1. 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

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

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

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

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

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

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

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

9. 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?

10. U.S. Ethanol Production Renewable Fuels Association (RFA). 2006. From Niche to Nation Ethanol Industry Outlook. Washington DC, February. 105 ethanol plants = 5 BGY 44 under construction= total 8.3 BGY

11. Cattle on Feed Which feeders don’t have WDGS?

12. Will more corn go to ethanol production than is exported?

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

14. 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

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

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

17. 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

18. 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

19. 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= $$$

20. 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…

21. 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!

22. Thank You! Questions? For more information: edaley@usmef.org 303-623-6328 Or visit: www.usmef.org