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John HinnersAssistant V.P. Industry RelationsU.S. Meat Export Federation
Global Beef Trade Outlook Global Beef Trade Outlook and Opportunitiesand Opportunities
Oklahoma Cattlemen’s AssociationOklahoma Cattlemen’s Association7/29/067/29/06
History & Mission
• USMEF was formally organized in 1976 and is a non-profit trade association working to create new opportunities for beef, lamb and pork.
• USMEF’s mission has evolved over the years and is “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”.
U.S. Meat Export Federation Offices – 100
Employees
Taipei
Singapore
Guangzhou
Denver
Mexico City
Sao Paulo
MoscowLondon
Beirut OsakaTokyoSeoul
Monterrey
St. Petersburg
Caracas Hong Kong
Shanghai
World Population GrowthWorld Population Growth
0
1
2
3
4
5
6
7
'50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00
Billion
0123456789
10
'05 '10 '15 '20 '25 '30 '35 '40 '45 '50
Billion
HistoricalHistorical
Projected
Double 1980 by 2050
Who are our international customers?
Here’s what the World looks like in a village of 100 people with all existing human ratios remaining the same. What we look like, believe, own and how we live:
• 57 Asians, 21 Europeans, 14 from the Western Hemisphere - both North & South and 8 Africans
• 32 would speak a Chinese dialect• 82 would be non-white, 18 would be white
Who are our Customers?• 68 would be non-Christian, 32 would be Christian
• 32% of the village’s wealth would be in the hands of 5 people - all from the USA
• 80 would live in substandard housing
• 17 would be unable to read and write
• 50 would suffer from malnutrition
• 20 earn <$1 / day; 50 earn <$2 /day
• 33 would be without a safe water supply
• 1 would have a college education
• 7 would have access to the internet
Affordable Food
Percentage of Disposable Income Spent on Food*
U.S.- 10%U.S.- 10%U.K. - 11.2%U.K. - 11.2% Mexico - Mexico -
24%24%
India – 50%+India – 50%+
Sources: USDA/ERS, "The Public Image of America's Farmers," American Farm Bureau Federation, 2002
Relevance of Trade to U.S. Livestock Industries
Can indirect trade issues impact U.S. beef producers?
Relevance of Trade to U.S. Livestock Industries
• On March 10, 2002 Russia banned U.S. poultry keeping 53 million pounds per week in the U.S.
• Did this have anything to do to the cattle market?
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
Is meat consumption in the U.S. at a saturation point?
U S RED MEAT & POULTRY CONSUMPTIONPer Capita, Retail Weight, Annual
0
50
100
150
200
1982 1985 1988 1991 1994 1997 2000 2003 2006
Pounds
Turkey
TotalChicken
Pork
Beef
Exports have been a growth market for U.S. Red Meats
0
20
40
60
80
100
120
140
160
180
'60 '70 '80 '90 '00
mill
ion
mt
Rest of World 234%
U.S. 63%
Future Global Beef DemandFAO Beef Consumption Estimates
Source: FAO
0
10
20
30
40
50
60
70
80
90
mill
ion
me
tric
to
ns
1997/1999 2015 est 2030 est
+22%+44%
% change from base year
13 million mt every 15 years
Globalization
• Globalization is increasing – livestock sector
Investment and finance• Retail expansion into developing markets is
increasing global trade– Wal-Mart; in 2006 the world’s #1 retailer will
open 230 new international stores– going from 50 to 70 outlets in China by the
end of 2006
This globalization benefits our competitors as well
The New Era of Better Informed Consumers
• Consumers, both domestic and international are demanding assurances of food safety
• In addition to safety, consumers want to know where the product was produced, who produced it and is it fresh
Global Trends – New Realities
• Information is the cost of admission
• Plate to Gate, not Gate to Plate– Market is being
driven by consumers, not producers
• Increase in branding at retail level
Global Trends - “New Realities”
• World protein complex is dealing with the dual shocks of BSE and AI
• Consumers are becoming increasingly concerned about food safety. Brands/traceability are becoming more important.
• Competition for export markets is intensifying.
• FTA’s are enhancing long-term market prospects.
Global Trends - Brands
Natural Brands Store Brands Private Brands
The Brand Promise
Randy Blach, CattleFax, Branded beef products(not even counting store brands) account for about
10% of annual fed-cattle production, and he expectsit to grow significantly by the end of the decade.
Source: BEEF, January 2005
Global Trends - “Story Meat”
• Voluntary
• Marketing Tool
• Shows Producer,Farm and Cattle
• Let’s ConsumersKnow SomeoneStands BehindProducts
Store Brands Becoming the Norm
• Branding will grow because a brand represents a promise of quality
• A tremendous amount of marketing and dollars will be placed behind a brand
• A brand can build customer loyalty & repeat buyers
22
U.S. Beef Exports
What has been lost and when do we resume exports?
12/24/03 Bans on U.S. Beef Begin
Beef Exports
• Beef and beef variety meats exports in 2003 represented– 1.2 million MT with value
of $3.5 billion– 9% of all muscle cuts– 47% of all variety meats
• 90,000 MT of livers• 27,000 MT of tongues
• The equivalent of 3.5 million head of cattle (roughly 60,000 head per week)
Beef Export Premiums
$0$10$20$30$40$50$60$70$80
$ / Head
ShortPlate
Tongue Skirt ShortRibs
Tripe
Dom. Price Without Exports Export Premium
Export premiums on these 5 cuts alone
represent $78 per head
Source: USMEF
What’s the Current Status
• 133 countries imported U.S. beef between 1999-2003.
• 72 instituted bans in December 2003.– 26 markets currently
closed to U.S. beef.– Of those that have
reopened, access has often limited.
– 6 markets accounted for 90% of ’03 exports and 2 remain closed.
0
200
400
600
800
1,000
1,200
1,400
U.S. Beef & BVM Exports (1,000 MT’s)
7/27/07 Japan lifts ban on U.S. beef imports!
Japan• U.S. beef/bvm exports of
384K mt worth $1.4 billion in 2003
• 64% of beef consumed is imported – half was U.S.
• Beef is 4th protein source behind Fish, Pork, Poultry
01,000,0002,000,0003,000,0004,000,0005,000,0006,000,0007,000,0008,000,0009,000,000
mt
Beef Fish Pork Poultry
Japan Meat Consumption 1961-2001
Winning back consumers around the world
• More And More Consumers Give U.S. Beef Thumbs Up
• Online tracking surveys were conducted May 5-7 to update consumer reaction toward U.S. beef import resumption, safety and purchase intention. The survey showed 34 percent (up 3.2 percent from the last survey) of respondents support trade resumption. Approximately 18.5 percent would purchase U.S. beef. The results are higher than those from April.
Putting U.S. Beef Back On the World’s Market
Where Do We Go From Here?
To compete globally:• Focus on U.S.
advantages:– Diversity, flexibility of
programs, grain-fed• Aggressively pursue
trade and competition• Embrace trade
enhancing policies• “Export-minded”
mentality
How Well We Cooperate Will How Well We Cooperate Will Determine How Well We CompeteDetermine How Well We Compete!!
Questions?
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