Beef Industry Summer Conference Joint International Marketing Committee Trade Update Erin Daley...

Beef Industry Summer Conference

Joint International Marketing CommitteeTrade Update

Erin DaleyEconomist, USMEF

July 31, 2010Denver, Colorado

Global Beef Overview

Beef Consumption Growth

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

U.S. +4.4% or +538 Thous MT

Rest of World: +17% or nearly an additional 9 million MT which is equal to roughly 80% of U.S. production in 2010

Thous MT

Source: OECD/FAO 2010 Ag Outlook, carcass wt equivalent

Growth comparing 2009 to 2019 forecast:

Per capita beef consumption Lots of room for growth outside the U.S.

0

10

20

30

40

50

60Kg/capita

Source: USDA/FAS 2010 estimate

U.S. Export Growth Outpacing the Competition

January-May Beef Exports

0

100,000

200,000

300,000

400,000

500,000

600,000

2008

2009

2010

+4%-9%

+25%

+3%+18%

Source: Global Trade Atlas, excludes variety meats

Metric Tons

-45%

+17%

+3%

Australia’s Exports

• Down 6% in first half 2010, 436,095 MT

• Down 4% to Japan

• Down 28% but recovering to the U.S.

• Up 17% to Korea but losing Mkt Share to U.S. (exports to these top 3 markets accounted for 77% of Australia’s exports)

• Down 10% to Indonesia

• Largest growth: Russia and Middle East

Brazil’s Exports

• First half total: 560,000 MT, +3.5%• Top markets: Russia, Iran, EU-27, Egypt, Hong

Kong• Growth to Iran, 95,000 MT, +283%• Some recovery in EU but chilled exports are less

than one quarter of shipments prior to 2008; finally over 2,000 farms approved for EU

• Still seen as leading global supplier of the future

Canada’s Exports

• Diversifying away from U.S., market access negotiation success: Hong Kong, China, Vietnam

• Traceability

• More cattle on feed in Canada, more slaughter fed cattle and cows to U.S.

HK4%

Other3%

Japan2%

11%

U.S.80%

Mexico

Jan-May Beef Import Status

0

50

100

150

200

250

300

350

4002008 2009 2010

Source: GTA and USMEF est, excludes variety meats

Thous MT

-15%

+21%

+4%

-7%-21%

+1%

+20%

-5%

+20%

+9%

Who is the Competition?

Importing country: top suppliers, 2009 mkt share

• Mexico: U.S. 80%, Can 16%• Canada: U.S. 66%, NZ 18%, Aus 7%, Urg 7%• Japan: Aus 75%, U.S. 14%, NZ 6%• Korea: Aus 58%, U.S. 26%, NZ 14%• Hong Kong/Vietnam: India 35%, U.S. 23%, Bz

22%

U.S. Beef Exports, Recovery

0

200

400

600

800

1,000

1,200

1,400Variety Meats

Beef

Source: USDA/USMEF

Thousand MT2010F: beef +17%, variety meats steady= 1 MMT, +12% valued at $3.7 billion, +21%; just 3% less than ‘03

U.S. Beef Exports to Top Markets

0

50

100

150

200

250

300

350

400

200320092010F

Source: USDA/USMEF Forecast, thousand MT, includes variety meats

Lost beef export value due to BSE (2004-2010)

• Japan: $8 billion (-$70 million/month currently)

• Korea: $4.7 billion• Others: >$1 billion

Total: ~$14 billion(based on annual export value compared to 2003; estimated for 2004 through 2010)

Source: USDA/FAS data; USMEF estimates

Exports are up this year…Weekly U.S. beef exports through July 15

6%

6%4%

26%

18%

14%

14%

12%

MEXICO

KOREA

JAPAN

VN/HK

CANADA

TAIWAN

RUSSIA

OTHER

1. Mexico -10%2. Korea +114%3. Japan +29%4. Vietnam/HK +39%5. Canada 0%6. Taiwan +27%7. Russia: 16,746 MT

(already a new annual record)

Total: +26%

Source: USDA/FAS Weekly Export Report

Mexico

Japan

KoreaVN/HK

Canada

Taiwan

Russia

Weekly U.S. Beef Exports to Asia*

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

1/10

2/10

3/10

4/10

5/10

6/10

7/10

8/10

9/10

10/1

011

/10

12/1

0

2008

2009

2010

Source: USDA/FAS, metric tons, *Korea, Japan, Vietnam, Hong Kong, Taiwan

Jan-July 15: +52%

Growth led by Korea & Japan

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

1/7/2010 3/7/2010 5/7/2010 7/7/2010

Korea

JapanVietnam/HK

Taiwan

2010 Weekly Beef Exports to Top Asian Markets

Source: USDA/FAS

Metric Tons

Weekly Short Rib Prices

$1.00$1.20$1.40$1.60$1.80$2.00$2.20$2.40$2.60$2.80$3.00$3.20$3.40$3.60$3.80

2007

2008

2009

2010

Source: USDA/AMS $/pound

Adding ~$15-$20/head

$293 $229 $360

$223

Cutout: $1.54/lb 800 lb carcass

$28$58

$41

Total Cut-out Value $1,232

+$133 from year-ago! +$39 from Chuck! +$37 from Rib +$24 from Round +$21 from Loin

Maximizing Carcass Value

U.S. Monthly Meat Exports to Mexico

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

Pork

Poultry

Beef

Source: USDA/USMEF, GTA, Metric Tons, includes variety meats

Still a price-sensitive market

Asia Has Been the Growth Market Weekly U.S. Beef Exports

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Mexico

Asia

Source: USDA/FAS, metric tons

Weekly U.S. Beef Exports to Russia, back in business

0200400600800

1,000

1,2001,4001,6001,8002,000

2008

2009

2010

Source: USDA/FAS, metric tons

16,746 MT through July 15, 2010 surpassing 2008 annual record: 15,644 MT

Sources of Risk:Market Exchange Rates

Yen

Peso Ruble Won

Sources of Risk:Competitor Exchange Rates

Real A$ C$

Euro

Our Competition…

Who will meet the growing global demand?

-20%

-15%

-10%

-5%

0%

5%

10%Forecast Change in Beef Production 2010/2009

Production Trends for the Top Beef Exporters

0

2,000

4,000

6,000

8,000

10,000

12,000

U.S.

Brazil

Argentina

Australia

Canada

Thous MT

Export Dependence?

0%

2%

4%

6%

8%

10%

12%

14%

2000 2002 2004 2006 2008 2010 2012 2014

Source: USDA/USMEF, percent of beef muscle cuts exported

Export Dependence?

0%

10%

20%

30%

40%

50%

60%

70%

2010 Estimated Exports as Percent of Production

Thank You!

• For more information: – Erin Daley

edaley@usmef.org

Or visit www.usmef.org

A Challenge to the U.S. Industry

-150

-100

-50

0

50

100

150

200

Change in U.S. Production Change in Global BeefImports

(1,000 MT)

-1.3%

+4%

Source: USDA Ag Outlook, Feb 2010, carcass weight equivalent

2012 Forecasts

EU Imports Chilled Beef

• Currency issue;

• Update on first quota year under the new agreement