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John HinnersAssistant V.P. Industry RelationsU.S. Meat Export Federation

Global Beef Trade Outlook Global Beef Trade Outlook and Opportunitiesand Opportunities

Oklahoma Cattlemen’s AssociationOklahoma Cattlemen’s Association7/29/067/29/06

History & Mission

• USMEF was formally organized in 1976 and is a non-profit trade association working to create new opportunities for beef, lamb and pork.

• USMEF’s mission has evolved over the years and is “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”.

U.S. Meat Export Federation Offices – 100

Employees

Taipei

Singapore

Guangzhou

Denver

Mexico City

Sao Paulo

MoscowLondon

Beirut OsakaTokyoSeoul

Monterrey

St. Petersburg

Caracas Hong Kong

Shanghai

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

Who are our international customers?

Here’s what the World looks like in a village of 100 people with all existing human ratios remaining the same. What we look like, believe, own and how we live:

• 57 Asians, 21 Europeans, 14 from the Western Hemisphere - both North & South and 8 Africans

• 32 would speak a Chinese dialect• 82 would be non-white, 18 would be white

Who are our Customers?• 68 would be non-Christian, 32 would be Christian

• 32% of the village’s wealth would be in the hands of 5 people - all from the USA

• 80 would live in substandard housing

• 17 would be unable to read and write

• 50 would suffer from malnutrition

• 20 earn <$1 / day; 50 earn <$2 /day

• 33 would be without a safe water supply

• 1 would have a college education

• 7 would have access to the internet

Affordable Food

Percentage of Disposable Income Spent on Food*

U.S.- 10%U.S.- 10%U.K. - 11.2%U.K. - 11.2% Mexico - Mexico -

24%24%

India – 50%+India – 50%+

Sources: USDA/ERS, "The Public Image of America's Farmers," American Farm Bureau Federation, 2002

Relevance of Trade to U.S. Livestock Industries

Can indirect trade issues impact U.S. beef producers?

Relevance of Trade to U.S. Livestock Industries

• On March 10, 2002 Russia banned U.S. poultry keeping 53 million pounds per week in the U.S.

• Did this have anything to do to the cattle market?

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

Is meat consumption in the U.S. at a saturation point?

U S RED MEAT & POULTRY CONSUMPTIONPer Capita, Retail Weight, Annual

0

50

100

150

200

1982 1985 1988 1991 1994 1997 2000 2003 2006

Pounds

Turkey

TotalChicken

Pork

Beef

Exports have been a growth market for U.S. Red Meats

0

20

40

60

80

100

120

140

160

180

'60 '70 '80 '90 '00

mill

ion

mt

Rest of World 234%

U.S. 63%

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

Globalization

• Globalization is increasing – livestock sector

Investment and finance• Retail expansion into developing markets is

increasing global trade– Wal-Mart; in 2006 the world’s #1 retailer will

open 230 new international stores– going from 50 to 70 outlets in China by the

end of 2006

This globalization benefits our competitors as well

The New Era of Better Informed Consumers

• Consumers, both domestic and international are demanding assurances of food safety

• In addition to safety, consumers want to know where the product was produced, who produced it and is it fresh

Global Trends – New Realities

• Information is the cost of admission

• Plate to Gate, not Gate to Plate– Market is being

driven by consumers, not producers

• Increase in branding at retail level

Global Trends - “New Realities”

• World protein complex is dealing with the dual shocks of BSE and AI

• Consumers are becoming increasingly concerned about food safety. Brands/traceability are becoming more important.

• Competition for export markets is intensifying.

• FTA’s are enhancing long-term market prospects.

Global Trends - Brands

Natural Brands Store Brands Private Brands

The Brand Promise

                                                          

                             

Randy Blach, CattleFax, Branded beef products(not even counting store brands) account for about

10% of annual fed-cattle production, and he expectsit to grow significantly by the end of the decade.

Source: BEEF, January 2005

Global Trends - “Story Meat”

• Voluntary

• Marketing Tool

• Shows Producer,Farm and Cattle

• Let’s ConsumersKnow SomeoneStands BehindProducts

Store Brands Becoming the Norm

• Branding will grow because a brand represents a promise of quality

• A tremendous amount of marketing and dollars will be placed behind a brand

• A brand can build customer loyalty & repeat buyers

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U.S. Beef Exports

What has been lost and when do we resume exports?

12/24/03 Bans on U.S. Beef Begin

Beef Exports

• Beef and beef variety meats exports in 2003 represented– 1.2 million MT with value

of $3.5 billion– 9% of all muscle cuts– 47% of all variety meats

• 90,000 MT of livers• 27,000 MT of tongues

• The equivalent of 3.5 million head of cattle (roughly 60,000 head per week)

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’s the Current Status

• 133 countries imported U.S. beef between 1999-2003.

• 72 instituted bans in December 2003.– 26 markets currently

closed to U.S. beef.– Of those that have

reopened, access has often limited.

– 6 markets accounted for 90% of ’03 exports and 2 remain closed.

0

200

400

600

800

1,000

1,200

1,400

U.S. Beef & BVM Exports (1,000 MT’s)

7/27/07 Japan lifts ban on U.S. beef imports!

Japan• U.S. beef/bvm exports of

384K mt worth $1.4 billion in 2003

• 64% of beef consumed is imported – half was U.S.

• Beef is 4th protein source behind Fish, Pork, Poultry

01,000,0002,000,0003,000,0004,000,0005,000,0006,000,0007,000,0008,000,0009,000,000

mt

Beef Fish Pork Poultry

Japan Meat Consumption 1961-2001

Winning back consumers around the world

• More And More Consumers Give U.S. Beef Thumbs Up

• Online tracking surveys were conducted May 5-7 to update consumer reaction toward U.S. beef import resumption, safety and purchase intention. The survey showed 34 percent (up 3.2 percent from the last survey) of respondents support trade resumption. Approximately 18.5 percent would purchase U.S. beef. The results are higher than those from April.

Putting U.S. Beef Back On the World’s Market

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

How Well We Cooperate Will How Well We Cooperate Will Determine How Well We CompeteDetermine How Well We Compete!!

Questions?