Feedgrain & Oilseed Caucus Market Overview USMEF Strategic Planning & Marketing Conference Cancun, Mexico November 2, 2006 Erin Daley Manager, Research and Analysis U.S. Meat Export Federation

Overview  Introduction  Beef Exports  Pork Exports  Lamb Exports  Corn Market/Ethanol  Distillers Grains and Beef Cattle Production  Conclusions

U.S. Beef Exports (000 MT) 636 Source: USDA/USMEF

U.S. Beef and Beef Variety Meat Exports (000 MT) 636 Beef*: 369 BVM*: 267 Source: USDA/USMEF *Forecast Jan-August

U.S. Pork Exports by Region (000 MT) Source: USDA/USMEF

U.S. Pork Exports (000 MT) * ForecastSource: USDA/USMEF

U.S. Lamb & Mutton Exports MT 13,800 Source: USDA/USMEF

Total Feedgrains and Soybean Meal Exported through Beef and Pork (million bushels) Source: USDA/USMEF

Changing Corn Demand:  Feed, Fuel, and Exports  Livestock feeders largest corn users Feed & Residual Use predicted around 55 percent of corn production in 2006/07 6 billion bushels  Use per GCAU projected down in 2006/07  GCAUs are up slightly???  Drought, bird flu, strong demand…  Cattle on feed inventory up 9% but placements were 5% lower during October  Beef, pork, and poultry production projected higher in 2007  Co-products make up the difference?

U.S. Ethanol Production Renewable Fuels Association (RFA) From Niche to Nation Ethanol Industry Outlook. Washington DC, February. 105 ethanol plants = 5 BGY 44 under construction= total 8.3 BGY

Cattle on Feed Which feeders don’t have WDGS?

Will more corn go to ethanol production than is exported?

Top 10 U.S. Corn Export Markets USDA; 1000 MT Approx 2 Billion bushels

Trade-offs between increasing corn prices and increasing supply of distiller’s grains  Availability and variety of ethanol co-products  Transportation and handling costs Additional investments  Consistency  Cattle Performance  Environmental regs  Changing co-products/ethanol production innovations

WDGS Transport WDGS 35% Dry Matter How far can we haul all that water? ~ 35-40% increase in feed weight

WDGS Storage  Additional storage costs Preservatives Silage bags  Use w/in 3 to 5 days  Concrete Slab  Front-end loaders

Quick Note on Pork & Poultry  More difficult to feed distillers grains  Can only feed at low inclusion rates (< 15% of the ration on dry matter basis)  Generally cannot feed WDGS, only DDGS which partially replaces corn & soybean meal  Soybean meal higher quality protein source more consistent

Economic Returns from Feeding WDGS  Trucking costs: $2.50 per loaded mile  10 year average corn prices Assuming $0.05 to $0.10/bu basis at plant WDGS 95% price of corn on equal DM basis  Vander Pol et al. (2006) At plant optimum WDGS inclusion rate 30 to 40% on dry matter basis $10-$23 per head return

Changes  When ethanol production arrives: Turn off the steam chest Feed WDGS with dry rolled corn  Increase cattle performance  Decrease Natural Gas costs  Invest in Roto-mix® trucks  If already feeding silage shouldn’t need additional equipment (front end loaders)  Increase labor, fuel and maintenance  Feed lower quality forages  Vegetarian diets= $$$

Distant from ethanol production  15% DDGS (dry matter basis) Railed in similar to corn Save processing costs Positive cattle performance results  Also Corn gluten feed…

Finally…  Cost effective use of WDGS depends on inclusion rate, distance from ethanol plant, cattle performance  Even with extra costs, still affordable feed ingredient  Livestock feeders and ethanol producers can co- exist!

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