Brett Stuart

Economic Turmoil / Credit Crisis
• Meat export deliveries lag transactions by weeks exaggerating credit freeze impact
• Global shipping falls to a standstill (container rates from Asia EU hit ZERO in January 09; Baltic Dry
Index down 96%)
• Rapid dollar appreciation shifts global pricing
• Economic uncertainty globally drives consumer belt-tightening
• Consumer demand varies by country, but remember: U.S. beef is the discount beef in key markets (Japan, S.Korea)

30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
-60%
-70%
-80%
Key Global Financial Indices
Percentage Change from Jan 1, 2008
Daily
DJIA, -34%
SYDI, -40%
Nikkei, -41%
DAX, -42%
Bovespa, -45%
Hang Seng -49%
BOM, -57%
Shanghai, -65%

Source: Pacific Exchange Rate Service

The flow of capital and equity in the meat/livestock industries is increasing
• JBS (22 countries)
• COFCO (China) buying 7 million shares from Smithfield
Tyson formed 3 rd joint venture in China (poultry)
• Marfrig (Brazil) rapidly expanding overseas investment
(Pemmican jerky line - ConAgra, OSI in Europe/BRZ)
• Sadia (Brazil) poultry in Russia and UAE
• Goldman Sachs: 60% of Shanghui group, 13% of Yurun
Food Group, 10 hog farms ~ $300 million (all China
• Deutsche Bank: 30% of unnamed Chinese hog farm, other J.V.’s in China

Global Meat Forecasts
Source: FAO/OECD Forecasts
Added 2008-2017:
Beef: 11 mmt
Pork: 21 mmt
Poultry: 18 mmt

Global Beef Trends
2009 F
Source: USDA/FAS, CattleFax Projections

76% of US beef exports go to
Mexico, Canada,
Japan, and S.
Korea

Global Beef Trends: ‘09 Steady/Lower
Source: USDA/FAS, CattleFax Projections

U.S. TRADE

U.S. Meat Exports in 2009
Source: USDA, CattleFax Projections

U.S. Beef Trade and Forecasts
Exports
Source: U.S. Dept of Commerce, forecasts by CF

Bottom Line: Future of U.S. Beef Exports
• Global demand will outpace supplies
• However, ACCESS is a much bigger factor o Japan, China, EU, Mexico o Russia, Mexico
• Exports of competing species critical to net meat supply equation
• Disease issues are alive and well (PRRS, AI, FMD)

Key Considerations for 2009
• Exports to NAFTA (Canada/Mexico) are critical, worth
$50-60 per head
• Trade friction with Mexico is HIGH
• 12 months of access to S. Korean market~ 468 mil lbs

Another Key Factor: 2009
• Expanded Japan access would be significant to
U.S. cattle industry (~ $3-4/cwt live) o o o o
Currently at 24% of pre-BSE levels (19 mil lbs/week)
$373 million in 2008 vs $1.4 billion in 2003
Japan has previously offered access < 30 moa
<30 moa would restore 95%+ of pre-BSE volumes