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Ag United For South Dakota

Ag United For South Dakota. Future Potential and Challenges for U.S. Red Meat in the Global Marketplace. John Hinners Assistant V. P. Industry Relations U.S. Meat Export Federation. Agriculture has long been South Dakota’s leading industry with a 19.2 billion economic impact.

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Ag United For South Dakota

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  1. Ag United For South Dakota Future Potential and Challenges for U.S. Red Meat in the Global Marketplace John Hinners Assistant V. P. Industry Relations U.S. Meat Export Federation

  2. Agriculture has long been South Dakota’s leading industry with a 19.2 billion economic impact. Livestock production made up $5.7 billion of the $19.2 billion total Ag United, through the support of South Dakota Cattlemen’s Association, Pork Producers Council, Corn Growers Association, Soybean Association and Farm Bureau believe in growing agriculture driven by over 30,000 farm and ranch families Importance of Agriculture In South Dakota

  3. South Dakota farmers & ranchers raised 1.74 million feeder cattle in 2004 One milk cow will eat 3 tons of hay and 1,460 lbs of distiller’s grain over the course of a year It takes 150 lbs of soybean meal to feed a pig to its finished weight Every pound of U.S. pork exported utilizes 1.5 pounds of U.S. Soybeans More than 54 million bushels of soybeans were exported through U.S. red meat in 2006 Did You Know……

  4. More than 300 million bushels of corn were exported through U.S. red meat in 2006 While direct corn exports have increased by 25% since 1990, indirect exports of corn through the value added process of exporting red meat has increased by 196% Did You Know……

  5. A 100 Million Gallon Plant Brings….. • 50 Direct Jobs • 139 Indirect Jobs • Total Payroll w/ Benefits: over $2.5 million • Average Salary: $50,000 • Value of Plant Production: $226 million • DDGs Produced= 310,000 tons • Estimated Taxes: over $4.4 million • Local and indirect • Total Output Effects = $248,171,700 Source: NPPD

  6. Net farm income is forecast to be $87.5 billion, up $28.5 billion from 2006 and over $30 billion above its 10-year average of $57.4 billion. This tops the previous record of $85.9 billion for net farm income earned in 2004. Source USDA Agriculture Income Increases in 2007

  7. U.S. Meat Export Federation History & Mission • USMEF was formally organized in 1976 and is a non-profit trade association working to create new opportunities for beef, lamb and pork. • USMEF’s mission has evolved over the years and is“to increase the value and profitability of the U.S. beef, pork and lamb industries by enhancing demand for their products in targeted export markets through a dynamic partnership of all stakeholders”.

  8. Who are our customers? Here’s what the World looks like in a village of 100 people with all existing human ratios remaining the same. What we look like, believe, own and how we live: • 57 Asians, 21 Europeans, 14 from the Western Hemisphere - both North & South and 8 Africans • 32 would speak a Chinese dialect • 82 would be non-white, 18 would be white

  9. Who are our Customers? • 68 would be non-Christian, 32 would be Christian • 32% of the village’s wealth would be in the hands of 5 people - all from the USA • 80 would live in substandard housing • 17 would be unable to read and write • 50 would suffer from malnutrition • 20 earn <$1 / day; 50 earn <$2 /day • 33 would be without a safe water supply • 1 would have a college education • 7 would have access to the internet

  10. Why Export?World Population Growth Historical Projected Double 1980 by 2050

  11. Is red meat consumption in the U.S. at a saturation point? U.S. Red Meat Consumption Per Capita, Retail Weight, Annual Source: USDA

  12. Exports have been a growth market for U.S. Red Meats Growth in Red Meat Consumption: Rest of World  387% U.S.  58% Source: USDA

  13. U.S. Pork Export Trends

  14. Exports help diversify our markets Picnics &Trimmings to Central EU and Russia Hams to Mexico Bellies and Butts to Korea Variety Meats to China Loins & Tenderloins to Japan

  15. Exports as a % Of Domestic Production is Rising • Exports accounted for only 3% of domestic production as recently as 1990. • Has doubled in the past 6 yrs to over 14% today.. • Export growth helps to diversify market portfolio and allows industry to arbitrage on a global basis. Data from USDA statistics and USMEF

  16. U.S. Now Has Over 27% Share of World Pork Exports 27% 18% Source: USDA

  17. The net benefit of U.S. pork exports to the pork industry in 2007 equates to $22 added dollars per market hog Japan, Mexico, Canada and Korea account for 75% of all U.S. pork exports – 10% of total production One in every four pounds of pork traded in the world originates from the U.S. The U.S. exports the equivalent of 49,500 market hogs daily 2007 Pork Exports add $22.00 per hog

  18. Destinations of U.S. Pork & Pork Variety Meat Exports – 2006 Percent Source: USDA

  19. Competition is Building • EU is considering export subsidies to help their pork producers hurt by rising cost of production & aggressive exports from the U.S. • If subsidies occur, look for China to be a major buyer as China tends to be a price sensitive buyer • Mexico has a FTA with Japan and have increased advertising and exports • Chile has increased market share in Korea within the past five years • Brazil – Draft Export protocol with China

  20. Benefits of U.S. Beef Trade Rest of World – Beef Consumption U.S. Consumption Source: FAO

  21. Global Beef Consumption Growth 2007 - 65 million metric tons 2001 - BSE in Japan Source: OECD/FAO Agricultural Outlook 2007, Thousand metric tons

  22. Global Beef Consumption +27% Source: USDA, carcass weight equivalent, thousand MT

  23. Global Beef Exports +208% South America exporting to the E.U, Middle East & Russia South America has 44% market share followed by Oceania (Australia / New Zealand) with 26% and North America with 16%. Source: USDA, carcass weight equivalent, thousand MT

  24. Global Beef Export Forecast Brazil & U.S. beef exports will grow while others decline Source: OECD/FAO Outlook July, 2007; thousand MT

  25. U.S. Beef Exports- Historic & Forecast Volume Surpass 2003 volume by 2010 2007 F: +15%, 754,400 MT 2008 F: +34%- market access-Korea Source: USDA and USMEF Forecasts; BVM= Beef Variety Meats

  26. Lost Beef Export Value Estimate- due to BSE • Focus on Japan, Korea, Greater China, and Russia • Cumulative for 2004-2007 • only includes lost value based on estimated exports without the BSE market disruption • Japan: Approximately $6 Billion • Korea: Approximately $3.4 Billion • Russia: $245 million • beef around $30 million • lost liver exports & premium= at least $215 million • Greater China: Approximately $650 million • Total: 10.3 Billion

  27. BSE – New Realities • Information is the cost of admission • Plate to Gate, not Gate to Plate • Market driven by consumers, not producers • Increase in branding at retail level

  28. To compete globally: Focus on U.S. advantages: Diversity, flexibility of programs, grain-fed Aggressively pursue trade and competition Embrace trade enhancing policies “Export-minded” mentality Where Do We Go From Here?

  29. Global red meat demand is expanding Population, incomes, globalization BSE has changed the way we do business Participating in red meat trade helps U.S. producers Increase profitability of industry Participate globally Invest in future markets Maintain competitiveness In Summary

  30. Consumers are becoming increasingly concerned about food safety. Brands/traceability are becoming more important. Competition for export markets is intensifying FTA’s are enhancing long-term market prospects As global wealth increases, consumers are moving from vegetable-proteins to animal-proteins and pork is within their reach There is growing consumer concern for animal welfare and it will likely influence purchasing decisions from exporting countries In Summary

  31. Thank You!

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