Factors Influencing Red Meat Exports

Travis Arp, Ph.D.

Technical Services Manager

U.S. Meat Export Federation

The Landscape

Tight Global Beef

Supplies

Global Economic Growth

Market Access Issues

Strong U.S.

Dollar

Large 2015 Hog Supplies

U.S. Beef Exports

• 2014 beef exports…

– $7.14 billion value (+16%)

– 1.197 MMT (+2%)

– 14% of production

– Added $300.36/hd (+ $55.40)

– Top Markets (value) • Japan

• Hong Kong

• Mexico

• Canada

• Korea

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$1

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$3

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$7

$8

$9

Bill

ion

s

Value of U.S. Beef Exports

Variety Meats

Beef

-

200

400

600

800

1,000

1,200

1,400

Tho

usa

nd

me

tric

to

ns

U.S. Beef & Variety Meat Exports & Forecast

U.S. Pork Exports

• 2014 Pork Exports…

– $6.67 billion value (+10%)

– 2.178 MMT (+2%)

– 26.5% of production

– Added $62.45/hd (+ $8.50)

– Top Markets (value) • Japan

• Mexico

• Canada

• Hong Kong/China

• Korea

-

500

1,000

1,500

2,000

2,500

3,000

Tho

usa

nd

me

tric

to

ns

U.S. Pork & Variety Meat Exports & Forecast

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

Bill

ion

s

Value of U.S. Pork Exports

variety meats

Pork

Strong USD Not Good for Exports

Shrinking Beef Supplies

-800

-600

-400

-200

0

200

400

600 W

orl

d

U.S

.

Bra

zil

EU

Ch

ina

Ind

ia

Arg

enti

na

Au

stra

lia

Mex

ico

Paki

stan

Ru

ssia

Can

ada

Tho

usa

nd

Met

ric

ton

s

Forecast Change in Beef Production 2015 - 2014

Source: USDA/FAS April 2015

Decreases expected for our primary competitors

MLA’s 2015 Outlook for Australia

• Herd: 26.8 million head, 2 decade low

• Beef production: 2.3 mil mt carcass wt., -11%

• Beef exports: 1.15 mil mt product wt., -11%

• Beef Slaughter: 8.2 million hd, -11%

• Live Cattle Exports: 990,000 hd, -23%

U.S. cattle prices remain significantly higher than prices for other major exporters

One sign of strong demand…

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$5

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2009 2010 2011 2012 2013 2014

Bill

ion

s

Nicaragua

Belarus

Mexico

EU28

Argentina

Paraguay

Uruguay

Canada

New Zealand

India

Brazil

U.S.

Australia

Global beef export value has basically doubled since 2009, to about $37 billion in 2014, up 18% from 2013

Source: Global Trade Atlas & USMEF estimates

China, EU & US > 80% of World’s Pork

0

20,000

40,000

60,000

80,000

100,000

120,000

Tho

usa

nd

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Global Pork Production

Others

S. Korea

Japan

Mexico

Philippines

Canada

Vietnam

Russia

Brazil

United States

European Union

China

Source: USDA/FAS

2015 Increases in Production to be Led by the U.S.

-200

-100

0

100

200

300

400

500

600

700

Tho

usa

nd

me

tric

to

ns

Forecast Change in Pork Production 2015 - 2014

+0.4%

-0.2%

+6%

+1% +2% +1% +1.4% +1% +4% +1% +0.2% +3%

Source: USDA/FAS

Race to the bottom for major

exporter prices

-5% -11%

-15% -29%

-17% -29%

-25%

+15%

+19%

+20% +3% +2%

*Vietnam and Philippines prices are for January

EU Competition

• China/HK, Japan, ASEAN and Korea accounted for 73% of EU export volume, up from 60% in 2013.

• The increase in exports to these markets was +395,000 mt.

• This alone nearly offset the 444,000 mt that would have gone to Russia.

Free Trade Agreements

BSE

BSE

BSE BSE

BSE

BSE Hormones

Hormones

Hormones Beta Agonists

Beta Agonists PRT’s

PRT’s

BSE

PRRS

PRRS

Trichinae Trichinae

Animal Health Concerns

• Import restrictions due to animal disease

– BSE

– PRRS

– Trichinae

– FMD

– ASF

– HPAI

• U.S.: robust animal disease control system

– World Organization for Animal Health (OIE) Standards

• Importance of traceability?

– Lack of national traceability program affect ability to regain market access?

Bolivia

Morocco

South Africa

Saudi Arabia

China

Brazil

Kenya

Australia Argentina

Markets Closed Due to BSE Concerns

Paraguay

Venezuela

LT30 Only Markets

Ukraine South Korea

Thailand

Singapore

Taiwan

Russia (Currently closed)

Japan

Market Displacement

44%

51%

5%

76%

12%

12%

52% 38%

10% JAPAN

2003 2008 2014

21%

68%

10%

65% 14%

21%

55% 35%

10% KOREA

United States Australia Others

SPS Market Access Issues

Hormones

• EU, Russia, China, Egypt?

• Codex vs. FDA vs. Precautionary Principle

Beta Agonists

• EU, Russia, China

• AMS Never Fed Beta Agonist PVP

• Non-Use vs No-Residue

PRT’s

• EU, Singapore, Japan

• Food Additive vs. Processing Aid

West Coast Port Situation

• U.S. beef to Asia each month: 48,000 mt & $330 million

– Chilled: near 12,000 mt & >$100 million per month

• Shelf life for chilled beef = 60 days

– Freezing in transit

• Risk of lost retail shelf space/features as buyers switch to competitor products

• Added costs

Stiff Competition

Overall in the year of the Sheep…

BEEF • Limited global beef supplies will help sustain historically

high prices • Product will flow to those who are willing and able to pay • China remains huge market access variable

PORK • Record hog production drive down domestic prices,

improve competitiveness in global market • Strong EU pork competition, distorted trade flows • Russia and limited China opportunity due to market

access

Overall in the year of the Sheep…

• Effects of West Coast Ports and COOL?

• Leader in grain fed beef production

– Unique aspects of U.S. beef and pork should sustain export success

– U.S. is low cost grain fed producer

• World leader in production and efficiency

– How does that effect our global position?

– Animal health, animal welfare, food safety, sustainability