Current Situation
U.S. DOLLAR INDEX
Key Currencies Versus the U.S. Dollar
% Change Since 2003
140%
Since Jan 1, 2003
120%
BRZ R, +56%
100%
CAD$, +29%
80%
JP ¥, +21%
60%
EUR €, +20%
40%
AUS$, +15%
20%
SK W, -11%
0%
Jan-03
Jun-03
Nov-03
Apr-04
Sep-04
Feb-05
Jul-05
Dec-05
May-06
Oct-06
Mar-07
Aug-07
Jan-08
Jun-08
Nov-08
-20%
Monthly
Source: Pacific Exchange Rate Service
Dow Jones Average
Crude Oil
Cattle Industry Outlook
and Strategies
Florida Cattlemen’s Institute
January 2009
Total Cattle Inventory
140
95.2 Million
Down 1.4 Million
130
120
Mil Head
110
100
90
80
70
60
50
30
40
Source: USDA
2009 Projected
50
60
70
YEARS
80
90
00
Commercial Cow Slaughter
9,000
8,500
+9% 500,000 HEAD IN 2008
8,000
000 HEAD
7,500
7,000
6,500
6,000
5,500
5,000
4,500
4,000
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08
Source: USDA
Projected 2008
YEARS
Down 2% (650,000) head
January 1 Cattle-On-Feed
12,500
DOWN 6%, 790,000 HEAD
11,974
12,000
11,804
11,798
11,475
11,500
11,565
11,253 11,299
11,155
000 HEAD
12,097
11,307
11,000
10,558
10,500
10,631
10,658
10,346
10,000
9,500
9,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
YEARS
U.S. Beef Trade and Forecasts
Exports
Source: U.S. Dept of Commerce, forecasts by CF
30
29
Beef Production and Net Beef Supply
Production
Net Supply
28
B
I
L
L
B
S
27
26
25
24
23
22
21
20
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08
YEARS
Source: USDA
2008-2009 projected
U.S. Dollar Index
U.S. Meat Exports in 2009
Source: USDA, CattleFax Projections
Per Capita Meat Consumption
100
90
2009 vs. 2008 Total Meat Consumption down 3.4 lbs
2009 vs 2008
-1.9lbs
Beef
80
-1.7lbs
Pounds
70
60
Pork
50
40
30
+0.4lbs
Broiler
-0.2lbs
20
Turkey
10
0
50 53 56 59 62 65 68 71 74 77 80 83 86 89 92 95 98 01 04 07
Source: USDA
Years
Recessions
Length of Change in Change in
Recession CH Retail Per Capita
(months)
Price
Supply
Peak
Trough
2008
???
???
+2-4%
-2-3%
Mar 2001
Nov 2001
8
+10%
-1%
Jul 1990
Mar 1991
8
+7%
-4%
Jul 1981
Nov 1982
16
+1%
+0%
Jan 1980
Jul 1980
6
+2%
-2%
Nov 1973
Mar 1975
16
+2%
+5%
Shifts in Beef Demand
 Change in values
 90s Trimmings +15%
 Chuck +10%
 Round +9%
 Rib +0%
 Loin -7%
FEEDGRAINS
Estimated Corn Production Costs in Iowa
$1,000
$5.00
$4.51
Projected break-even
corn price for 2009
$4.50
$800
$3.48
$735
Total Costs/Acre
$700
$3.50
$600
$2.76
$2.55
$500
$400
$4.00
$344
$2.42
$363
$2.83
$2.96
$3.00
$557
$2.57
$2.50
$473
$386
$439
$414
$2.00
$300
$1.50
$200
$1.00
$100
$0.50
$0
$0.00
2002
2003
2004
Source: Adapted from Iowa State University
and University of Illinois Extension
2005
2006
Years
2007
2008F
2009F
Breakeven Corn Price $/bushel
$900
Cattle Markets
&
Supply
Impact on Feeding Industry
►Fewer feeding companies will finish a higher
percentage of the cattle.
►Cattle ownership in feed yards will become more
highly concentrated. “The feed yards will own
more cattle”
►The feeding industry will remain primarily located
in the 5-state area (NE, CO, KS, OK, TX).
►To much capacity, tremendous loss of equity, access to capital,
capacity will be idled, some move to grow yards, others will close
►Managing cost and price risk will be an essential
ingredient for a successful business model.
Packing Segment
● Tighter fed supplies – excess packing capacity
● Hide & Offal value decline to squeeze margins
● Industry is vulnerable to the loss of more packing
capacity in 2009-2010
2009 750lb Steer Price Projection
110
2009 est. average $98-$100
105
$CWT
100
95
90
85
80
J
F
M
A
M
J
J
A
S
O
N
D
Role of Stocker Operator
 Inventory
shock absorber
Add low cost of gain
Warehouse cattle
 Add value and improve quality
2009 550lb Steer Calf Price Projection
120
2009 est. average $110+/115
110
105
100
95
J
F
M
A
M
J
J
A
S
O
N
D
High Return Producers Don’t Cheat
When it Comes to:
1.Animal Health
2.Nutrition
3.Genetics
Habits of High - Return Producers
$
$
$
$
1. Below average annual cow costs
2. Lower feed costs
3. Lower than average calf breakeven prices
4. Lower interest expense
5. Lower general operating expense
6. Higher averaging weaning weights
7. Higher conception rates
8. More pounds weaned per cow exposed
(less debt)
$
$
$
$
Stair Steps
to
Profitability
Strategies for 2009
Stocker & Cow-Calf Operations
► Stocker operations must manage profits. It is
the cattle feeders turn to make money.
► Narrow feeder to fed spreads. Does this present
an opportunity to retain ownership?
► Narrow calf to feeder/fed spreads. Does this
present an opportunity to retain ownership?
Impact on Cow/Calf Producers
♦ Cost management hasn’t gone away.
♦ Value capture becomes essential (calves, bred females,
open females, cull bulls, etc.
♦ Precision nutritional management when supplemental
feeds are being provided.
♦ “No surprises” in terms of animal health, genetics and
reproductive performance is the mantra of producers.
♦ Risk management involves long-term grass leases,
supply chain contracts, and more focus on managing
at least part of the calf crop through the stocker and or
finishing phase.
Impact on Cow/Calf Producers
♦ Optimize reproduction – rising feed and input costs will
increase sensitivity to the “law” of diminishing returns”,
producers are de-incentivized to maximize reproductive
rates.
♦ Economies of scale become increasingly important which
will force additional consolidation.
♦ Producers will only adopt technologies with very distinct
financial advantages.
♦ Estate planning and inter-generational asset transfer
become increasingly important.
♦ Labor availability is a limiting factor.
Thank You
Have a Profitable 2009