2020 Commodity Outlook - FarmSmart · Roughly 10% of hay and grazing areas affected by drought June...

2020 Commodity Outlook

Steve DuffChief Economist

OMAFRA

Overview US market situation and outlook

Canadian and Ontario Market Situation

Ontario Outlook

2

US Market Situation and Outlook

3

Parity Era

Target Price Era

Decoupled Era

Source: USDA-NASS

1933 AAA

1996 FAIR Act

US Farm Policy – Distinct Eras

4

Chart1

1933193319331933

1934193419341934

1935193519351935

1936193619361936

1937193719371937

1938193819381938

1939193919391939

1940194019401940

1941194119411941

1942194219421942

1943194319431943

1944194419441944

1945194519451945

1946194619461946

1947194719471947

1948194819481948

1949194919491949

1950195019501950

1951195119511951

1952195219521952

1953195319531953

1954195419541954

1955195519551955

1956195619561956

1957195719571957

1958195819581958

1959195919591959

1960196019601960

1961196119611961

1962196219621962

1963196319631963

1964196419641964

1965196519651965

1966196619661966

1967196719671967

1968196819681968

1969196919691969

1970197019701970

1971197119711971

1972197219721972

1973197319731973

1974197419741974

1975197519751975

1976197619761976

1977197719771977

1978197819781978

1979197919791979

1980198019801980

1981198119811981

1982198219821982

1983198319831983

1984198419841984

1985198519851985

1986198619861986

1987198719871987

1988198819881988

1989198919891989

1990199019901990

1991199119911991

1992199219921992

1993199319931993

1994199419941994

1995199519951995

1996199619961996

1997199719971997

1998199819981998

1999199919991999

2000200020002000

2001200120012001

2002200220022002

2003200320032003

2004200420042004

2005200520052005

2006200620062006

2007200720072007

2008200820082008

2009200920092009

2010201020102010

2011201120112011

2012201220122012

2013201320132013

2014201420142014

2015201520152015

2016201620162016

2017201720172017

2018201820182018

2019201920192019

2020202020202020

2021202120212021

2022202220222022

2023202320232023

2024202420242024

2025202520252025

2026202620262026

2027202720272027

2028202820282028

1973 A&CPA

Corn

Wheat

Column1

Column3

$/Bushel

0.494

0.736

0.802

0.839

0.632

0.827

1.03

1.02

0.49

0.959

0.469

0.556

0.542

0.686

0.601

0.674

0.736

0.939

0.894

1.09

1.08

1.35

1.03

1.41

1.23

1.49

1.53

1.9

2.16

2.29

1.28

1.98

1.24

1.88

1.52

2

1.66

2.11

1.52

2.09

1.48

2.04

1.43

2.12

1.35

1.98

1.29

1.97

1.11

1.93

1.12

1.75

1.05

1.76

1

1.74

1.1

1.83

1.12

2.04

1.11

1.85

1.17

1.37

1.16

1.35

1.24

1.63

1.03

1.39

1.08

1.24

1.16

1.25

1.33

1.33

1.08

1.34

1.57

1.76

2.55

3.95

3.02

4.09

2.54

3.55

2.15

2.73

2.02

2.33

2.25

2.97

2.52

3.78

3.11

3.91

2.5

3.66

2.55

3.45

3.21

3.51

2.63

3.39

2.23

3.08

1.5

2.42

1.94

2.57

2.54

3.72

2.36

3.72

2.28

2.61

2.37

3

2.07

3.24

2.5

3.26

2.26

3.45

3.24

4.55

2.71

4.3

2.43

3.38

1.94

2.65

1.82

2.48

1.85

2.62

1.97

2.78

2.32

3.56

2.42

3.4

2.06

3.4

2

3.42

3.04

4.26

4.2

6.48

4.06

6.78

3.55

4.87

5.18

5.7

6.22

7.24

6.89

7.77

4.46

6.87

3.7

5.99

3.61

4.89

3.36

3.89

3.3

4.6

3.25

4.99

3.52

5.1

3.6632300843

5.1134062117

3.764573876

5.1055377484

3.7174587494

5.1064828811

3.7179785775

5.1013560318

3.6923322544

5.0978986488

3.7346521505

5.1023733621

3.7193809145

5.1040906281

3.7009951793

5.1050286052

3.7004894468

5.1055259471

Sheet1

CornCottonWheatColumn1Column2Column3

1933$0.49$0.1020$0.74

1934$0.80$0.1240$0.84

1935$0.63$0.1110$0.83

1936$1.03$0.1240$1.02

1937$0.49$0.0840$0.96

1938$0.47$0.0860$0.56

1939$0.54$0.0910$0.69

1940$0.60$0.0990$0.67

1941$0.74$0.1700$0.94

1942$0.89$0.1910$1.09

1943$1.08$0.1990$1.35

1944$1.03$0.2070$1.41

1945$1.23$0.2250$1.49

1946$1.53$0.3260$1.90

1947$2.16$0.3190$2.29

1948$1.28$0.3040$1.98

1949$1.24$0.2860$1.88

1950$1.52$0.4010$2.00

1951$1.66$0.3790$2.11

1952$1.52$0.3460$2.09

1953$1.48$0.3230$2.04

1954$1.43$0.3360$2.12

1955$1.35$0.3230$1.98

1956$1.29$0.3180$1.97

1957$1.11$0.2970$1.93

1958$1.12$0.3320$1.75

1959$1.05$0.3170$1.76

1960$1.00$0.3020$1.74

1961$1.10$0.3290$1.83

1962$1.12$0.3190$2.04

1963$1.11$0.3220$1.85

1964$1.17$0.3110$1.37

1965$1.16$0.2940$1.35

1966$1.24$0.2180$1.63

1967$1.03$0.2670$1.39

1968$1.08$0.2310$1.24

1969$1.16$0.2200$1.25

1970$1.33$0.2200$1.33

1971$1.08$0.2820$1.34

1972$1.57$0.2730$1.76

1973$2.55$0.4460$3.95

1974$3.02$0.4290$4.09

1975$2.54$0.5130$3.55

1976$2.15$0.6410$2.73

1977$2.02$0.5230$2.33

1978$2.25$0.5840$2.97

1979$2.52$0.6250$3.78

1980$3.11$0.7470$3.91

1981$2.50$0.5430$3.66

1982$2.55$0.5960$3.45

1983$3.21$0.6660$3.51

1984$2.63$0.5890$3.39

1985$2.23$0.5630$3.08

1986$1.50$0.5240$2.42

1987$1.94$0.6430$2.57

1988$2.54$0.5660$3.72

1989$2.36$0.6620$3.72

1990$2.28$0.6820$2.61

1991$2.37$0.5810$3.00

1992$2.07$0.5490$3.24

1993$2.50$0.5840$3.26

1994$2.26$0.7200$3.45

1995$3.24$0.7650$4.55

1996$2.71$0.7050$4.30

1997$2.43$0.6620$3.38

1998$1.94$0.6170$2.65

1999$1.82$0.4680$2.48

2000$1.85$0.5160$2.62

2001$1.97$0.3200$2.78

2002$2.32$0.4570$3.56

2003$2.42$0.6300$3.40

2004$2.06$0.4470$3.40

2005$2.00$0.4970$3.42

2006$3.04$0.4840$4.26

2007$4.20$0.6130$6.48

2008$4.06$0.4910$6.78

2009$3.55$0.6480$4.87

2010$5.18$0.8460$5.70

2011$6.22$0.9350$7.24

2012$6.89$0.7570$7.77

2013$4.46$0.8380$6.87

2014$3.70$0.6570$5.99

2015$3.61$0.6120$4.89

2016$3.36$0.6800$3.89

2017$3.30$0.66$4.60

2018$3.25$0.68$4.99

2019$3.52$0.65$5.10

2020$3.66$0.66$5.11

2021$3.76$0.66$5.11

2022$3.72$0.66$5.11

2023$3.72$0.67$5.10

2024$3.69$0.68$5.10

2025$3.73$0.68$5.10

2026$3.72$0.68$5.10

2027$3.70$0.68$5.11

2028$3.70$0.68$5.11

Source: University of Illinois 2018

• 2018 Market Facilitation Payment (MFP) - Corn: payment of $0.01 per bu is about 0.29% of the current cash price of $3.41 per bu in the US - did little to retrace the roughly $0.60 per bulost since June. Soybeans: payment of $1.65 per bu is about 19% of the current cash price of $8.58 in the US – retraced a larger portion of the roughly $2 per bu lost since June

• As of November 18, 2019, USDA reports that MFP 2019 has paid $6.898 billion of the announced $14.5 billion; MFP 2018 is reported to have paid farmers $8.59 billion. MFP makes direct cash payments to farmers of select commodities and was created by the Trump Administration, not Congress.

US Corn and Soybean Prices during China Dispute

5

Source: WASDE

US Corn used for Ethanol

6

2018- 2019 Changes in US Corn Exports

Source: USDA-FAS

7

Source: USDA-FAS

2018- 2019 Changes US Soybean Exports

8

US 2019 Estimated Corn Yields

9

Source: USDA-NASS

PresenterPresentation NotesJune 2011 – 29% of US cow area in droughtNov 2013 over 50 percent of U.S. in drought Nov 2015: 14 percent of U.S. in drought

US 2019 Estimated Soybean Yields

10

Source: USDA-NASS


US Drought Monitor

11

Less than 1% of corn & soybean areas affected by drought

Roughly 10% of hay and grazing areas affected by drought


US Corn Supply-Disposition

Source: USDA - WASDE12

CORN2016/17 2017/18 2018/19

2019/20 as of Jan

2019 2020/21

Area Planted 94 90.2 88.9 89.7 94.5Area Harvested 86.7 82.7 81.3 81.5 87.1

Yield per Harvested Acre174.6 176.6 176.4 168.0 178.5

Beginning Stocks 1,737 2,293 2,140 2,221 1,893Production 15,148 14,604 14,340 13,692 15,545Imports 57 36 20 50 50 Supply, Total 16,942 16,933 16,500 15,963 17,488Feed and Residual 5,470 5,302 5,432 5,525 5,775Food, Seed & Industrial 2/ 6,885 7,054 6,791 6,770 6,870 Ethanol & by-products 3/ 5,432 5,600 5,376 5,375 5,725 Domestic, Total 12,355 12,356 12,223 12,295 12,645Exports 2,294 2,438 2,065 1,775 2,100 Use, Total 14,649 14,794 14,288 14,070 14,745Ending Stocks 2,293 2,139 2,221 1,893 2,743

Stocks-Use Ratio 15.7% 14.5% 15.5% 13.5% 18.6%

Avg. Farm Price ($/bu) 3.36 3.36 3.61 3.85 3.40

Million Acres

Bushels

Million Bushels

USDA Corn long-term projections as of October 2019

US Soybeans Supply-Disposition

Source: USDA - WASDE13

SOYBEANS2016/17 2017/18 2018/19

2019/20 as of Jan 2019 2020/21

Area Planted 83.4 90.1 89.2 76.1 84.0Area Harvested 82.7 89.5 87.6 75.0 83.2

Yield per Harvested Acre 52 49.3 50.6 47.4 50.5

Beginning Stocks 197 302 438 909 474Production 4,296 4,411 4,428 3,550 4,200Imports 22 22 14 15 20 Supply, Total 4,515 4,735 4,880 4,482 4,694Crush 1,901 2,055 2,092 2,105 2,135Seed 105 104 88 96 100Residual 41 8 43 32 32 Domestic, Total 2,047 2,167 2,223 2,233 2,267Exports 2,166 2,129 1,748 1,775 1,895 Use, Total 4,213 4,296 3,971 4,008 4,162Ending Stocks 302 439 909 474 532

Stocks-Use Ratio 7.2% 10.2% 22.9% 11.8% 12.8%

Avg. Farm Price ($/bu) 9.47 9.33 8.48 9.00 8.85

Million Acres

Bushels

Million Bushels

USDA Soybean long-term projections as of October 2019

U.S. Meat Production

Source: USDA - WASDE

14

US Cow Herd Size

15

US cow herd bottomed in 2014 and is now into a fifth year of expansion – some signal of contraction

PresenterPresentation NotesThe US beef industry starts with its cow herd

US cow herd has been declining in numbers for years. Bottomed in 2014 down 14% of 2000

A combination many events lead to this decline some of which we are still experriencing

Low cattle prices in the late 2000s were compounded by US ethanola policy that drove up the price of corn making cattle much more expensive to finish

This also made crop production significanlty more profitbale per acre and pulled acreage away from forages and pasture.

Starting in 2009, the US also began a period of almost unheard of dry weather and drought in its major cattle and cow regions pushing farmers to further liquidate their herds not just due to the price of feed but due to the availability of feed and pasture

The high in US cattle prices occurred in the fourth quarter of 2014. So, even though we’ll look back at 2015 as a good market historically, the cattle cycle is turning, US is expanding and prices will trend cyclically lower probably at least through 2018, 2019.”

Wont be back to past levels – hard to put fences back up or restore pastures

2018- 2019 Changes in US Beef Exports

Source: USDA-FAS

16

US Beef Supply-Disposition

17


Beef Units 2017 2018 2019 2020 Beginning stocks Mil. lbs. 757 649 662 675 Commercial production Mil. lbs. 26,187 26,944 26,948 27,670 Change from previous year Percent 3.8 2.9% 0.0% 2.7%

Farm production Mil. lbs. 63 66 66 66 Total production Mil. lbs. 26,250 26,938 27,014 27,736 Imports Mil. lbs. 2,993 2,998 3,030 2,870 Total supply Mil. lbs. 30,000 30,585 30,706 31,281 Change from previous year Percent 3.5 2.0% 0.4% 1.9%

Exports Mil. lbs. 2,860 3,161 3,126 3,305 Ending stocks Mil. lbs. 649 10.5% -1.1% 5.7%

Total disappearance Mil. lbs. 26,491 26,762 26,905 27,301 Per capita, retail weight Pounds 57 57.2 57.2 57.7 Change from previous year Percent 2.6 0.4% 0.0% 0.9%

Prices Steers, 5-area $/cwt 121.52 114.50 114.50 114.00 Feeder steers, Oklahoma City $/cwt 145.08 146.93 140.50 141.00

Cattle inventory 1,000 head 93,705 94,298 94,759 94,950Beef cow inventory 1,000 head 31,210 31,466 31,765 31,641Total cow inventory 1,000 head 40,559 40,898 41,119 41,000

USDA Beef long-term projections as of October 2019









US Sow Herd Size

18

US sow herd bottomed in late 2013 and is now into a fifth year of expansion









US Sow Herd Productivity

19

US productivity per litter has grown rapidly since 2006

PresenterPresentation NotesSimilar to the US, the prolonged impact of low returns, rising input costs and loss of pasture and forage land in favor of cash crops has pushed the Canadian and Ontario beef herds to its lowest levels in 20 years

Herd in Canada and Ontario have fallen close to 30% since 2005

In the last few years the rate of decline has slowed but cow numbers have yet to show a year over year increase. Upcoming STC release on cattle inventories will be interesting

Replacement heifer numbers have been flat of a couple years, Ontario showed a slight increase in numbers in 2015 but not enough for certainty. Again upcoming release will be key

So unlike the US, Canada and Ontario are not in a clear move that we know at this point

2018- 2019 Changes in US Pork Exports

Source: USDA-FAS

20

US Pork Supply-Disposition

21


Pork Units 2017 2018 2019 2020

Beginning stocks Mil. lbs. 507 554 559 590 Commercial production Mil. lbs. 25,584 26,315 27,578 28,680 Change from previous year Percent 2.6 2.9% 4.8% 4.0%

Farm production Mil. lbs. 14 15 14 14 Total production Mil. lbs. 25,598 26,330 27,592 28,694 Imports Mil. lbs. 1,116 1,042 956 915 Total supply Mil. lbs. 27,221 27,926 29,107 30,199 Change from previous year Percent 2.2 2.6% 4.2% 3.8%

Exports Mil. lbs. 5,632 5,876 6,580 7,300 Ending stocks Mil. lbs. 512 559 590 630

Total disappearance Mil. lbs. 21,077 21,491 21,937 22,269 Per capita, retail weight Pounds 50.2 50.9 51.7 52.1 Change from previous year Percent -0.1 1.4% 1.6% 0.8%

Prices National base, live equivalent $/cwt 50.48 45.93 49.00 58.00

Hog inventory, Total Hog Inventory 1,000 head 71,545 73,145 74,915 77,050

USDA Pork long-term projections as of October 2019









Canadian & Ontario Market Situation

22

Ontario Crop Production

23

Field crop production stats in Ontario (2007-2019)Harvested Area (acre) in Ontario

5-yr CAGR 10-yr CAGR

Type of crop 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2014-2019 CAGR a

2009-2019 CAGR a

% change 2018 to

2019Winter Wheat 595,000 1,255,000 970,000 855,000 1,100,000 840,000 1,070,000 775,000 649,000 1,080,000 920,000 914,000 656,100 -3.3% -3.1% -0.7%Spring Wheat 180,000 195,000 128,000 132,000 115,000 89,000 80,000 80,000 125,000 119,000 90,000 81,500 95,000 3.5% -2.9% 16.6%Corn for grain 2,055,000 1,740,000 1,820,000 1,940,000 2,000,000 2,210,000 2,210,000 1,865,000 2,080,000 2,110,000 2,060,000 2,080,000 2,147,500 2.9% 1.7% 3.2%Canola 48,000 55,000 50,000 80,000 88,000 74,000 60,000 32,000 35,000 39,000 43,000 62,400 43,100 6.1% -1.5% -30.9%Soybeans 2,225,000 2,095,000 2,465,000 2,495,000 2,463,000 2,587,000 2,595,000 3,060,000 2,930,000 2,770,000 3,060,000 3,005,000 3,089,600 0.2% 2.3% 2.8%Dry White Beans 85,000 79,000 49,000 85,000 35,000 65,000 45,000 59,000 65,000 51,000 69,000 52,300 66,400 2.4% 3.1% 27.0%Dry Coloured Beans 74,000 54,000 47,000 60,000 52,000 55,000 45,000 64,000 65,000 70,000 61,000 65,200 79,000 4.3% 5.3% 21.2%a Compound Ave Growth Rate (CAGR)

Yield in Ontario5-yr CAGR 10-yr CAGR

Type of crop 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2014-2019 CAGR a

2009-2019 CAGR a

% change 2018 to

2019Winter Wheat 73.6 80.2 73.2 79.5 75 78.3 79.3 77.2 78.6 87.5 87.3 83.6 76.8 -0.1% 0.4% -4.2%Spring Wheat 51.1 49.5 50.6 52.3 52 55.1 52.2 56.3 64 52.9 46.7 54.3 58.5 0.8% 1.5% 7.7%Corn for grain 133.8 156.3 142.9 163.9 152 153.2 160.5 160.4 169 156.4 167 166 158.4 -0.3% 1.0% -4.6%Canola 34.7 40 39.4 41.6 36.9 36.5 36.7 43.1 42.9 41.9 46.5 47.1 43.2 0.0% 0.9% -8.3%Soybeans 33 43.4 40.2 46.1 47.6 48.3 45.9 45.5 46.8 45.5 45.6 51.4 44.1 -0.6% 0.9% -14.2%Dry White Beans 16.1 20.3 17.8 21.4 20 23.1 22.2 22.3 19.6 21.1 20.6 26.4 18.7 -3.5% 0.5% -29.2%Dry Coloured Beans 13.6 22.5 19.1 20.6 19.2 20 18.4 22.3 19.3 17 20.4 23.9 19.1 5.4% 0.6% 17.2%

Harvested area (acres)

Average yield (bushels per acre)

http://www.omafra.gov.on.ca/english/stats/crops/estimate_hist_imp.xlsx

Ontario Crop Yield

24

http://www.omafra.gov.on.ca/english/stats/crops/estimate_hist_imp.xlsx

PresenterPresentation NotesCanadian grain and oilseed prices in the medium term will be lower than the latest spike but do reach a higher plateau than the historical average.

Ontario Land Rental Rates

25

http://www.omafra.gov.on.ca/english/stats/county/farmvalue.xls

Estimated Rental Rate per acre, Province, CAR, CD, 1991- 2016Source: 1991-2016, Census of Agriculture, Statistics Canada

Geography 1991 1996 2001 2006 2011 2016Ontario 47 54 58 72 89 149Southern Ontario Region 78 92 103 123 143 227Hamilton-Wentworth Regional Municip 54 59 .. .. .. ..Hamilton Division .. .. 55 72 83 139Niagara Regional Municipality 72 70 63 128 108 168Haldimand-Norfolk Regional Municipa 73 81 84 114 135 231Brant County 69 84 92 113 137 226Oxford County 83 100 135 152 183 252Elgin County 71 35 97 115 124 197Chatham-Kent Division .. .. 154 157 186 292Essex County 89 101 112 125 144 226Lambton County 67 78 98 120 143 217Middlesex County 70 82 106 112 144 247Kent County 104 128 .. .. .. ..Western Ontario Region 42 49 59 74 94 156Peel County/ Regional Municipality 37 37 37 31 36 58Dufferin County 23 26 30 43 54 82Wellington County 38 42 54 62 90 151Halton County/ Regional Municipality 34 35 38 42 54 105Waterloo County/ Regional Municipal 59 66 107 112 116 196Perth County 71 93 115 159 191 312Huron County 63 82 108 121 155 251Bruce County 31 37 38 55 68 122Grey County 16 16 16 20 30 51Simcoe County 37 40 42 54 61 95

Source: 1991-2016, Census of Agriculture, Statistics CanadaGeography 1991 1996 2001 2006 2011 2016Ontario 1.9% 2.3% 1.9% 1.7% 1.5% 1.6%Southern Ontario Region 3.0% 3.0% 2.5% 2.3% 1.9% 1.9%Hamilton-Wentworth Regional Muni 0.9% 1.2% .. .. .. ..Hamilton Division .. .. 1.1% 0.9% 0.8% 1.0%Niagara Regional Municipality 1.1% 1.3% 1.0% 1.4% 0.9% 1.0%Haldimand-Norfolk Regional Municip 3.5% 3.3% 2.6% 2.6% 2.2% 2.2%Brant County 2.3% 2.7% 2.3% 1.9% 1.9% 1.9%Oxford County 3.3% 3.0% 2.7% 2.2% 1.8% 1.5%Elgin County 3.7% 1.4% 2.8% 2.6% 2.1% 2.0%Chatham-Kent Division .. .. 4.2% 3.6% 2.8% 2.7%Essex County 3.1% 2.8% 2.3% 1.8% 1.7% 1.7%Lambton County 3.8% 3.4% 3.1% 2.9% 2.4% 2.2%Middlesex County 2.9% 2.8% 2.7% 2.2% 1.9% 2.0%Kent County 4.8% 4.3% .. .. .. ..Western Ontario Region 1.4% 1.9% 1.6% 1.4% 1.3% 1.3%Peel County/ Regional Municipality 0.3% 0.4% 0.3% 0.2% 0.1% 0.2%Dufferin County 0.7% 1.1% 1.0% 0.9% 0.8% 0.9%Wellington County 1.2% 1.6% 1.5% 1.2% 1.2% 1.3%Halton County/ Regional Municipalit 0.2% 0.4% 0.3% 0.2% 0.2% 0.4%Waterloo County/ Regional Municip 1.8% 2.8% 3.7% 2.4% 1.7% 2.1%Perth County 2.1% 3.2% 3.0% 2.8% 2.4% 2.5%Huron County 0.5% 1.3% 1.2% 1.0% 0.8% 0.9%Bruce County 0.7% 0.9% 0.8% 0.8% 0.7% 0.8%Grey County 0.7% 0.5% 0.3% 0.3% 0.3% 0.3%Simcoe County 2.2% 1.8% 1.2% 1.2% 0.9% 0.8%

Ratio of Estimated Rental Rate per acre to Estimated Value of Land per acre, Province, CAR, CD, 1991- 2016


Ontario Corn Basis

26

http://www.omafra.gov.on.ca/english/stats/crops/weeklycornprice.xlsx


Ontario Soybean Basis

27

http://www.omafra.gov.on.ca/english/stats/crops/weeklysoybeanprice.xlsx


Beef Imports

28

Beef imports are a major part of the Canadian supply chain and have returned to pre-BSE levels – 26%

Ontario imports close to 50% of beef consumption

PresenterPresentation NotesTalked about excess demand. Canada could roughly supply its own domestic demand for beef provided it didn’t export any cattle or beef products

For many producers and packers, exports provide a more profitable market than domestic sales – that’s the nature of trade

As a result, beef imports primarily from the US are needed to meet consumer beef demand. Close to 35% of Canadian beef consumed was imported prior to BSE and since BSE, the number has gradually climbed to 26%

Ontario as Canada’s largest market for beef but a smaller cattle production is even more pronounced with close to 50% and sometimes higher than 50% of beef consumed being from imports

A key strategy in economic growth is to replace imports of products that you already competitively produce, like beef

Canadian Cattle Slaughter

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• Tight supply has lead to increasing carcass weights

PresenterPresentation NotesSo we had fewer fed cattle, excess demand for beef and record high fed cattle prices

To try and stem some of this issue, feedlots and packers all supported heavier cattle to help supply more beef overall

Carcass weights in the US, Canada and Ontario have all grown significantly as a result of this combination of events

Avg carcass weight in Canada was 809 lbs per fed animal and for 2015 this will show even highe

Ontario Cattle Slaughter

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• Ontario cattle slaughter fell as cow numbers fell over time• Eastern Canadian processing capacity has changed as Quebec lost its

major plant, Ontario lost many provincial plants and Ontario fed cattle lost access to plants in the US

• Slaughter prices have fallen as US supplies have grown and Ontario packers processed more Ontario and Quebec cattle

PresenterPresentation NotesAs Ontario cow herd fell so has our slaughter numbers

Slaughter numbers havent fallen as much as cow numbers have because Ontario imports a large portion of its feeder cattle supply from western canada

Amount varies by season, year and farm but about 40% of Ontario”s total cattel slaughtered originate from western canada

This is simply a function of lack of calf supply coupled with excess demand for fed cattle due to excess demand for beef

So as the US beef supply contracted driving up beef and fed cattle prices, Ontario’s market move along in lock step and gave feedlot operators reord or near record prices

Retail Meat Prices

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Growing demand for lean protein Beef demand continues to rise despite rising prices

PresenterPresentation NotesGrowing demand for lean protein and beefPrior to 2014, meat complex price increases relatively the sameIn 2014, beef and pork prices rose roughly 15% with ground beef rising nearly 25%2015 saw chicken and pork rise by roughly 3% compared to beef at about15% again

This story has mirrored in the US and as beef imports hit records in 2014, the industry was very concerend about permanently losing market share to imports.

Ontario Feeder Calf Basis

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• Weekly basis calculations available on OMAFRA’s statistics website: www.omafra.gov.on.ca/english/stats/livestock/weeklycattleprice.xlsx

http://www.omafra.gov.on.ca/english/stats/livestock/weeklycattleprice.xlsx

PresenterPresentation NotesAll of these things come together for strong demand through the entire beef value chain for Ontario product, right from processed beef all the way down to 500 pound calves

Like fed cattle, this has put cow-calf producers in a position for the last 2 years at least where they can enjoy the benefits of a strong US price and then tack on a weak dollar and crazy strong local demand for their calves.

Ontario vs Alberta Fed Cattle Slaughter Basis

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• Ontario fed cattle prices post BSE were typically higher than in Alberta – higher basis

• Since 2016, with few outlets for Ontario fed cattle outside of Ontario and within Ontario, the basis has fallen relative to Alberta

PresenterPresentation NotesIts not always the case that the feedlot sector faces strong fed cattle prices out of the US and strong local demand

2014 and certainly 2015 broke that mold.

Feedlots thus benefited from a extremely strong basis and demand for their finsihed cattle and this along with the high US price and a weak Cdn dollar

However last few weeks of 2015 and now into 2016 has shown what thoughts of north american expansion can do and the local basis has dropped signifcantly to now below historical levels even despite a weak dollar

Ontario Fed Cattle Slaughter Basis

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• Start of 2019 saw a historically weak basis largely due to concerns about access to China

• Closure of Ryding Regency has not significantly affected the overall basis • Data available to calculate basis doesn’t reflect the discounts many feedlots are

experiencing due to having to ship heavy cattle as a result of the backlog of cattle created by Ryding’s closure and more cull cows being processed

http://www.omafra.gov.on.ca/english/stats/livestock/weeklycattleprice.xlsx





Ontario Sow Herd Productivity

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Ontario productivity per litter has grown rapidly since 2006 Ontario pigs born per litter exceed US by almost 2 pigs

PresenterPresentation NotesSimilar to the US, the prolonged impact of low returns, rising input costs and loss of pasture and forage land in favor of cash crops has pushed the Canadian and Ontario beef herds to its lowest levels in 20 years

Herd in Canada and Ontario have fallen close to 30% since 2005

In the last few years the rate of decline has slowed but cow numbers have yet to show a year over year increase. Upcoming STC release on cattle inventories will be interesting

Replacement heifer numbers have been flat of a couple years, Ontario showed a slight increase in numbers in 2015 but not enough for certainty. Again upcoming release will be key

So unlike the US, Canada and Ontario are not in a clear move that we know at this point

Ontario Hog Slaughter

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• Total Ontario hog slaughter fell as sow numbers declined and has began to rise again

• Roughly 1.5 million market hogs go to Quebec for slaughter now

PresenterPresentation NotesAs Ontario cow herd fell so has our slaughter numbers

Slaughter numbers havent fallen as much as cow numbers have because Ontario imports a large portion of its feeder cattle supply from western canada

Amount varies by season, year and farm but about 40% of Ontario”s total cattel slaughtered originate from western canada

This is simply a function of lack of calf supply coupled with excess demand for fed cattle due to excess demand for beef

So as the US beef supply contracted driving up beef and fed cattle prices, Ontario’s market move along in lock step and gave feedlot operators reord or near record prices

Ontario Hog Slaughter

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• Tight slaughter supply means a stronger basis• Movement of hogs to Quebec has pushed this also

http://www.omafra.gov.on.ca/english/stats/livestock/weeklyswineprice.xlsx





Pork Imports

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Pork imports are a major part of the Canadian supply chain

Ontario imports roughly 40% of pork consumption

PresenterPresentation NotesTalked about excess demand. Canada could roughly supply its own domestic demand for beef provided it didn’t export any cattle or beef products

For many producers and packers, exports provide a more profitable market than domestic sales – that’s the nature of trade

As a result, beef imports primarily from the US are needed to meet consumer beef demand. Close to 35% of Canadian beef consumed was imported prior to BSE and since BSE, the number has gradually climbed to 26%

Ontario as Canada’s largest market for beef but a smaller cattle production is even more pronounced with close to 50% and sometimes higher than 50% of beef consumed being from imports

A key strategy in economic growth is to replace imports of products that you already competitively produce, like beef

Ontario Market Outlook

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40

Ontario G&O Price Trends, Outlook, and Returns

Using Feeder Futures and Basis – Looking Forward

• Here’s what feeder cattle futures on Nov 11, 2019 and a weekly five year average basis would suggest for Ontario 500-599 pound steer prices for the next year

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Using Fed Cattle Futures and Basis – Looking Forward

• Here’s what fed cattle futures on Nov 11, 2019 and a weekly five year average basis would suggest for Ontario 1,250+ pound liveweight fed steer prices for the next year

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Adapted from OMAFRA RMP feedlot farm sample

Ontario Cattle Price Trends, Outlook and Returns

PresenterPresentation NotesHog prices are expected to remain above the 2005-2009 average of $129.40/ckg.Fed steer prices are expected to remain close to the 2005-2009 average of $86.60/cwt.Feeder steer prices, however, are expected to be below the 2005-2009 average of $116.50/cwt.Livestock producers are also expected to face increasing cost of production, particularly feed costs.

Using Live Hog Futures and Basis – Looking Forward

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Ontario Hog Price Trends, Outlook, and Returns

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Adapted from OMAFRA RMP hog finishing farm sample

PresenterPresentation NotesHog prices are expected to remain above the 2005-2009 average of $129.40/ckg.Fed steer prices are expected to remain close to the 2005-2009 average of $86.60/cwt.Feeder steer prices, however, are expected to be below the 2005-2009 average of $116.50/cwt.Livestock producers are also expected to face increasing cost of production, particularly feed costs.

Highlights Long-term prospects for the ag sector continue to be bright. 2020 should see modestly higher US acreage for grains & oilseeds crops. US beef and pork production continues to grow while demand is growing –

adding strength to prices in the medium to longer term Unpredictability and volatility are likely to increase due to expansion of

livestock markets in the US and high level of stocks Weak Canadian dollar continues to largely shield Canadian farmers from

price weakness experienced in US. Ontario prices Farmers must continue to implement a number of strategies:

• pushing for production and cost efficiencies;• participating in business risk management programs;• hedging on commodity markets;• using available marketing tools;• ensuring credit is in place before it is needed; and,• reducing debt and increasing liquid assets.

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Slide Number 1OverviewUS Market Situation and Outlook Slide Number 4Slide Number 5US Corn used for Ethanol 2018- 2019 Changes in US Corn ExportsSlide Number 8US 2019 Estimated Corn YieldsUS 2019 Estimated Soybean YieldsUS Drought MonitorUS Corn Supply-DispositionUS Soybeans Supply-DispositionSlide Number 14US Cow Herd Size2018- 2019 Changes in US Beef ExportsUS Beef Supply-DispositionUS Sow Herd SizeSlide Number 192018- 2019 Changes in US Pork ExportsUS Pork Supply-DispositionCanadian & Ontario Market SituationSlide Number 23Ontario Crop YieldOntario Land Rental RatesOntario Corn BasisOntario Soybean BasisSlide Number 28Slide Number 29Slide Number 30Retail Meat Prices Slide Number 32Slide Number 33Slide Number 34Slide Number 35Slide Number 36Slide Number 37Slide Number 38Ontario Market OutlookSlide Number 40Slide Number 41Slide Number 42Slide Number 43Slide Number 44Ontario Hog Price Trends, Outlook, and ReturnsHighlights

2020 Commodity Outlook - FarmSmart · Roughly 10% of hay and grazing areas affected by drought June...

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