Livestock and meat industry Per capita consumption Demand measures Trends Industry segments and structure Think of implication for supply and demand??????

Livestock & Poultry Markets 2009 Billion Per Cap Price Exp Imp lbs1 lbs2 $/cwt %3 %3 Broilers 35.2 80.0 77.59 16.0 0.2 Beef 26.0 61.6 83.16 7.0 10.6 Pork 23.0 50.8 40.82 19.3 0.1 Turkeys 5.6 17.0 79.72 9.3 0.2 Lamb .17 .97 100.91 8.8 95.3 Production of carcass weight meat measured at the packing plant. Consumption is estimated as a residual and divided by population. Price is the annual average farm level price. Export % are measured as the pounds exported as a percent of total production. 1/ Billion pounds of US production 2/ Pounds consumed per person per year 3/ As a percent of production

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Measuring consumption Balance sheet approach Beginning inventories + Production + Imports - Exports - Ending inventory = Disappearance Per Capita consumption = Disappearance Population A measure of supply rather than demand Because we do not weigh each serving we put on our plate, we have to have another method to estimate consumption. The balance sheet approach based on factors USDA does measure estimates the amount of meat that disappeared during the year.

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Meat exports have also increased over time Meat exports have also increased over time. Beef exports dropped dramatically in 2004 due to finding a cow with BSE in the US and most countries ban US beef. Chicken is not only the meat with the largest consumption in the US it is also the meat with the largest exports on a tonnage basis. Chicken exports have been more than pork and beef exports combined since 1994.

The US is a net importer of beef on a tonnage basis The US is a net importer of beef on a tonnage basis. Imports exceed Exports every year. When the estimated beef from cattle imported to the US from Mexico (feeder cattle) and Canada (slaughter and feeder cattle) are included the amount of beef that was from cattle born in another country is approximately double that of US beef exports. On a dollar basis, the US export3 more dollars of beef and beef products than it imports (excluding cattle imports) through 2003. The reason for this difference is that the US exports higher value beef (for example Choice steaks) and imports lower value beef (lean grinding meat for burgers). We also count hides in the value but not the weight and we export over 60% of US hides. The first case of BSE was found in the US December 23, 2003 and exports dropped in 2004 and are slowly rebuilding.

US pork exports have grown steadily and dramatically over the last 18 years from near zero in 1987 to over 3 billion pounds in 2007. Pork imports have been relative flat over that time, but the importation of hogs from Canada has increased the amount of pork from hogs born outside the US. The growth in hog imports from Canada has been primarily feeder pigs and weaned pigs that are finished in the US (most often Iowa) and slaughtered in the US.

Meat production (or supply) is made up of two components: number of head slaughtered and weight of the carcass. Carcass weights of cattle and hogs have increased due to genetics with larger body size and leaner. To reach the same end point for fat-to-lean ratio that the market wants the animal is larger. In the case of cattle growth promoting implants cause the animal to deposit more lean relative to fat and thus postpone the marketing date and weight when the animal is at the preferred quality grade.

Livestock Marketing Information Center Data Source: USDA/NASS 19

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US Beef Cattle Sector Packers: 33.7 million slaughter and 4 = 73% Feedlots: 26.2 million marketings, 260 = 60% Backgrounders Beef Cows: 32.5 million cows in 758,000 herds

One time capacity

Estimated Beef Packer Capacity Rank Company Head/Day Share 1 Cargill Meat Solutions 29,000 21.2% 2 Tyson Foods 28,700 21.0% 3 JBS Swift 28,600 20.9% 4 National Beef Packing 14,000 10.2% 5 American Foods Group 7,000 4.7% 6 Greater Omaha Packing 2,900 2.0% 7 Nebraska Beef 2,600 1.9% 8-13 10,100 7.4% Smaller 14,605 10.7% Total 136,855 Source: CME DLR

US Hog Operations and Inventory by Size Based on Ownership of Hogs, 2007 Hogs/Operation <500 48,760 2,727,080 56 500-999 2,840 2,181,664 768 1000-1999 1,860 3,272,496 1,759 2000-4999 1,600 6,135,930 3,835 5000-9999 670 5,454,160 8,141 10000-19999 340 16,042 20000-49999 150 40,906 50000+ 120 36,815,580 306,797

Commercial Hog Slaughter Companies Company 2002 2003 2004 2005 2006 2007 2008 Smithfield 19.9 22.5 26.1 25.1 26.5 28.4 28.3 Tyson 18.0 18.5 17.9 17.4 17.6 JBS USA 10.7 11.5 10.8 10.9 11.1 Cargill 8.5 9.2 8.9 9.0 8.7 Hormel 7.0 6.9 8.4 8.2 TOP 5 64.1 68.1 71.3 69.8 71.9 74.3 73.4

Hog or meat market formula 44.2 47.2 54 44.5 41.4 39.9 41.8 38.3 37.1 Percent of U.S. Hogs Sold Through Various Pricing Arrangements, January 1999-2009* Year 99 00 01 02 03 04 05 06 07 08 09 Hog or meat market formula 44.2 47.2 54 44.5 41.4 39.9 41.8 38.3 37.1 41.2 Other market formula 3.4 8.5 5.7 11.8 7.2 10.3 8.8 11.0 7.9 Other purchase arrangement 14.4 16.9 22.8 8.6 19.2 20.6 15.4 16.6 15.2 13.4 11.6 Packer-sold 2.1 2.2 2.4 2.6 6.7 6.1 5.6 Packer-owned 16.4 18.1 17.1 21.4 20 22.7 23.1 25.7 Negotiated - spot 35.8 17.3 16.7 13.5 10.6 10.2 9.2 8.1 Source; Grimes and Plain, University of Missouri http://agebb.missouri.edu/mkt/vertstud09.htm

8 3715 68 40 1347 133 295 673

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