US Pork Checkoff Update

1. US Pork Checkoff Update USMEF Board Meeting Las Vegas, NV May 26, 2006

2. Thank You USMEF

3. Exports of US Pork • Working towards 15th consecutive year of record US Pork exports. • Excess of $2.6 billion pork exports in 2005 • 1st quarter 2006 up 21% in volume and 9% in value over same period last year. • In the face of declining domestic demand, exports have been a key driver in hog demand/prices the past 15 months. • Momentum is a powerful ally…complacency is its enemy. Must maintain intensity.

4. Domestic Demand for Pork • 2005 domestic demand for pork down 4.2% and nearly 4% for the 1st quarter of 2006. • Pork checkoff responsibility is not to explain why, but to do something about it. • New pork repositioning campaign “Don’t be Blah” is an effort to find a formula that can change the course. • Thus a target market impact evaluation study was implemented a year ago, and early returns our just now in.

5. Background • NPB understands pork producers expect meaningful measurement of results from their Checkoff investments. • Demand is a good measure, is imperfect for measuring NPB marketing impact. • NPB needed a simpler, purer and more concise way to measure the impact of consumer communication executions.

6. Target Market Impact Evaluation • The Other White Meat’s brand campaign was focused on six target markets: • Atlanta, Philadelphia, Chicago, Dallas/Ft. Worth, Denver, Sacramento. • 12.21% of US Households (Neilsen). • Campaign utilized advertising, public relations, retail and foodservice promotions. • Investment of $4,079,909. • These target markets effectively offer NPB a laboratory for measuring marketing impact.

7. A new measure • Total Revenues for Pork. • Real (deflated) per capita consumer expenditures for pork. • Computed with the exact same measures as demand. • But based on dollars, not an index. • Important because producers invest dollars. • And correlates very closely to Demand. • Correlation co-efficient of 0.955. • Research conducted by Texas A&M Agricultural Economics Department.

8. Results - retail • From March 2006 to November 2006, this program generated between $17.2 million and $20.1 million in additional pork sales at the retail level. • Every $1 invested in this program yielded $4.22 - $4.94 in retail pork sales. BenefitsCostsB/C Ratio Atlanta $2.5 million $736,754 3.54 Chicago $4.7 million $1,011,976 4.70 Dallas $2.7 million $773,813 3.55 Denver $1.2 million $439,012 2.62 Philadelphia $4.3 million $815,056 5.29 Sacramento $1.8 million $303,298 5.46 Aggregate Target Area $17.2 million $4,079,909 4.22 Pooled Model $20.1 million $4,079,909 4.94

9. The bottom line • What’s that mean to our producers? • Over the period March 2005 to November 2005, the producer share of retail dollars was 31.1%. • Given this figure, for every $1 producers invested in this program, they received a return of $1.31 to $1.54. • Caveats. • Study does not account for any benefit seen at foodservice. • Study is an immediate or short-term measure of a program designed to create long term impact.

10. Next Steps – 24 months • This is a short term data set, more testing is needed. • Investigate the differences in target markets to determine the demographic and/or psychographic drivers that influence pork purchases among the target audience. • Establish a communications impact formula that is repeatable and scaleable. • Explore options for expanding the impact formula to broader markets.

11. 2006 Critical Issues (Priority Order) • Moving the needle on domestic demand. • The early identification and management of issues. • The transfer and deployment of knowledge and technology. • Partnerships and alliances inside and outside of the chain. • The image of the industry. • The resolution of the swine welfare issue with customers. • A long range strategy for US pork exports. • The industry’s future leadership. • Answers to the odor issue.

12. Anticipatory Issues Management Method for the early discovery and addressing of external forces that can impact the industry’s bottom line.

13. The General Life Cycle of an Issue Publicity Exposure and who is involved Politicians Public Media InterestGroups ScientistsAcademe Fringe Phase Triggering Event “Crisis”/Public Positioning Resolution Emergence Best opportunity to Save Resources, & Reduce Risk Crisis Time Anticipatory

14. Anticipatory Issues Management Relative Cost and Vulnerability Comparison Crisis Management Cost, Resources, Vulnerability Emergence Phase Management Triggering Event “Crisis”/Public Positioning Resolution Emergence Phase Time

15. AIM Process • Information Gathering • Monitor Named Issues • Scanning for Trends • Information to Intelligence • Informed Futurists • Scenario Building • Board of Directors • Prioritize Critical Issues • Hand off to Plan of Work Strategic Operating Plan and Budget

16. 2006 Critical Issues (Priority Order) • Moving the needle on domestic demand. • The early identification and management of issues. • The transfer and deployment of knowledge and technology. • Partnerships and alliances inside and outside of the chain. • The image of the industry. • The resolution of the swine welfare issue with customers. • A long range strategy for US pork exports. • The industry’s future leadership. • Answers to the odor issue.

17. Thank You! Please travel safely…