1

Paul ClaytonU.S. Meat Export Federation

Global Beef Trade Outlook Global Beef Trade Outlook and Opportunitiesand Opportunities

Consolidated Beef ProducersConsolidated Beef Producers

The next 25 to 50 years

• Population

• Resource management

• Technology

• Knowledge

• Economic integration

• Conflict

• Governance

Future Global Beef DemandFAO Beef Consumption Estimates

Source: FAO

0

10

20

30

40

50

60

70

80

90

mill

ion

me

tric

to

ns

1997/1999 2015 est 2030 est

+22%+44%

% change from base year

13 million mt every 15 years

Importer YTD 2005 Thru%

change

U.S. 846,164 Aug +4.0%

Japan 357,546 Aug +14.6%

Russia 249,073 Jun +27.3%

E.U. 304,239 Jul +9.2%

Mexico 177,639 Jul +30%

S. Korea 127,086 Aug +11.6%

Others 711,990 Jul +8.7%

TOTAL 2,482,672 Jul +7.4%

2005 Beef Import DEMAND - YTDBeef/BVM

Source: Global Trade Atlas, not including intra-EU trade

Value of Beef ExportsItem Domestic

UseExports

(mt)Extra Value

(million US$)

Short Ribs Trim 121,000 $388

Tongue Pet food 35,000 $328

Outside Skirt Trim 50,500 $166

Short Plate Trim 163,000 $63

Chuck Eye Roll As Is 71223 $43

Intestine Render 32,000 $35

Tripe Render 38,500 $35

Rib Finger Trim 14,000 $27

Chuck Flap Tail As Is 9,548 $26

Ribeye Roll As Is 18,212 $24

USMEF Estimate,

Value of Beef Exports

• Total Exports equal $12.45/cwt

• Top Ten Items Represent 65% of all Beef Exports

• 60% of Value Derived from Muscle Meats, 40% from Variety Meats

• Total Extra Value: $1.2 billion per year

• $2.79/cwt per Head Slaughtered, $33.47/Head

What is the Market Potential?

World Population in billions

0

1

2

3

4

5

6

7

8

9

1990 2000 2010 2020 2030

World Per Capita Income Growth Index

0

50

100

150

200

250

1970 1980 1990 2000 2010

19

70

=1

00

Benefits of U.S. Red Meat Trade

0

20

40

60

80

100

120

140

160

180

'60 '65 '70 '75 '80 '85 '90 '95 '00

mil

lio

n m

etri

c to

ns

Global Red Meat Consumption

U.S. Consumption

Source: FAO

World Population GrowthWorld Population Growth

0

1

2

3

4

5

6

7

'50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00

Billion

0123456789

10

'05 '10 '15 '20 '25 '30 '35 '40 '45 '50

Billion

HistoricalHistorical

Projected

Double 1980 by 2050

Growing Agricultural Trade• The world’s arable land is not

distributed around in the world in the same proportions as is population. (No way for Asia to be self-sufficient)

• With population growth, urbanization and broad-based economic development in LDCs, more of world food production will move through trade.

• Agriculture in most LDCs is underperforming relative to its potential.

• Greater trading opportunities for LDCs would accelerate their economic growth and expand their food consumption faster than production, increasing their food imports.

0123456789

10

%

China Korea Russia U.S. Mexico Japan Canada

2004 (f) 2005 (f)

Global GDP and Global Red Meat Consumption

1971-2002

0

20

40

60

80

100

120

140

160

180

0 10 20 30 40Global Red Meat Consumption (MMT)

Glo

bal

GD

P (

Tri

llio

n U

S$)

Source: FAO, World Economic Bank

Global Meat Consumption- metric tons -

0

20

40

60

80

100

120

1960 1965 1970 1975 1980 1985 1990 1995 2000

mill

ion

met

ric

ton

s

BeefFishPorkPoultry

U.S. Consumption

Source: FAO

Global Meat Consumption- Per capita in Pounds -

0

5

10

15

20

25

30

35

40

1960 1965 1970 1975 1980 1985 1990 1995 2000

Per

Cap

ita

Co

nsu

mp

tio

n -

Po

un

ds Beef

FishPorkPoultry

U.S. Consumption

Source: FAO

U.S. Production as a % of Global Consumption

0%

5%

10%

15%

20%

25%

30%

'60 '65 '70 '75 '80 '85 '90 '95 '00

BeefPorkLamb

Source: FAO

Global Consumption is outpacing U.S. production

U.S. “Global Market Share”

99%

U.S. Beef Exports

1%

U.S. Pork Exports

0%

Global Meat Consumption

outside of the U.S.

Source: FAO, USDA

Global Meat Consumption

Source: FAO

0

50

100

150

200

250

300

350

mil

lio

n m

etr

ic t

on

s

1997/1999 2015 2030

Poultry

Pork

Ovine

Bovine

+34%

+108%

+30%

+57%

+22% +44%

+22%+64%

% change from base year

+29%

+67%

Global Meat Consumption

0

50

100

150

200

250

300

350

400

mil

lio

n m

etr

ic t

on

s

1997/1999 2015 2030

Industrial Countries

Developing Countries

Source: FAO

+56% +113%

+15%

+24%

80

90

100

110

120

130

140

150

1960 1970 1980 1990 2000

19

60

= 1

00

USAEUNon US/EU

World Beef Exporters

U.S.4%

EU31%

Canada7%

N. Zealand7%

Argentina7%

Australia16%

Brazil16%

Others12%

Source: Global Trade Atlas

Australia

U.S.

S. America

EUCanada

New Zealand

Other29.3%

17.5%

15.5%

15.8%

7.5%

6.8%

7.5%(Brazil, Argentina, Uruguay)

2001

2004

World Tradein Meat as a Percent of Production

0%

2%

4%

6%

8%

10%

12%

14%

Beef Sheep Pork Poultry

Per

cen

t of

Pro

du

ctio

n E

xpor

ted1970198019902000

Source: FAO

Brazil

Australia

India

New Zealand

Argentina

CanadaUruguayEU-25

U.S.

Others

0%

20%

40%

60%

80%

100%

1999 2000 2001 2002 2003 2004 f 2005 f

Global Beef Market Share

Source: USDA Estimates

Competition is Fierce'Other' U.S. Beef Markets

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

(1-1

1)

MT

Others

Senegal

Bulgaria

S. Africa

Turkey

Gabon

Angola

Cote d'Ivoire

Romania

Global Beef Exporters by Country

0200400600800

1,0001,2001,4001,6001,800

Brazi

lAust

ralia

India

N. Zea

land

Argen

tina

Canad

aUru

guayEU-2

5

U.S.

Ukrai

neO

ther

s

1,0

00

MT

CW

E

199920002001200220032004 (f)2005 (f)

Top 10 Beef Export Markets in Common2003

U.S. Australia Brazil1 Japan U.S. Chile

2 Mexico Japan U.K.

3 S. Korea S. Korea Russia

4 Canada Taiwan Egypt

5 Russia Canada U.S.

6 Egypt Indonesia Hong Kong

7 Hong Kong Malaysia Saudi Arabia

8 Taiwan Philippines Netherlands

9 Indonesia Russia Italy

10 China China Iran

% 95% 93% 73%

Self-Sufficiency Dependence on Exports

Beef• New Zealand• Australia• Uruguay• Canada*• Argentina• Brazil• U.S.*

592%

265%

257%

131%

123%

122%

98%

Pork• Canada• Brazil• EU-25• U.S.

180%

128%

106%

104%

*U.S. – 2003, *Canada 2002, Others - 2004

Source: USDA/FAS PSD Tables

Brazil314 million

farmable acres

151 million farmed

U.S. / BrazilMeat Comparison

PRODUCTIONPRODUCTION EXPORTSEXPORTS

Mil MTMil MT 20022002 19971997 ChangeChange %% 20022002 19971997 ChangeChange %%

Beef

US 11.8 11.7 0.1 1% 1.2 0.98 0.4 26%

Brazil 7.0 6.0 1.0 17% 0.8 0.2 0.6 300%

Pork

US 8.7 7.8 0.9 12% 0.7 0.5 0.2 40%

Brazil 2.3 1.5 0.8 53% 0.4 0.1 0.3 300%

Poultry

US 14.4 12.3 2.1 17% 2.9 2.1 0.8 38%

Brazil 7.0 4.5 2.5 56% 1.4 0.7 0.7 100%

Uruguay

• World Exporter– FMD Under Control

• US Quota 20,000mt– 2005 imports 167,000mt over quota (26.4%

duty)– Price per pound as much as $.75 under

other importing countries

Australia

U.S. Quota 2003 2004 2005

378,214mt 379,000mt 379,000mt 307,000mt

US Beef Export vs. Import Summary

2003 Beef/BVM Exports2003 Beef/BVM Imports

2004 Beef/BVM Exports2004 Beef/BVM Imports

Net

2003 Exports-Imports ($1.66-$1.21/lb)2004 Exports-Imports ($1.18-$1.37/lb)

$3.9 billion $2.6 billion

$0.7 billion $3.7 billion

$0.45/lb($0.19)/lb

2004 Pork Export Premiums - Top 10 -

CutMT

exported

Export Prem. / pound

Export Premium

Bellies 61,600 $0.45 $ 61,080,099

Loins 129,485 $0.17 48,147,688

Butts 40,428 $0.43 37,929,942

Tenderloin 25,138 $0.52 28,870,885

Picnics 168,855 $0.06 23,453,561

Bungs 11,871 $0.46 12,107,754

Feet 50,732 $0.07 8,178,401

Tongues 20,484 $0.16 7,232,334

Skins 42,891 $0.07 6,843,477

Jowls 15,990 $0.10 $ 3,659,396

Exports Outpacing Imports

Avian Influenza

BSE LossesTop 10 Exported Cuts

Source: USDA, USMEF

Pre BSE

Price 12/03

PostBSE

Price 12/04 Loss/lb

Lbs / Hd

Loss/Hd

AnnualLost

Value *Short plates $1.80 $ 0.71 $(1.09) 40.0 $43.60) $(1,155)Liver 0.35 0.10 ( .25) 11.0 (2.75) (72)Short ribs 2.37 0.71 (1.66) 5.0 (8.30) (219)Intestine 0.55 - 0.55) 7.5 (4.13) (109)Chuck roll 1.66 1.52 (0.14) 38.0 (5.32) (140)Tongues 4.25 0.70 (3.55) 3.5 12.43) (329)Skirt 3.11 1.8 (1.30) 7.0 (9.10) (241)Rib Fingers 2.45 0.51 (1.94) 4.0 (7.76) (206)Tripe 0.99 0.43 (0.56) 7.5 (4.20) (111)Hanging Tndr 2.00 0.85 (1.15) 2.5 (2.88) (76)

TOTAL 126 (100.46) $(2,662)

Or

$ (8.04) per cwt

* Based on USDA steer / hfr slaughter

BSE Impact on Japan Market

Japan Meat Consumption

Poultry15%

Pork17%

Fish60%

US Beef2%

Beef6%

… but not to Japanese meat supplies

Japan Beef Supplies

1. Eating less, yet paying more

2. Losers: N. America, domestic industry

2003 2005 (f) % change

Consumption (mt) 903,781 810,300 -10.3%

Expenditures (yen) ¥ 6,639 ¥ 6,723 +1.3%

Imports (mt) 520,096 483,600 -7.0%

–Australia 289,123 435,000 +50.5%

–N.Z. 18,051 47,600 +163.7%

Production (mt) 353,695 348,600 -1.4%

Source: ALIC, USMEF

Beef Export Premiums

$0$10$20$30$40$50$60$70$80

$ / Head

ShortPlate

Tongue Skirt ShortRibs

Tripe

Dom. Price Without Exports Export Premium

Export premiums on these 5 cuts alone

represent $78 per head

Source: USMEF

What is the function of Traceability, Source Verification

and/or Process Verification? • Control animal and zoonotic

diseases– Only need live animals procedures – FMD, BSE

• Food Safety – Chemical

• Antibiotics, Hormones, Pesticides• GMO

– Sanitary• Microbiology• GMP• Physical Risks: Needles

– Only need plant procedures • Recall procedures

• Commercial purposes– Branded Programs

• Source Verification– Identity Preservation– Information Exchange

• Genetics• Production Practices

Production Verification

Traceability and Consumer Demand

Consumer Willingness to Pay

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

Traceability Animal Welfare Food Safety All Attributes

Verifiable Attributes

Do

llars Beef

Ham

Dickson and Bailey, Meat Traceability: Are US consumers willing to pay for it? 2002

Value Attributes

• Production – Genetics– Feed– Production Practices

• Animal Health• Feed• Animal Welfare

• Processing– Food Safety

Enhancements– Quality

Enhancements

BrandsNatural Brands Store Brands Private Brands

Marketing Value Attributes

Each of these product lines have traceable attributes. Some attributes must be traced back further in the production process.

Ribeye Striploin

Wal-Mart $7.48 $7.68

Wal-Mart Angus $12.03 $12.42

Cattlemen’s Collection $10.79 $10.99

Rancher’s Reserve $9.99 $11.49

Butcher’s Premium Angus $12.99 $11.49

Laura’s Lean All Natural $11.79

Coleman’s Natural Meats $16.99 $16.99

Where Do We Go From Here?

• Australia beef checkoff changed to $5 per head (all international)

• Canada has roughly $60 million to invest in overseas market development

• Virtually all beef competitors have traceability in one form or another

• Global demand is rapidly growing– Shifts in consumption and production

• Trade is liberalization is expanding– Bilateral agreements increasing– U.S. is committed to pursuing FTA’s

Where Do We Go From Here?

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

• Promote agility and ingenuity

In Summary

• Global beef demand is expanding– Population, incomes, globalization

• BSE has changed the way we do business• Participating in beef trade helps U.S. beef

– Increase profitability of industry– Participate globally– Invest in future markets– Maintain competitiveness

• Non-scientific trade barriers . . .