1. Brett Stuart Trade Analyst U.S. Meat Export Federation Future Potential and Challenges for U.S. Red Meat in the Global Marketplace UNL – ANSI Department May 4, 2005

2. 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.”

3. USMEF Offices & Representatives Taipei Singapore Guangzhou Denver Mexico City Sao Paulo Moscow London Beirut Osaka Tokyo Seoul Monterrey St. Petersburg Caracas Hong Kong Shanghai

4. USMEF Stakeholders Private Companies –Tyson –Swift & Company –Excel –National Beef –Hormel –Smithfield Agribusiness –Chicago Mercantile Exchange –Elanco Animal Health U.S. Dept. of Agriculture Nat’l & State Organizations –National Pork Board –Cattlemen’s Beef Board –United Soybean Board –American Farm Bureau Federation –National Cattlemen’s Beef Association –NE Beef Council –NE Corn Board –NE Dept of Ag –NE Soybean Board –American Meat Institute –National Pork Producers Council

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

6. Relevance of Trade to U.S. Livestock Industries In 2003, we exported 12% of domestic beef production

7. U.S. Beef/BVM Exports as a Percent of Production Source: USDA, USMEF

8. Relevance of Trade to U.S. Livestock Industries In 2003, we exported 12% of domestic beef production –Impact on cattle prices (chart) In 2004, we exported 11% of domestic pork production

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

10. Relevance of Trade to U.S. Livestock Industries In 2003, we exported 12% of domestic beef production –Impact on cattle prices (chart) In 2004, we exported 11% of domestic pork production In 2003, we exported 320 million bu. of corn and 38 million bu. of soybeans through red meat

11. Relevance of Trade to U.S. Livestock Industries In 2003, we exported 12% of domestic beef production –Impact on cattle prices (chart) In 2004, we exported 11% of domestic pork production In 2003, we exported 320 million bu. of corn and 38 million bu. of soybeans through red meat Even indirect trade issues impact U.S. producers –(chart)

12. June LC Contract - 2002 On March 10, 2002 Russia banned U.S. poultry keeping 53 million pounds per week in the U.S. Source: Chicago Mercantile Exchange web site

13. Topics Promotional Efforts Global Demand and Competition Current Issues - BSE Challenges Outlook

14. Promotional Efforts

15. Promotions Media Retail Foodservice Trade Foodshows

16. Global Demand and Competition

17. Income and PCC of Meat -- Log Scale -- Estimate: 1% Increase in PCI Increases PCC 0.6% Source: FAO

18. Red Meat Demand Drivers Source: U.S. Census Bureau, World Bank, USDA/ERS

19. FAO Meat Consumption Forecasts Source: FAO +34% +108% +30% +57% +22% +44% +22% +64% % change from base year +29% +67%

20. 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%.

21. Global Beef Market Share Source: USDA Estimates

22. Source: USDA Competition is Fierce

23. Global Pork Market Share Source: World Trade Atlas

24. Hog Production Source: FAO Million head 94% of China’s hogs are on operations with <9 head

25. Source: USDA

26. Recent Developments Argentina receiving FMD clearance by region –Beef access agreement with China Brazil wants to double meat production in 10 years Uruguay is 100% USDA Process- Verified Canada (Maple Leaf) will be using DNA traceability for Japan in 2005 What is the U.S. doing?

27. Brazil Factor

28. Current Issues - BSE

29. Key U.S. Beef Markets - BSE

30. Nebraska steer/heifer slaughter 2004=6.196 million head, or $619.6 million dollars lost in NE due to BSE bans, not considering other aspects of BSE losses (increased supplies, affiliated industry impact, etc)

31. Current Situation Perhaps the largest ‘non-issue’ issue in industry history 1.There is virtually zero risk of animal to human transmission –SRM removal 2.There is no risk of animal to animal transmission Then what is the issue?

32. Key Market Bans Japan U.S. beef/bvm exports of 384K mt worth $1.4 billion in 2003 Backed away from 100% testing; poor record of public health 64% of beef consumed is imported – half was U.S. Beef is 4 th protein source behind Fish, Pork, Poultry

34. USMEF Efforts Trade Teams Media Teams Proposals Information

35. When Will the Markets Reopen Japan –Agreed in principle to re-open (10/04) –Domestic rulemaking required S. Korea –May move independently of Japan –Requires political maneuvering Others

36. Current BSE Status 65 countries initially closed – 28 have reopened –Represent 40% of 2003 volumes –Many have boneless and age restrictions Beef exports to Mexico have reached 81% of pre-BSE levels

37. Challenges

38. Threats to U.S. Success Production built to domestic market –Our competitors have a very different perspective Traceability

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

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

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

42. Outlook

43. U.S. has a 35% advantage over Australia/N.Z. compared to Jan. ‘03 Source: 2005 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada

44. U.S. Pork Export Forecasts USDA and USMEF USMEF forecasts $2.2 billion in 2004

45. USMEF Beef Export Forecasts USDA and USMEF USMEF forecasts $3.9 Billion in 2003

46. 2005 Outlook Continued weak U.S. dollar Global economic growth Bigger importers and exporters are emerging (specialization) Animal disease issues driving production/consumption trends China consumption and Brazil production Trade Policy –Will the Doha Round reach a conclusion? –CAFTA –Will TPA be renewed (expires in June - could be extended 2 years)

47. For more information: Brett Stuart bstuart@usmef.org@usmef.org (303)623-6328 Or visit USMEF at www.usmef.org Questions ?