Where in the World? – US Beef and Global Markets Prepared for USMEF Lunch Meeting American Farm Bureau Federation Nashville, TN January 8, 2006 Cara L. Gerken IMI Global, Inc.

Where were you? December 23, 2003 December 12, 2005

International Marketing

Mandatory vs. Voluntary Traceability In Global Beef Supply Chains EU and Japan—Mandatory, farm-of-origin to retail (all beef) Australia and Brazil— Mandatory only for exported beef, but plans for general and mandatory traceability Canada– Mandatory for animals moving away from farm of origin Argentina– Mandatory only for exported beef and for domestic beef produced in regions where animal diseases still persist USA– Voluntary only, at present Source: Souza- Monteiro & Caswell, 2004

It behooves produces who are interested in foreign trade to bring there business into compliance with the requirements “Feeders need to hustle now,” Rick Majewski, Brawley Beef “Traceability is going to be a huge issue,” says Todd Larimer, international sales manager for Washinton Beef LLC Source: Drovers, August 2005

Source: and Montana Stockgrowers Magazinehttp:// “The premiums paid to producers, from commercial-fed cattle to seedstock, are the result of CAB staff and the licensee network creating pull-through demand,” says Jim Riemann, CAB president. “That is the basis on which we were founded. It will continue to be the focus for at least the next 25 years, so that everyone finds more profit in producing and selling the brand.” “If every part of the beef production chain will work together and listen to the demands of each other, we have a much better chance of producing something the consumer will keep buying” Branding Drives Value Back to Producers

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 expects it to grow significantly by the end of the decade. Source: BEEF, January 2005

“Brands reside within the hearts and minds of the customer. They console us, befriend us and inspire us.” Brands present a consistent vision and personality that consumers not only value but trust Emotional branding–a marketing strategy that tries to help consumers connect on a personal level –Starbucks Coffee—created a distinctive product, and its own world of vocabulary, rituals, and traditions –Not what the product says but what it brings to one’s lifestyle Source: Grocery Headquarters, 2003

Provides suppliers the opportunity to assure customers of their ability to provide consistent quality products or services. Accomplished by – having their system 1) documented and 2) verified through independent, third party audits. “USDA Process Verified suppliers are able to make marketing claims -- such as breed, feeding practices, or other raising and processing claims -- and market themselves as "USDA Process Verified." USDA PVP Source:

PVP and QSA Programs Manage the “System” Most importantly – –Allows you to TELL your story (a.k.a. market & capture value)

Japan’s Requirements for Age Basics for the cow calf producer –Calving Records (documented and filed) –Unique Animal Identification (individual or group qualifies) –Transfer of Information –Defined Calving Season –Maintain Records (3 yrs) IMPORTANT: Standardize Practices/Procedures and Records to Support

Individual Animal Age Verification

Group Animal Age Verification

Program Compliant Tags Allow cattle to move through non-USDA QSA or PVP programs –Examples: Merial SureHealth Program Missouri Department of Agriculture AngusSource IMI’s USVerified Supply Verified

Methods of Identification Visual methods: tags, brands, earnotching Electronic: –Bar Codes, 2-D Symbol –RFID: tags, bolus, implants Biometric: –DNA –Antibody (fingerprinting) –Iris Scanning –Retinal Imaging Source: Blasi, Dhuyvetter, Spire, Epp and Barnhardt

Basics for stocker/grower, livestock market, feedyard, packer –Preserve identity of the group –Ensure “group” and/or “individual” identity is maintained (so cattle do not lose their conforming status) –Generate “approved supplier list” as an approved QSA or PVP entity or only sell cattle as source and age if they are enrolled in a QSA or PVP program –Ensure age information is available with the cattle at all changes in ownership unless they are enrolled in a QSA or PVP program –Communicate conforming cattle’s status Japan’s Requirements for Age

Availability of Supply Near Term--feedlots will work to “back-verify cattle” –Small numbers in December and January –As we get into calf feds (spring) numbers will increase –Location advantages based on procurement strategies Ranch Direct, large strings, brand States –Calf-fed Holsteins have year-around supply Long-Term—more of the base supply (sources) will be enrolled and available for feedlots to enroll –Program Compliant Tag Programs and Feedlots with QSA Programs will be key –Hard to source verify with smaller herds—challenge in S.E.— cow/calf enrollment in a PVP or QSA program is key –Seasonality of native supply (tough months—December, January, February, first of March) Older grassed cattle Difficult to tie to source Challenges in Communication –Steep Learning Curve with a segmented supply chain –Misinformation due to lack of understanding –Equate QSA to NAIS at times

Opportunities for the Source of Origin (Cow/Calf Producer) Enroll with a USDA Process Verified Data Service Provider (age as a claim) –Sterling Solutions –IMI Global’s Beef Passport –eMerge Source and Age CattleLog –AgInfoLink Enroll in a USDA PVP Program –IMI’s USVerified Supply Verified for Source and Age –IMI’s USVerified Feedlot QSA Program –PM Beef Group –AngusSource –Power Genetics –North Dakota’s Program Enroll in a USDA QSA Program –Feedlot’s QSA –MerialSureHealth –Missouri Department of Ag –Meyer Natural Angus

Competition for international markets is becoming tougher, especially in the near two years U.S. beef has been largely absent – Brazil, Argentina, Australia, New Zealand and now a newly outfitted Canada are all grabbing a bigger share. How can the U.S. regain lost markets in the coming years? If we want to recapture and grow our share of the international beef market, then we will have to develop a different attitude as an industry. Our opportunity as an exporter is our unrivaled ability to create high quality beef that is cut to specification, delivered to meet year round demand, and in a volume that lets export customers access the specific items that their marketplace desires. We have to make sure that our infrastructure is best in world. We need significant investment in our processing, transport and shipping sectors. A system of source verification will also be critical to our ability to re-enter many markets. Finally, we have to stop being our own worst enemy – industry in-fighting has cost us time, money, and relationships – we aren’t going to find the solutions in mud slinging – it is high time for innovation and creativity to become our trademarks. “We must innovate, invest and engage, or fade into the sunset,” he said. “We need to think about how we move and change ourselves.” Source: Dr. Tom Field, Colorado State University

Delivering the Lifestyle Continue to LEARN more about the beef you produce Continue to APPLY that information Continue to DELIVER the product your customers demand Continue to TELL your success story!