1. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Turkey and Protein Sector Outlook 2010 Dr. Thomas E. Elam President FarmEcon LLC February 11, 2010 1

2. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Disequilibrium: 2 A situation where internal and/or external forces prevent market equilibrium from being reached or cause the market to fall out of balance. This can be a short-term byproduct of a change in variable factors or a result of long-term structural imbalances.

3. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Two major disequilibrium drivers Higher feed costs still not fully reflected in protein prices 2008/2009 recession Both imply lower protein production Poultry has made adjustments Red meats & dairy slower to respond Those who adjusted have been rewarded Those who have not are still in pain Protein markets in adjustment 3

4. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Feed cost pressures continue 4 1/22/2010

5. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Reduced global grain stocks Support from subsidized ethanol demand Historically high crude oil prices High ethanol prices Increases value of corn Corn pulls other feeds up Dollar devaluation Why the higher feed costs? 5

6. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Some key correlations 6

7. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Corn/gasoline price relationship (Through 1/20/2010) 7

8. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Protein sector profitability has suffered – Product prices relative to feed costs 8

9. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Estimated profit/loss per unit Sources: Fed Cattle: Iowa State fed yearling budget Market Hogs: Iowa State farrow-finish budget Broilers: Informa Economics broiler margin model Turkeys: Informa Economics turkey margin model Dairy: Penn State milk margin model 2010 Forecast: FarmEcon LLC 9

10. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Estimated 2009 total profit/loss 10 Profit/Loss for primary production only, does not include value added operations past RTC, carcass or raw milk

11. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Current breakevens and prices 11 Turkey and broiler price is weighted average of whole birds and parts

12. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2010 red meat production will decline Milk production likely to decline Broiler production likely to grow Turkey production about the same Wholesale prices for all likely to increase Red meat and dairy more than poultry Turkey more than broilers What does this tell us? 12

13. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2010 Protein Production Outlook 13 Sources: 2005-2009, USDA/FAS PS&D database; 2010, FarmEcon forecast)

14. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Per Capita Meat Disappearance 14 First 3 year decline since 1920s

15. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Production declines, lack of profitability Exports Strong 2005-2008 growth 2009 decline 2010 (forecast) to increase 2009 frozen stocks reduction – not to be repeated in 2010 1%/year population increase Factors in the per capita numbers 15

16. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2010 TURKEY SECTOR OUTLOOK 16

17. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2009 Outlook (Feb, 2009 NTF Presentation) Summary: Declining production sets the stage for higher prices, feed costs likely to be less volatile, but export and U.S. demand remain a huge question mark. 17

18. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2010 Turkey Outlook Overview Surplus cold storage stocks worked down Production cuts helped prices late in 2009 Q1: production 2-4% lower than 2009 Q2: production +1 to -2% compared to 2009 Q3/Q4: production likely to increase 1-3% Exports expected to grow modestly Lower total competing meat supply More stable feed costs (?) 18

19. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Inventories = production/use balance 19 Record Inventory Reduction! Record Whole Bird Use!

20. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President FarmEcon Model: RTC Value Per Pound and Feed Costs Based on FarmEcon LLC model of 70% cut-up and 30% whole bird marketing mix. Prices are USDA/AMS. Does not include value-added products. 20

21. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Cutout Values/Pound RTC Turkey Breast Meat Value is Biggest Issue 21

22. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Exports Lose the Gains of 2008 Source: U.S. Census Exports, converted to RTC weight by USDA/FAS Jan.- Nov. 22

23. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Export Value Drops With Volume Source: U.S. Census Exports, declared value Jan.- Nov. 23

24. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President U.S. Market RTC Turkey Consumption 24

25. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President RTC Turkey Consumption Per Capita 25 ProfitableProfitable UnprofitableUnprofitable Turkeys are generally profitable at 17 pounds per capita or less - and not profitable at 17.5 pounds or more. Note the similar patterns: 2000 to 2004 and 2006 to 2010

26. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2009 Recession Effect: Turkey p rices down despite reduced consumption 26

27. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Production down slightly, entire reduction in Q1/Q2 Limited potential to reduce inventory again Limited downside on exports vs. 2009 Result is 16.9 pounds per capita, down 3% Why under 17 pounds in 2010? 27

28. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Weekly UB Poult Placements Point to Lower Jan-May 2010 Production Placements through week of Jan. 20, 2010 28

29. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2010 Turkey Forecast Detail (Production, Use and Stocks in Million Pounds) 29

30. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Feed Cost Outlook 2009/2010 30

31. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Mandated Corn-based Ethanol Production And Corn Required 31

32. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Corn/gasoline price relationship (Through 1/20/2010) 32

33. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Corn Stocks/Price Curve Shifts Up 33

34. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Corn/Meal Price Outlook – 2009/20010 Corn prices remain at $3.30-$4.25, meal at $275-325, through May-June* Weather and acres drive prices after that Ethanol production will grow due to RFS 2010 RFS is 12 bg vs. 10.5 for 2009 Ethanol use mandate = ethanol price mandate Volatile energy prices are critical to outlook More volatility in feed ingredients likely 34 *Central Illinois cash prices

35. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Note increases in both average price and volatility! Corn prices – average and variability 35

36. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President Turkey Feed Cost Outlook – 2010 Added $0.60/bu. for corn and $25/ton for soybean transportation and handling Based on 2.6:1 FCR, 70% corn, 18% SBM, 5% meat and bone meal, 6% grease diet 36

37. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 2010 Turkey Outlook Summary: The 2009 “Double-Whammy” Lower production was required for higher prices to cover higher feed costs Also needed to reduce inventories Production down more than needed in long run 2010: Still adjusting to higher feed costs, and… Stocks issues have been addressed 2010 outlook for improved demand and prices Slightly lower feed costs Cost volatility lower, but an ongoing issue RTC production should be close to 2009 Consumption will drop to about 17 pounds 37

38. FarmEcon LLC A source of information on global farming and food systems Thomas E. Elam, PhD President 38 Questions? Comments?