Prospects for U.S. Meat Exports The View From Washington

1. Prospects for U.S. Meat Exports The View From Washington Shayle Shagam World Agricultural Outlook Board U.S. Department of Agriculture

2. Meat Trade Increasingly Important to U.S • 2007 beef exports forecast to equal 6 percent of U.S. production. Was 8 percent in 1998 but almost 10 percent in 2003. • Pork exports will equal 14 percent of U.S. production in 2007. Was 6 percent in 1998. • Beef and pork variety meat exports totaled 491,000 tons in 2006. Was 460,000 tons in 1996 but 568,000 tons in 2003 • U.S. exports concentrated in limited number of markets • Beef: Mexico, Canada, Japan, Korea represent 83 percent of U.S. meat exports (Jan-Aug 2007) • Pork: Japan, Mexico, Canada, Korea, Russia represent 79 percent of meat exports (Jan-Aug 2007) • Variety meats: : Mexico, Egypt, China, Canada, Hong Kong represent 81 percent of total exports (Jan-Aug 2007)

3. US Red Meat Export Shares Beef Export Shares Pork Export Shares

4. Prospects Favorable for Meat Export Growth • 2007 red meat exports to rise 8 percent • Beef: 37 percent ( 25 percent Jan-Aug) • Pork: 1 percent ( -1 percent Jan-Aug) • 2007 broiler exports will be 5 percent higher ( 7 percent Jan-Aug) • 2006/07 (Oct-Sept) beef and pork variety meat exports forecast 2 percent higher (3 percent Oct-Aug)

5. Prospects Favorable for Meat Export Growth (cont) • Further improvement in 2008 for red meats • Beef exports up 29 percent • Pork exports 2 percent higher • Broiler export growth to slow to 2 percent • Variety meat exports in October-September 2007/08 are forecast at $800 million, about the same as in 2006/07. Tonnage will be 500,000 tons, about the same as in 2006/07

6. Supportive Factors • Continued good economic growth boosts incomes • Strong growth in middle-income (eg; China, Korea, Russia) countries boosts meat demand • Weaker dollar helps exports • U.S. product cheaper • More competitive with domestic product and competing exports.

7. 2008 U.S. Red Meat Production Higher • U.S. beef production will increase fractionally in 2008 (26.1 billion lbs) • Larger steer and heifer slaughter more than offsets lower cow slaughter • Higher weights • U.S. pork production will increase 3 percent (22.3 billion pounds) • Producers responding to 3 years of good returns • Weight gains limited by feed prices

8. U.S. Livestock Prices Lower • Cattle prices will decline slightly ($88-$95/per cwt) • Inventories tight after 2 years of declining calf crops • Herd rebuilding with improved forage • Hog prices will fall 4 percent ($44-48/cwt) • Large supplies of hogs • Increased imports of hogs from Canada • Larger supplies of total meat should pressure wholesale prices

9. Brazil: Red meat sector continues to expand Weakening Real Sanitary issues Regionalized disease restrictions Competing Exporter Assumptions

10. Competing Exporter Assumptions(cont) • Australia: • Current liquidation of cattle herd due to drought • Increased US demand for processing beef

11. Competing Exporter Assumptions(cont) • Canada: • Inventories declining • Higher feed costs, weaker US dollar, and packing industry problems pushing cattle and hogs to US.

12. Competing Exporter Assumptions(cont) • EU: • Beef and pork production declining • Reduced exports to Russia as Russia relaxes restraints on Brazil • Strong Euro may constrain exports

13. Major Export Market Assumptions • Japan: Continued slow gains in US beef exports; pork increases • Increased supplies of qualifying beef • Lower U.S. wholesale prices • U.S continues to negotiate changes in protocol.

14. Major Export Market Assumptions(cont) • Korea: U.S. beef export growth limited by trade restrictions but pork continues to expand • Strong demand for U.S. products • Increasing beef imports may pressure growth in pork

15. Major Export Market Assumptions(cont) • Russia: Slow increases in U.S. pork exports • Attempting to balance support of domestic swine and poultry industries against consumer price rises • Competition from Brazil

16. Major Export Market Assumptions(cont) • Canada: Expanding U.S. beef and pork sales • Lower inventories, higher live animal exports to U.S. • Shakeup in meat packing industry

17. Major Export Market Assumptions(cont) • Mexico:U.S. beef and pork exports will slowly expand • Dichotomy between Mexican import data and U.S. export data • Increased domestic supplies • Lower remittances from U.S. could be limiting expenditures

18. Overall Export Picture Looks Bright But There are Concerns • Weather (USDA forecasts assume normal weather) • Poor weather could affect grain prices • Poor weather could prolong liquidation in Australia, trigger liquidation in US • Sanitary and disease issues • Plant/border closures could affect trade flows • Avian Influenza outbreaks could affect consumption • Income growth • Slower income growth could reduce demand for meat • Higher energy costs could affect buying habits

19. U.S. and World Meat Trade Forecasts will be Updated on the Following Websites on November 9: • World Agricultural Supply and Demand Estimates • www.usda.gov/oce/commodity/wasde/index.htm • Livestock and Poultry: World Markets and Trade • www.fas.usda.gov/dlp/livestock_poultry.asp