Asia Pacific Region

1. Asia Pacific Region Modified Version of Original Presentation without Photos Joel Haggard – Vice President, Asia Pacific

2. The Asia Pacific Region • Japan • Korea • Taiwan • China • Southeast Asia • Oceania

3. Asia’s Strategic Importance to the U.S. Red Meat Industry • Beef: 63% of Total U.S. Export Value (’03) Pork: 61% of Total U.S. Export Value (’03) • Growing population, per capita incomes, & market access • Continued diet diversification • Declining comparative advantage in livestock production • Complementary red meat demand structure

5. Asia: Key Strategic Demand Issues in the Future • China: market access • Japan: impact of food safety on consumption • Korea: impact of food safety on consumption • Taiwan: popularization of beef consumption • SE Asia: Macro factors (esp. exchange rates)

6. Economic & Political Environment • Japan: Strongest growth in a decade • Korean: trade-lead growth; weak domestic consumption • China: regional economic “engine” • Taiwan: trade lead growth; political softening toward China • Hong Kong: Tourism & shipping lead growth • SE Asia: new leadership grapples with challenges

7. Asia Beef Imports January – July 2004 • Regional import volume down 26%; value down 28% (US$750 million) • Variety meat import volume down the sharpest • SE Asian beef imports up • Oceania: supply focus on Japan & Korea • Supply shortfall boosts regional demand for Brazil, Chinese & Indian Beef

8. Asian Beef Suppliers 2004Changes in Export Levels (Jan – Aug) (c) = cooked product

9. Asia:  Post-BSE Market Re-opening Assumptions • Quick return of consumer confidence and purchasing once product is "placed“, esp. at foodservice; • Quick take-up of traditional U.S. slicing and Yakiniku items including short ribs, chuck ribs and short plates; • Quick recapture of most pre-BSE U.S. chilled beef retail market share from Australia; • Possible short term supply-demand imbalance induced by initial wave of buying, esp. of commodity items;  • Longer-term:  stronger U.S. competitive position based on continued high product quality and enhanced safety, barring additional multiple BSE cases.

10. Asia: Pork Trade Trends 2004 • Regional import volume up 20%; value up 22% (up $697 million) • Japan accounts for 56% of region’s imports and 84% of import value. • Pork imports 2004 are increasing in every Asian country. • All suppliers (U.S., Canada, EU) are increasing volumes to the region except Brazil. • The declared value of Japan’s pork imports is greater than total Asian beef import value • Non traditional importers making inroads (e.g. Chile)

11. East Asia Pork Imports: Supplier Market Shares (2003) Total Imports: 1,549 tmt* *Product weight Note: includes variety meats: includes Hong Kong imports from PRC

12. Japan USMEF/Tokyo

13. Importance of the Region & its Markets to U.S. Beef & Pork Trade Japan: Safety as the pre-requisite. U.S. Beef: • Largest market. • High-value markets, Loin &“Yakiniku” cuts. • Major importer of variety meats. U.S. Pork: • Largest and growing market. • High-value/table-meat markets.

14. Demographics Japan: • High-density population in Metropolitan areas. (127 million, 375,000 sq.km) • Japan population growth slowing. • Growing percentage of elderly.(>65 19% in 2004e) • Primary protein consumption is from fish and soybeans.

15. Economic Situation Japan: • Recovery stronger than expected. (GDP growth estimated 2.7% in 2003) • Growing unemployment rate (5.3% in 2003) • Consumer price declined .3% in 2003.

16. Political Climate Japan: • Lack of political leadership by L.D.P. & Cabinet (allied with the Komei-to). • Influence of Ag. politicians at L.D.P declining. • Poor risk communication by the GOJ. • Food Safety Commission (F.S.C) conducts risk assessments. • Conservative policy toward the resumption of U.S. beef imports.

17. Trade Policy & Market Access Environment Japan: • FTA’s – Expansion anticipated. • BSE • Pork VL & Pork/Beef Safe Guard. • Avian Influenza & import ban. • New competitors

18. General Market Situation & Trends • Generally declining self-sufficiency in meat production.(Pork:.5-1.0% annually) • Outbreak of animal diseases has altered trading partners. • Restructuring of retail industry. • Increased importance of traceability.

19. Japan-- Beef -- • US beef import ban continues to next spring?? • Export forecast: pre-BSE levels by 2007 and 05 may see exports at 40%-60% of pre BSE levels. • Aussie beef builds strong presence in both retail and HRI sectors>> The major threat to the US recovery. • More requirements possible against BSE by GOJ.

20. Key Drivers Consumers are increasingly safety conscious. Major HRI companies intend to return to US beef. Retail ready to follow HRI. Strategic Priorities Rebuilding confidence in U.S. beef (Consumer/trade) Recapture market share by focusing on major accounts. Education/communication Key Drivers & Strategic Priorities-- Japan Beef --

21. Japan-- Pork -- • Domestic pork production declines .5-1.0% annually. • U.S. chilled pork increasing. • Export Forecast; comparatively slow decline to competitors after resumption of U.S. beef imports. • Tougher competition for frozen and processed pork markets. • Stronger pork consumption with perception of nutrition and wholesomeness.

22. Key Drivers Better taste and quality of U.S. pork. Off-shore production of value-added pork products by H&S Stronger pork consumption with perception of nutrition and wholesomeness. Strategic Priorities Expand market for chilled pork. Emphasize availability of value-added pork products. Heighten consumer awareness. Trade education for positioning Key Drivers & Strategic Priorities-- Japan Pork --

23. Economy Impact Study by UFJ If Japan keeps import ban for one year from December, 2004….. • Total sales of US$ 2.5 billion lost by the Japanese industry • Equals to the profit of Yakiniku industry • 72,000+ jobs lost

24. Current status of consumer attitude • Consumer groups vs. real consumers • What is true consumer behavior? General survey vs. survey at purchasing point

25. Korea JiHae Yang – USMEF/Seoul

26. General Market Situation & Trends • Generally declining self-sufficiency in meat production. • Continuous meat consumption increase • Increasing modern retail outlets • Increasing western restaurants • More eating out • Importance of brands/traceability • Food safety conscious consumers

27. Meat Consumption Trend in Korea Pork Beef Poultry

28. Korea-- Beef -- • Market remains closed. Japan will be key to make ROKG lift the ban in terms of timing and eligible items. • Korea beef imports are expected to reach pre-BSE levels by 70% in 2005; within 8-9 months of 2006, may see exports at 90% of pre BSE levels. Due to increasing demand by other markets, availability will be a key issue. • Aggressive MLA activity • Low supply resulted in total consumption drop.

29. KOREA: MLA ‘s Aggressive Retail Promotions(number of retail in-store promotion events)

30. Key Drivers Expanding retail sector. Consumers are increasingly safety and quality conscious Slow economy BSE Strategic Priorities Return U.S. beef (especially chilled prime/choice) to retail shelves ASAP. Reposition U.S. beef as safe and high quality to Korean consumers. Re-establish U.S. beef supply channel to HRI sector Foster branded development for retail Key Drivers & Strategic Priorities-- Korea Beef --

31. Korea: Market Re-opening Dynamics Quantity Beef Supply Pre-BSE level Beef Demand Time

32. Korea-- Pork -- • Animal disease issues pushed pork consumption up in 2004. • U.S. pork exports in 2004 to Korea have increased by 57%; main increase was in grill items.(e.g. single ribbed belly by 429% & collar buttby 419%) • Competition & U.S. market position

33. Key Drivers Rapidly expanding retail and HRI sector Increasing pork consumption and seasonal supply shortage Strategic Priorities Continuous retail promotion for chilled U.S. pork. Educate retailers and foodservice operators on the benefits of U.S. chilled pork. Key Drivers & Strategic Priorities-- Korea Pork --

34. Taiwan Davis Wu – USMEF/Taipei

35. Beef Market Status Chronicle of BSE Risk Assessment in Taiwan • Department of Healthis in charge of the risk assessment process regarding lifting U.S. beef import ban • March 29: 2004, USG formally requests lifting U.S. beef import ban,USMEF helped with the documentation translation • May 12: DOH creates a risk assessment panel, composed of 17 animal science specialists and medical doctors, to review USG documentation • August 22:First Risk Assessment Meeting is held. 6 out of the 17 committee members oppose re-opening the market for U.S. beef • Oct. 20: Second Risk Assessment committee meeting; Conditions announced for market reopening

36. Taiwan: Post BSE U.S. Beef Export Scenario Metric tons

37. Branding is Key in Future Taiwan Beef Market • After BSE case was discovered in the U.S., U.S. beef imports were banned and most of the supermarkets which sold U.S. beef reduced their beef showcase space and developed local meat branding showcases. Pork and chicken branding showcases are commonly seen. • USMEF believe beef branding substantially benefits both suppliers & Taiwan consumers by creating awareness, trust and loyalty US beef, the best meat you will never forget!

38. Taiwan: Beef Import Trends January – June, 2004 * Taiwan Import Statistics

39. -- Taiwan Beef --Key Strategic Priorities • To assist the trade to transfer knowledge of the safety, variety and availability of U.S. beef cuts to their downstream (HRI and retail) customers. • To regain the dominant position of U.S. beef in the fine dining segment and expand distribution to Chinese-style restaurants and mid-class Taiwanese steakhouses. • To educate foodservice and retail buyers about the safety, profitability of U.S. beef and increase sales of both underutilized U.S. beef cuts and chilled U.S. beef in both retail and HRI sectors. • To position U.S. beef as a nutritious product in the minds of consumers. • To position U.S. beef as the highest quality and the most delicious product in order to increase the range of consumers who currently purchase U.S. beef. • To educate Chinese style restaurants on the advantages of using lower priced U.S. beef cuts.

40. Taiwan Pork Market Situation November 2004

41. Pork Import Forecast

42. Taiwan: Pork Imports Pork Market Share (value) January – June, 2004

43. Taiwan CAS Certification • CAS certified meat is produced from Chartered Slaughter houses. Raw materials originate from domestic livestock. CAS products shall be sold chilled. CAS logo is only authorized for certified and contract products. CAS = Chinese Agriculture Standard

44. Taiwan Natural Pork • In order to distinguish high quality pork in Taiwan pork market, Taiwan Meat Sales Association develops and certifies Taiwan Natural Pork. Every year, there are 50,000 head of hogs certified through this system. • Taiwan Natural Pork’s 6 guarantees: 1) No antibiotics residues 2) No sulfa drugs 3) No hormones 4) 210 days feeding、 mature hog 5) Under double certification by COA & ATIT. 6) Slaughtered at CAS & HACCP controlled plants.

45. Taiwan: Future Pork Market Trends • Taiwan is expected to increase imports of U.S. picnics in the near future as Taiwan government seeks to declare itself an FMD-free country and seek export eligibility to Japan. • Taiwan importers are seeking cooperation with small U.S. packers (500-1,000 head daily capacity plants) for pork variety meat needs. 

46. China, Hong Kong & Macau

47. China – General MarketSituation & Trends • Strong economy boosts consumption and foodservice spending; • Raw material demand boosts inflationary pressures, including agricultural commodity prices; • Early but mixed signs that inflation & fixed asset investment is cooling; ‘hard landing’ likely can be avoided; • Trade engine powers ahead; imports up 38%; exports up 35%; • HONG KONG: Tourism and shipping/services aids growth, employment, consumption

48. China’s Pork Industry – 2004 • Rising Prices Factor weaners – ↑37.9%; market hogs – ↑36.2%; retail pork – ↑26.6% • Factors Behind Rising Prices * Post-SARS contraction in production * AI outbreak in January * “pig raising enthusiasm” leads to piglet shortage * increase in transportation costs due to enforcement of highway overloading restrictions * urbanization (e.g. Zhejiang Province) * expensive and poor quality feed supply (e.g. Shandong) * seasonal factors clash with demand (summer is “low” production season) * economic growth; double digit increases in foodservice revenues

49. Key Drivers & Strategic Priorities CHINA - PORK • Strategic Priorities • Focus on local foodservice operators • Tactical focus on chef education • Link with importer/ distributor for orderly growth • Geographical Focus • Guangdong, Shanghai, Beijing, NE China (ethnic) Key Drivers • Strong overall HRI growth • Increasing menu prices • Positive image of U.S. products • High domestic prices

50. China – Beef Market Developments • Beef is highest growth meat item in China: per capita annual consumption growth is estimated at 3.7% for 2000-2010; • Domestic production, consumption and prices up in 2004; • Total Chinese beef and beef variety meat imports down 60% (Jan – Aug); • Australia & New Zealand face plant certification problems; • Resolving U.S. beef import ban challenging; • Hong Kong/ Macau: foodservice demand strong; many imperfect U.S. beef substitutes available