to
OTM
Weekly Exports
5,000
4,000
3,000
2,000
1,000
0
1
3
5
7
9
11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
Source: APHIS, LMIC
35
Canadian Cow Slaughter
Canadian Cow Slaughter
20,000
1998-02
18,000
2006
2007
2008
Impact of the Border Closure
16,000
Weekly Slaughter
14,000
12,000
10,000
8,000
Still large slaughter despite open
border
6,000
4,000
2,000
0
1
3
5
7
9
11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
Source: Canadian Beef Grading Agency
36
Alberta – Beef Cow Inventory
Beef Cows: January 1, 1998-2008
Beef Cows (Million Head)
2.2
2.0
Down 4.8%
since 2005
1.8
1.6
1998
2000
2002
2004
2006
2008
Canada
Down 5.7%
since 2005
Source: Statistics Canadastimate for 2006
37
US Beef Herd is declining…
US Beef Cow Herd, Jan 1
36,000
Last cycle had large herd
expansion
35,500
35,000
• Drought in SE US
• High Feed Grain Prices
• Aging Producers
34,000
33,500
Quick Peak
33,000
32,500
32,000
31,500
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
31,000
19
#of Beef Cows ('000)
34,500
38
Heavy losses feeding cattle
39
Low hog prices in Alberta
Alberta Cash Sales - Index 100
Weekly Average Hog Price
$1.75
5-Year Avg (2002-2006)
2006
2007
2008
C$ per kg. - carcass weight
$1.50
$1.25
$1.00
$0.75
$0.50
1/1
1/29
2/26
3/26
4/23
5/21
6/18
7/16
8/13
9/10
10/8
11/5
12/3 12/31
Source: Economics and Competitiveness Division, AF
40
Increased Feeder Pig Exports
Canadian Feeder Pig Exports to the US
180,000
2001-05
2006
2007
2008
160,000
Weekly Exports
140,000
120,000
100,000
80,000
60,000
1
3
Source: APHIS, LMIC
5
7
9
11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
41
The same for fed pig exports
Canadian Fed Pig Exports to the US
100,000
2001-05
2006
2007
2008
90,000
80,000
Weekly Exports
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
1
3
Source: APHIS, LMIC
5
7
9
11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
42
Western Canada Sow Inventory
Jan 1 Sow and Bred Gilt Inventory
400
Alberta
Saskatchewan
Manitoba
350
250
200
150
100
50
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
0
19
Inventory ('000)
300
43
Slaughter Sow and Boar Exports to US
Canadian Slaughter Sows and Boar Exports to the US
16,000
2001-05
2006
2007
2008
14,000
Weekly Exports
12,000
10,000
8,000
6,000
4,000
2,000
0
1
3
5
Source: APHIS, LMIC
7
9
11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
44
What is happening with our Sows??
Canadian Slaughter Sows and Boar Exports to the US and
Slaughter in Canada
14,000
Weekly Exports and Slaughter
13,000
12,000
11,000
10,000
9,000
8,000
YTD down 11% from 2007
7,000
2006
2007
2008
6,000
1
3
5
7
9
11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
Source: APHIS, LMIC, Agriculture Canada
45
US Sow Slaughter
US Sow Slaughter
80
2001-05
2006
2007
2008
75
Weekly Slaughter ('000)
70
65
60
55
50
45
40
1
3
5
7
9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53
Source: LMIC
46
Year over Year Change in Sow Herd
10.0%
Canada
United States
8.0%
6.0%
4.0%
2.0%
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
-2.0%
1990
0.0%
-4.0%
-6.0%
-8.0%
47
Low prices in Canada, but….Imports
Canadian Beef and Pork Imports
600
Beef Fresh
Beef Frozen
Pork Fresh and Frozen
500
Millions ($)
400
300
200
100
0
2003
Source: Statistics Canada
2004
2005
2006
2007
48
Source: Statistics Canada, 2007
20
20
20
20
19
19
19
19
19
07
05
03
01
99
97
95
93
91
89
87
85
83
81
79
77
Receipts ($ Billion)
Livestock
19
19
19
19
19
19
19
Alberta Farm Cash Receipts
6
Crops
4
2
0
49
Summary
•
•
•
•
•
•
Exchange Rate
Feed Grain Prices and Competitiveness
Record Meat Production
Over capacity in Beef Slaughter
US herd not expanding
…in addition the meat market is becoming
increasingly complex as consumers search for
antibiotic free,organic, animal welfare, traceable,
carbon food-print, guaranteed tender, ‘Angus’….
50
Questions
51
Fed Cattle Price Projection
Choice Steers, Neb $/cwt
95
93
91
89
87
85
83
2006
81
2007
2008
79
77
75
1
2
3
4
Quarter
Source: ERS Projections - Feb 15, 2008
52
Feeder Steer Price Projection
Feeder Steers, Ok City $/cwt
120.00
115.00
110.00
105.00
100.00
2006
2007
2008
95.00
90.00
1
2
3
4
Quarter
Source: ERS Projections - Feb 15, 2008
53
Hog Price Projections
Barrows and Gilts, N base, cwt
55
53
51
49
47
45
43
41
39
2006
37
2007
2008
35
1
2
3
4
Quarter
Source: ERS Projections - Feb 15, 2008
54
Feeder Cattle Basis (Cash to Futures)
Alberta Feeder Calf Basis Levels
(C. Alberta 5-600 lb. Cash STEERS less Nearby CME Feeder Cattle Futures )
$56.00
$48.00
(Canadian $ per cwt.)
$40.00
56.00
2007
2006
2008
48.00
5-Year AVERAGE basis 1998 to 2002 (yellow
line) plus/m inus 1 standard deviation
40.00
$32.00
32.00
$24.00
24.00
$16.00
16.00
5-Year Average
$8.00
8.00
$0.00
0.00
-$8.00
-8.00
-$16.00
-$24.00
12-Jan
-16.00
Source: CME; Canfax; Economics
& Competitiveness Division, AAF
23-Feb
6-Apr
18-May
29-Jun
10-Aug
21-Sep
2-Nov
-24.00
14-Dec
55
Fed Cattle Basis (Cash to Futures)
Alberta Slaughter Cattle Basis Levels
(Direct Sales Cash Steer Price less Nearby CME Live Cattle
Futures)
$8.00
8.00
$6.00
2007
$4.00
2008
2006
4.00
(Canadian $ per cwt.)
$2.00
$0.00
5-Year AVERAGE basis 1998 to 2002 (yellow
line) plus/m inus 1 standard deviation
-$2.00
-$4.00
0.00
-4.00
-$6.00
-$8.00
-8.00
-$10.00
-$12.00
-12.00
-$14.00
-$16.00
-16.00
-$18.00
-$20.00
-20.00
-$22.00
-$24.00
5-Jan
9-Feb
16-Mar 20-Apr 25-May 29-Jun
3-Aug
7-Sep
-24.00
12-Oct 16-Nov 21-Dec
56
Pork Exports in 2007
Canadian Pork Exports
40%
Share of Exports ($)
35%
30%
25%
20%
15%
10%
5%
0%
Australia
Japan
South Korea
Russia
USA
57
Beef Exports in 2007
Canadian Beef Exports
90%
80%
Share of Exports ($)
70%
60%
50%
40%
30%
20%
10%
0%
Japan
Hong Kong
Mexico
US
Other
58
Beef Cutout Comparison
Cutout: Canadian AAA (C$) vs US Choice (US$) (2007)
205
US Choice US$
AAA
US Choice C$
195
185
$/cwt
175
165
155
145
135
125
1
3
5
7
9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
59
Be prepared to switch feed grains
Feed Wheat premium over Feed Barley (Red Deer)
55
35
25
15
J-08
N-07
S-07
J-07
M-07
M-07
J-07
N-06
S-06
J-06
M-06
M-06
J-06
N-05
S-05
J-05
M-05
M-05
J-05
N-04
S-04
J-04
M-04
-5
M-04
5
J-04
Feed Wheat Premium ($/tonne)
45
-15
-25
-35
Source: Alberta Grain Commission, Economics and Competitiveness Divison, AF
60
“Prediction is very difficult,
especially about the future.”
Niels Bohr (1885 - 1962)
“As a general rule, the most successful
people in life are the people who have
the best information.”
Benjamin Disraeli
61
Nearby is , future months
Lean Hogs Futures: Daily Settlement
Lean Hog Futures:
February
25 vs March 2, 2008
March
2, 2008
85
80
75
$US/cwt
70
65
60
55
50
45
40
Apr-08
May-08
Jun-08
Source: Chicago Mercantile Exchange
Jul-08
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Futures Month
62
2007 Slaughter Plant Capacity
Capacity is running at
around 70-75% capacity.
63
After JBS Acquisitions
• Fall of 2007 – up to $75/head loss in the US.
64
Feeder Placements by Size
AB/SK Feeder Placements
60%
2005
2006
2007
2008 Jan
50%
% of Placements
40%
30%
20%
10%
0%
Less than 600 lbs
Source: Canfax
600 to 700 lbs
700 to 800 lbs
> 800 lbs
65
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
Consumption per person (lbs)
Meat Consumption
US: Annual Per Person Consumption
100
Beef
Pork
Chicken
90
80
70
60
50
40
30
66
2006
2004
2002
2000
1998
1996
1994
1992
Pork
1990
1988
1986
1984
Beef
1982
1980
1978
1976
1974
1972
1970
Expenditure per person (US$)
Meat Expenditure
US: Annual Per Person Expenditure
300
Chicken
250
200
150
100
50
0
67
Coarse Grains 2007-08
World trade – 120 MMT
World production – 1,052 MMT
400
350
300
250
200
150
100
50
0
351
Canada
137
28 28
71
53
9
5
Production
EU
US
Canada
4 17 3
5
Trade
Argentina
Australia
FSU
68