1. Pork Academy U.S. Pork Exports Situation and Outlook Becca Nepple, VP International Marketing, National Pork Board Dermot Hayes, Professor, Iowa State University

2. Checkoff Focus on International Trade

3. Areas of Checkoff Investment Marketing and promotion Market research Market intelligence New product development Marketing and promotion Market research Market intelligence New product development

4. Growth of US Market Due to Access

5. Partnership with USMEF

6. Where Are We Now?

7. Looking Back: 2014 Value record: $6.674 B, ↑10% Volume: 4.803 B lbs, ↑2% Value at $62.45/head

8. Current: 1 st Quarter 2015 Value: ↓14% Volume: ↓10% – But, March showed largest volume of exports in 11 months – March showed a 10% increase from February Value at $48.48/head 25% of production

9. Addressing Compounding Issues What’s Happened? China access Russia closure…EU/Canada nimble Currency issues…many competitors have advantages West coast port issues…still backlog, loss of chilled value What’s Coming? MCOOL retaliation? Expect big increase in U.S. production

10. Top US Export Markets: Jan-Mar 2015 Mexico 396.0, ↑7% Japan 229.1, ↓13% China/HK 149.4, ↓40% Korea126.5, ↑43% Canada107.8, ↑2% C/S Am65.9, ↓8% Oceania28.1, ↓41% Carrib22.4, 0% ASEAN20.9, ↓57% Japan $386.6, ↓19% Mexico $321.2, ↓6% Canada $192.4, 0% Korea $180.4, ↑55% China/HK $152.1, ↓42% C/S Am $80.1, ↓5% Oceania $45.2, ↓37% Carrib $25.4, 0% ASEAN $21.0, ↓61% Volume (Million Pounds) Value (Million $) Source: USDA statistics compiled by USMEF, compared to 2014

11. Source: USDA/FAS, PSD Data Lost Share of Global Pork Exports

12. Where Do We Go From Here?

13. We Have a Goal! By 2020, increase pork exports through access to new markets and expansion of existing markets, and achieve an increase an average annual increase of 9% in value and quantity (compared to 2014 year-end data)

14. How? Move Muscle Meats

15. How? Move By-Products

16. How? Promotion Focus in industry Access Product

17. Economist’s Perspective

18. Overview Big picture: where is the available land and what is the best way to move agricultural products? Obstacles to agricultural trade Importance of trade agreements Impact of trade on pork market in 2014 and 2015

19. World Map in Proportion to Population

20. World Map in Proportion to Arable Land

21. World Map in Proportion to Cereal Sales

22. Growth in Wealth (1975-2002)

23. Ship Grains or Meat?

24. So Why Do We See Grain Trains? Governments in Asia have traditionally protected their livestock and allowed for the free movement of grain They do this to encourage economic activity and to maintain a semblance of food security This means that free trade agreements result in additional meat exports

25. Where Does the Pork Come From?

26. US Currently Has FTAs with 20 Countries

27. Plus, Potential with 12 TPP Countries

28. Plus, Potential with EU

29. Colombia: An Example Continued phase out of duties Solution to the Trichinae barrier has provided better access for chilled product Sales hit $132 million in the past 12 months Is Peru next?

30. Colombia: An Example

31. Mexico: An Example

32. Global Carcass Price

33. Exports, Year Ending March Partner Country United States Dollars % Change 2015/2014 201320142015 World6,356,995,2866,444,731,4496,731,950,7934.46 Japan1,944,093,9801,890,979,1581,849,003,999- 2.22 Mexico1,159,058,1231,416,170,8061,675,061,41818.28 Canada866,787,832835,798,099911,654,0749.08 Korea, South374,053,384303,748,135518,770,97070.79 China736,872,753769,366,505378,068,857- 50.86 Hong Kong188,501,768228,669,018358,607,55556.82 Australia207,187,710190,118,271165,547,314- 12.92 Russia243,184,757118,195137,911,189∞ Colombia58,574,462112,876,080132,428,22917.32 Philippines104,946,515117,085,60196,459,289- 17.62 Singapore26,408,70865,239,39859,592,371- 8.66 Dominican Republic37,271,30845,903,78449,469,6727.77 Chile45,810,07464,398,71748,028,675- 25.42 Honduras47,131,32949,748,35346,258,745- 7.01 Guatemala27,318,82430,114,92343,942,26145.92 Taiwan39,813,86338,647,54539,217,5111.47 Panama22,232,77927,105,12528,682,4195.82 New Zealand28,086,68824,599,98918,322,778- 25.52 Peru5,798,89615,502,27116,164,8094.27

34. Quantity of Exports Partner CountryUnit Quantity % Change 2015/2014 201320142015 WorldT2,267,6262,284,2002,206,919- 3.38 MexicoT613,996703,089745,4206.02 JapanT443,136439,861455,2753.50 CanadaT238,577217,691209,210- 3.90 ChinaT354,249353,644164,992- 53.35 Korea, SouthT135,231107,180155,64445.22 Hong KongT78,71986,556138,42959.93 ColombiaT21,75744,03746,5785.77 AustraliaT65,53956,43643,081- 23.66 PhilippinesT46,84152,43337,431- 28.61 RussiaT85,0953336,257∞ SingaporeT8,88526,06221,167- 18.78 Dominican RepublicT15,98219,51018,194- 6.75 ChileT17,76825,50617,994- 29.45 HondurasT20,02321,41717,534- 18.13 TaiwanT17,33916,85616,514- 2.03 GuatemalaT11,98111,39713,97022.57 PanamaT10,44511,57110,295- 11.03 PeruT2,6656,9126,612- 4.34 BahamasT4,4364,8324,8941.27 New ZealandT9,5998,0974,842- 40.20

35. Impact of Exports on Live Hog Prices Last spring we had access to China and Russia, and Japan, South Korea and Mexico had PED As a result, export growth was strong and prices were high Since then the EU and Canada lost a half million ton market in Russia, we lost access to Russia and have had problems in China China is particularly important because it buys so many variety meats

36. China Opportunity A 10,000 ton change in direct monthly exports of pork and pork variety meats to China causes a $5.50/cwt change in live hog values for that month. This 10,000 tons represents the exports sales lost due to this restriction Exports to China have fallen by 15,000 per month Paradoxically, China needs more imported pork because it has killed millions of sows

37. February 2015 futures

38. June 2015 Futures

39. EU Exports to Asia

40. EU and US Exports to China

45. So, What Happens Next? 2014 pork production was only 2.5% lower than 2013 production, yet we had record prices; part of this was due to strong export demand USDA expects 8.9% more US pork production in the third quarter and 6.1% more pork in the fourth quarter, this is due to more sows, recovery from PED and lower cost of gain It would take a 10% growth in US pork consumption to clear this market unless exports grow…..very difficult unless we get an outbreak of bird flu in the south this fall

46. Three Possible Outcomes We solve the Ractopamine dilemma and get back into China, prices stay near those on the CME We enter into a price war with the EU and expand the volume, but not the value of exports US hog prices fall so much that weights fall and the surplus is eliminated

47. Questions and Comments