1. 1 Philip Seng President and CEO U.S. Meat Export Federation Opportunities, Challenges, and Future Potential for U.S. Pork in the Global Marketplace National Pork Industry Forum March 5, 2005

2. 2 The Expanding Pork Checkoff Dollar Each $1 of checkoff invested with USMEF last year returned $2.27 (ROI of 127%) ++= Pork Checkoff $3.7 Million MAP $4.1 Million 3 rd Parties $0.6 Million $8.4 Million USMEF

3. 3 USMEF Mission Statement To increase the value and profitability of the U.S. beef, pork and lamb industries by enhancing demand for their products in targeted export markets through a dynamic partnership of all stakeholders.

4. 4 USMEF Stakeholders Private Companies –Tyson –Swift & Company –Excel –Sara Lee –Hormel –Smithfield Agribusiness –Chicago Mercantile Exchange –Elanco Animal Health U.S. Dept. of Agriculture Natl & State Organizations –National Pork Board –Cattlemens Beef Board –United Soybean Board –American Farm Bureau Federation –National Corn Growers Association –National Cattlemens Beef Association –Minnesota Pork Board –American Meat Institute –National Pork Producers Council

5. 5 USMEF -- A Global Presence -- Offices –Tokyo & Osaka –Seoul –Mexico City & Monterrey –Hong Kong –Taipei –Moscow & St. Petersburg –Shanghai –Singapore –London Representatives –Beirut –Caribbean –Central America –South America (based in Sao Paulo) –Beijing Total Staffing –Approximately 100 Annual Budget –$25,000,000

6. 6 USMEF Pork Funding Sources

7. 7 Strategic Priorities Market Access Trade Support Market Presence Buyer Education and Loyalty Product Image Total Carcass Utilization

8. 8 2004 Overview

9. 9 U.S. Pork and Pork Variety Meat Exports Source: USDA 14.3% Average Annual Growth - Volume

10. 10 Where Was the Growth in 2004 U.S. Pork / PVM Exports Source: U.S. Census Data

11. U.S. has a 30% advantage compared to Jan. 03 © 2005 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada

12. 12 BSE Impact on U.S. Pork Exports? Regions That Have Reopened to Beef 20032004% ch Mexico 219,034 361,587+65% Canada 97,902 112,360+15% C/S Am * 17,210 17,585+2% Caribbean 7,289 13,014+79% EU 16,614 10,712-36% ASEAN 4,753 8,127+71% 362,802 523,385+44% * Panama remains closed to U.S. beef Regions that Remain Closed to Beef 20032004% ch Japan 269,230 313,574+17% S. Korea 28,779 27,876-3% Russia 7,329 27,152+271% HK/CH 56,625 79,701+41% Taiwan 25,893 38,806+50% Other 6,748 12,919+91% 394,604 500,028+27% Source: USDA, USMEF

13. 13 U.S. Pork / PVM Exports as a Percent of Production Source: USDA, USMEF

14. 14 Trade Balance of U.S. Pork and PVM Exports

15. 15 Chef Training -- China -- Funded with $15,000 contribution from MN Pork Board December 27-29 in Hainan province – Chinas Oriental Hawaii 50 chefs from throughout China participated: –Classroom presentations –Guest chef demonstrations –Hands-on applications Very effective in expanding the range of cuts and number of restaurants using U.S. pork

16. 16 U.S. Pork Campaign -- Japan -- Participation by 30 national and regional retail chains (2200 outlets) in summer of 04 Involved tie-in with Moranbong to include 1 of 4 different meat sauce mini-packets in U.S. Pork retail packs Increases reported by participating retailers generally in 10%-15% range

17. 17 U.S. Pork Caravan Supports Retail Promotions Supported U.S. Pork retail campaign at 8 locations on 6 weekends in May and June, 2004 Opportunity to demonstrate recipes being promoted in- store Helped drive increases in total pork sales –U.S. Pork sales increases ranging from 110% to more than 500%. Strong demand from retailers to continue this type of promotion support

18. 18 Mothers Day Promotion -- Mexico -- USMEF partnered with Gigante and Commercial Mexicana (102 total outlets) for 6 week promotion in the Spring of 04. Coupons inserted in meat packages with beef purchases worth 1 point each, pork purchases 2 points. With 20 points, consumers could exchange coupons for a ticket to the Mothers Day celebration event. Nearly 3,000 attended the Mothers Day event.

19. 19 Advertising Support 72 inserts in womens and cooking publications 800,000 in-store flyers distributed over 4-week promotion 276 radio spots

20. 20 New Realities

21. 21 New Realities Protein complex is dealing with the dual shocks of BSE and AI – creating opportunity to grow percentage of eating occasions that include U.S. Pork Consumers are becoming increasingly concerned about food safety. Brands/traceability are becoming more important Competition for export markets is intensifying FTAs are enhancing long-term market prospects Checkoffs face an uncertain future

22. 22 #1 -- The Consumer Reality Consumers want to know who stands behind the product, how the animal was raised & what it was fed – essentially creating story pork Increasing importance of source and process verification Driven by BSE, AI, E- coli, mis-labeling, etc.

23. 23 Aeon Department Store In response to consumer concerns about beef safety, Japanese retailer installed computers in their meat departments enabling consumers to see: –DOB and slaughter date –Where raised –Feed –Health records –BSE testing certification Similar info also now made available thru cell phone camera technology

24. 24 #2 – Competition is Intensifying Brazil has emerged as a global meat exporter –Increased from 2% of world pork trade in 1994 to 15% in 2003 –Will be the #1 exporter of beef in 2004 China –Will investment turn the worlds largest hog production base into an export powerhouse? Mexico and Chile also becoming exporters and benefiting from trade agreements with Japan Korea recently established a pork checkoff promotion plan and has its eyes on a return to the Japanese market Canada and Denmark continue to push aggressive promotion programs

25. 25 Recent Efforts Argentina receiving FMD clearance by region –Beef access agreement with China Brazil has a goal to double meat production in 10 years Uruguay is USDA Process Certified Canada (Maple Leaf) will be using DNA traceability for Japan in 2005

26. 26 S. America Factor

27. 27 Source: USDA Competition is Fierce

28. 28 Global Pork Market Share Source: World Trade Atlas

29. 29 Growth in World Pork Imports - 2.436 million mt from 1993 to 2003 - * Excluding Intra EU Trade Source: FAO 1,074,500 mt 1,361,551 mt #3 – Global Pork Demand is Rising

30. 30 Growth in World Pork Imports - 2.436 million mt from 1993 to 2003 - * Excluding Intra EU Trade OECD in RED Growth 93 –03 Japan 533,655 Mexico 231,247 China 216,987 U.S. 208,190 Russia 199,290 Hong Kong 194,668 S. Korea 148,931 Romania 105,821 Canada 67,707 Singapore 56,918 EU (15) * 43,321 Others 429,316 Total2,436,051 Source: FAO

31. 31 Challenges / Opportunities

32. 32 Threats to U.S. Success Production built to domestic market –Our competitors have a very different perspective Funding sources –Checkoff uncertainty –Budget deficits will decrease future federal agriculture funding Protectionist attitudes –At home and abroad FTAs –China / S. America? –Asian Free Trade Area?

33. 33 Threats to U.S. Success (cont.) Inability to control food safety and animal health issues –Avian Influenza, FMD Inability to develop standardized trading principles –Sovereignty rights vs. worldwide obligations –Non-tariff trade barriers: dumping cases, SPS issues, etc.

34. 34 As Tariffs Fall…Other Measures Rise Source: Cato Institute Average Tariffs and Antidumping Measures (nontraditional users, 1987-1999)

35. 35 Future Demand?

36. 36 Global Beef and Pork Consumption Pork 287% Beef 111%

37. 37 Source: USDA

38. 38 China Factor World food demand will increase 50% over the next 20 years, paced by the growing population and greater affluence of China 1988 to 2002 In China –calories from animal sources +120% –calories from vegetable sources - unchanged In the Developing World –calories from animal sources +48% –calories from vegetable sources +4%.

39. 39 Who Will Meet The Demand? U.S. pork exports represented –2% of Japanese meat consumption in 2002 –13.7 million mt available –4% of Mexico meat consumption in 2002 –6.7 million mt available

40. 40 Who Will Meet The Demand? U.S. Pork Production World Meat* Consumption Source: FAO, USDA * Beef, Pork, and Poultry

41. 41 Questions For more information: USMEF – Denver 303-623-6328 On the web: www.usmef.orgwww.usmef.org