UNL – ANSI Department May 4, 2005

1. UNL – ANSI DepartmentMay 4, 2005 Future Potential and Challenges for U.S. Red Meat in the Global Marketplace Brett Stuart Trade Analyst U.S. Meat Export Federation

2. USMEF Mission Statement “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.”

3. St. Petersburg Denver London Moscow Tokyo Seoul Osaka Beirut Monterrey Shanghai Mexico City Guangzhou Taipei Caracas Hong Kong Singapore Sao Paulo USMEF Offices & Representatives

4. Private Companies Tyson Swift & Company Excel National Beef Hormel Smithfield Agribusiness Chicago Mercantile Exchange Elanco Animal Health U.S. Dept. of Agriculture Nat’l & State Organizations National Pork Board Cattlemen’s Beef Board United Soybean Board American Farm Bureau Federation National Cattlemen’s Beef Association NE Beef Council NE Corn Board NE Dept of Ag NE Soybean Board American Meat Institute National Pork Producers Council USMEF Stakeholders

5. Strategic Priorities • Market Access • Trade Support • Market Presence • Buyer Education and Loyalty • Product Image • Total Carcass Utilization

6. Relevance of Trade to U.S. Livestock Industries • In 2003, we exported 12% of domestic beef production

7. U.S. Beef/BVM Exports as a Percent of Production Source: USDA, USMEF

8. Relevance of Trade to U.S. Livestock Industries • In 2003, we exported 12% of domestic beef production • Impact on cattle prices (chart) • In 2004, we exported 11% of domestic pork production

9. U.S. Pork and Pork Variety Meat Exports 14.3% Average Annual Growth - Volume Source: USDA

10. Relevance of Trade to U.S. Livestock Industries • In 2003, we exported 12% of domestic beef production • Impact on cattle prices (chart) • In 2004, we exported 11% of domestic pork production • In 2003, we exported 320 million bu. of corn and 38 million bu. of soybeans through red meat

11. Relevance of Trade to U.S. Livestock Industries • In 2003, we exported 12% of domestic beef production • Impact on cattle prices (chart) • In 2004, we exported 11% of domestic pork production • In 2003, we exported 320 million bu. of corn and 38 million bu. of soybeans through red meat • Even indirect trade issues impact U.S. producers • (chart)

12. June LC Contract - 2002 On March 10, 2002 Russia banned U.S. poultry keeping 53 million pounds per week in the U.S. Source: Chicago Mercantile Exchange web site

13. Topics • Promotional Efforts • Global Demand and Competition • Current Issues - BSE • Challenges • Outlook

14. Promotional Efforts

15. Promotions • Media • Retail • Foodservice • Trade • Foodshows

16. Global Demand and Competition

17. Income and PCC of Meat-- Log Scale -- Estimate: 1% Increase in PCI Increases PCC 0.6% Source: FAO

18. Red Meat Demand Drivers Source: U.S. Census Bureau, World Bank, USDA/ERS

19. FAO Meat Consumption Forecasts % change from base year +67% +29% +108% +34% +57% +30% +64% +22% +44% +22% Source: FAO

20. China Factor • World food demand will increase 50% over the next 20 years, paced by the growing population and greater affluence of China 1988 to 2002 • In China • calories from animal sources +120% • calories from vegetable sources - unchanged • In the Developing World • calories from animal sources +48% • calories from vegetable sources +4%.

21. Global Beef Market Share Source: USDA Estimates

22. Competition is Fierce Source: USDA

23. Global Pork Market Share Source: World Trade Atlas

24. Hog Production 94% of China’s hogs are on operations with <9 head Million head Source: FAO

25. Source: USDA

26. Recent Developments • Argentina receiving FMD clearance by region • Beef access agreement with China • Brazil wants to double meat production in 10 years • Uruguay is 100% USDA Process-Verified • Canada (Maple Leaf) will be using DNA traceability for Japan in 2005 • What is the U.S. doing?

27. Brazil Factor

28. Current Issues - BSE

29. Key U.S. Beef Markets - BSE

30. Nebraska steer/heifer slaughter 2004=6.196 million head, or $619.6 million dollars lost in NE due to BSE bans, not considering other aspects of BSE losses (increased supplies, affiliated industry impact, etc)

31. Current Situation Perhaps the largest ‘non-issue’ issue in industry history • There is virtually zero risk of animal to human transmission • SRM removal • There is no risk of animal to animal transmission Then what is the issue?

32. Key Market Bans Japan • U.S. beef/bvm exports of 384K mt worth $1.4 billion in 2003 • Backed away from 100% testing; poor record of public health • 64% of beef consumed is imported – half was U.S. • Beef is 4th protein source behind Fish, Pork, Poultry

34. USMEF Efforts • Trade Teams • Media Teams • Proposals • Information

35. When Will the Markets Reopen • Japan • Agreed in principle to re-open (10/04) • Domestic rulemaking required • S. Korea • May move independently of Japan • Requires political maneuvering • Others

36. Current BSE Status • 65 countries initially closed – 28 have reopened • Represent 40% of 2003 volumes • Many have boneless and age restrictions • Beef exports to Mexico have reached 81% of pre-BSE levels

37. Challenges

38. Threats to U.S. Success • Production built to domestic market • Our competitors have a very different perspective • Traceability

39. Threats to U.S. Success • Production built to domestic market • Our competitors have a very different perspective • Traceability • Funding sources • Checkoff uncertainty • Budget deficits will decrease future federal agriculture funding • Protectionist attitudes • At home and abroad • FTA’s • China / S. America? • Asian Free Trade Area?

40. Threats to U.S. Success (cont.) • Inability to control food safety and animal health issues • FMD, BSE, etc • Inability to develop standardized trading principles • Sovereignty rights vs. worldwide obligations • Non-tariff trade barriers: dumping cases, SPS issues, etc.

41. As Tariffs Fall…Other Measures Rise Average Tariffs and Antidumping Measures (nontraditional users, 1987-1999) Source: Cato Institute

42. Outlook

43. U.S. has a 35% advantage over Australia/N.Z. compared to Jan. ‘03 Source: 2005 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada

44. U.S. Pork Export Forecasts $2.2 billion in 2004 USMEF forecasts USDA and USMEF

45. USMEF Beef Export Forecasts $3.9 Billion in 2003 USMEF forecasts USDA and USMEF

46. 2005 Outlook • Continued weak U.S. dollar • Global economic growth • Bigger importers and exporters are emerging (specialization) • Animal disease issues driving production/consumption trends • China consumption and Brazil production • Trade Policy • Will the Doha Round reach a conclusion? • CAFTA • Will TPA be renewed (expires in June - could be extended 2 years)

47. Questions ? For more information: Brett Stuart bstuart@usmef.org (303)623-6328 Or visit USMEF at www.usmef.org