Cattle and beef industry projections workshop 2015 - Brisbane Monday, 30 th of November, 2015 Presented by: Len Steiner Steiner Consulting Group, +1.603.424.9664
Main Discussion Points Today #1: Previous Year Review #2: Economic Growth both in US and Global #3: Currency Markets #4: Feed Input Costs #5: Cattle Supplies in USA, Canada and Mexico #6: Product Availability from Importing Partners #7: USA Meat Production and Exports #8: Demand in US Domestic Market #9: Demand in Other Markets (Competition) #10: Supplies of Competing Proteins #11: WHO Report #12: US Lamb Business #13: HPAI #14: Price Forecasts -1-
Are Current Prices Sustainable? -2-
Nothing Goes Up Forever Remember Crude Oil Prices 160 140 120 Prior to 2008 After 2008 100 80 60 40 20 0 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-3-
US Fed Cattle Prices Today -4-
Australian 90CL Prices Today $/cwt 350 7:45, E. COAST 90CL IMPORTED BLENDED COW BEEF, YELLOW SHEET 300 250 200 150 100 50 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-5-
#2: Economic Growth Slower than earlier expected with significant problems in emerging markets. This should moderate beef price inflation in US and globally. -6-
#2: Economic Growth Global Growth Situation Canada: Mounting risks Russia Low oil prices USA: Growing Euro Zone UK and Germany expanding Brazil: Recession deepens Argentina: Mounting risks India Modest recovery Australia: Central bank easing Stronger commodity mkts Japan Monetary stimulus China Housing market worries New Zealand Commodities Source: Moody's Economy.com -7-
#2: Economic Growth Improvement But Not As Robust as Hoped REAL GDP GROWTH % 6.0 GLOBAL GROWTH OUTLOOK 5.0 4.0 3.0 2.0 1.0 0.0-1.0-2.0 World N. Am. S. Am. Euro Asia Oceania 2013 2014 2015 Est 2016 Fcst World N. Am. S. Am. Euro Asia Oceania 2013 2.2 1.5 3.0-0.2 4.9 2.1 2014 2.5 2.4 0.4 0.9 4.3 2.8 2015 Est 2.4 2.4-1.2 1.6 4.3 2.2 2016 Fcst 2.9 3.1 0.0 1.5 4.5 2.9 Latest data: 8/10/2015 Source: Moody's Economy.com -8-
#2: Economic Growth US Growth Slower Than Expected GDP growth in Q3 was slower than expected at 1.5%. Don t read too much into this, however, as inventory depletion accounted for much of the slowdown Going forward economists have lowered their outlook for economic growth, currently pegging it at 2.8% compared to about 3% a couple of months ago Weak growth in other markets and a strong US dollar is expected to impact exports & imports. While FED may raise rates by end of the year, the odds are not very strong and the rate hike could come in early 2016 % Ch. 8.0 6.0 4.0 2.0 0.0-2.0-4.0-6.0-8.0 * Forecast: Moody s -10.0 ANNUAL GROWTH RATE OF GDP Annualized Quarterly Growth Rate Forecast 2000 '01 '02 '03 '04 2005 '06 '07 '08 '09 2010 '11 '12 '13 '14 '15-9-
#2: Economic Growth Foodservice Growth Slower than earlier in the year but industry remains optimistic 105.0 RESTAURANT PERFORMANCE INDEX National Tracking Index. Values over 100 Indicate Expansion CONTRACTION EXPANSION 104.0 103.0 102.0 101.0 100.0 99.0 98.0 97.0 96.0 Expectations component Current situation component 95.0 2007 2008 2009 2010 2011 2012 2013 2014 2015-10-
#2: Economic Growth Foodservice $ sales up in 2015 12.0% GROCERY STORE $ SALES : Y/Y % CH. Latest Data is for September 2015 12.0% FOODSERVICE $ SALES : Y/Y % CH. Latest Data is for September 2015 10.0% 10.0% 8.0% 8.0% 6.0% 6.0% 4.0% 4.0% 2.0% 2.0% 0.0% 0.0% -2.0% -2.0% -4.0% -4.0% '08 '09 '10 '11 '12 '13 '14 '15 '08 '09 '10 '11 '12 '13 '14 '15 Restaurant menu price inflation has been especially high in 2015, which has likely impacted volume of product traded in the marketplace. High beef, pork and chicken prices in 2014 contributed to the increase -11-
#2: Economic Growth Labor Markets Are Key for Meat Demand 600 NEW JOB CREATION: NON AGRICULTURAL, 000's 12.00 USA UNEMPLOYMENT RATE: % 400 10.00 200 THOUSAND JOBS 0-200 percent 8.00 6.00 5.2-400 -600 4.00 2.00 Sept 2015 5.1% -800-1000 0.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Job gains in the US have been slowing down but remain positive. Unemployment rate now back to 5% from 10% just a few years ago. However baby boom generation is retiring and labor force growth will be stagnant, which will cap US GDP growth. -12-
#2: Economic Growth Labor Force Participation Sep 2015 Aging baby boomers Lower participation of 16-24 yr olds Fewer women in labor force Continued steady decline in men participation Source: US Federal Reserve -13-
#3 Currency Markets USD PER 1AUD -14-
# 3 Currency Markets % Change in Value of US Dollar 135% % change in the value of the US Dollar vs. Currencies of Top Meat Trading Partners 130% 125% 120% 115% USD/AUD USD/NZD USD/Peso USD/CAD Positive for US imports Negative for US exports 110% 105% 100% 95% 90% Negative for US imports Positive for US exports 85% Sep '14 Oct '14 Nov '14 Dec '14 Jan '15 Feb '15 Mar '15 Apr '15 May '15 Jun '15 Jul '15 Aug '15 Sep '15 Oct '15 Nov '15 Dec '15-15-
# 3 Currency Markets Price of Imported 90CL Beef in US$ Terms 350 Pricein USD Price of 90CL Imported Beef in US Market (FOB Philly). Prices in US$/cwt 300 250 March 2012 217.00 200 150 USD/cwt 205.00 Nov. 2015 100 2007 2008 2009 2010 2011 2012 2013 2014 2015-16-
#3 Currency Markets Price of Imported 90CL Beef in US$ Terms & AUD Terms 350 300 Pricein USD and AUD Price of 90CL Imported Beef in US Market (FOB Philly). Prices in US$/cwt and AUD/cwt AUD/cwt Nov 15 289.63 250 200 150 206.31 March 2012 USD/cwt 100 2007 2008 2009 2010 2011 2012 2013 2014 2015-17-
#3 Currency Markets Effect on Australia Prices as Supplies Tighten Up AUD per 100kg 700 Australian EYCI vs. USA Fed Steer Prices US$/cwt 175 600 150 500 125 400 100 300 75 200 50 100 25 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015-18-
#4: Feed Input Costs Corn Supplies Remain Adequate, Keeping Prices in Check U.S. Corn Supply and Use 2013/14 2014/15 USDA Estimate USDA Estimate USDA Sep Est 2015/16 % Change USDA Oct Est vs. 2013/14 vs. 2014/15. Planted 95.4 90.6 88.9 88.4-7.3% -2.4% Harvested 87.5 83.1 81.1 80.7-7.8% -2.9% Yield per harvested acre 158.1 171.0 167.5 168.0 6.3% -1.8% Beginning stocks 821 1,232 1,732 1,731 110.8% 40.5% Production 13,829 14,216 13,585 13,555-2.0% -4.6% Imports 36 32 30 30-16.7% -6.3% Supply, total 14,686 15,479 15,347 15,316 4.3% -1.1% Feed and residual 5,040 5,317 5,275 5,275 4.7% -0.8% Ethanol for fuel 5,124 5,207 5,250 5,250 2.5% 0.8% Food, seed and residual 1,369 1,359 1,380 1,380 0.8% 1.5% Domestic use, total 11,534 11,883 11,905 11,905 3.2% 0.2% Exports 1,920 1,864 1,850 1,850-3.6% -0.8% Use, total 13,454 13,748 13,755 13,755 2.2% 0.1% Ending stocks 1,232 1,731 1,592 1,561 26.7% -9.8% Avg. farm price ($/bu) 4.46 3.70 3.45-4.05 3.50-4.10-14.8% 2.7% Ending Stocks/Use 9.2% 12.6% 11.6% 11.3% Source: USDA ** Corn crop marketing year starts September 1. -19-
#4 Feed Input Costs Production Again Near All Time Record Levels MIL BU. 16,000 US CORN PRODUCTION: MILLION BUSHELS, USDA 14,000 12,000 10,000 8,000 6,000 2014/15: 14.2B 2015/16: 13.6B 4,000 2,000 0-20-
#4 Feed Input Costs Ethanol Demand Has Hit a Wall MIL BU. 5,500 5,000 4,500 4,000 3,500 3,000 CORN USED FOR ETHANOL PRODUCTION IN USA % OF TOAL USE CORN USED FOR ETHANOL AS % OF TOTAL USE 45% 40% 35% 30% 25% 2,500 2,000 1,500 1,000 500 0 20% 15% 10% 5% 0% -21-
#4 Feed Input Costs Driving More but Using Less Gasoline trillion miles previous 12 months 3.20 3.00 GASOLINE CONSUMPTION VS. MILES DRIVEN Gasoline Mil Barrel/Day (12m mov avg) (right axis) Sep 2007 9.29 Sep 2007 3.03 mil barrels/day 3.11 9.09 9.40 9.00 2.80 2.60 MilesDriven 12-M Moving Total (trillion miles) (left axis) 8.60 8.20 2.40 7.80 2.20 7.40 2.00 7.00 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-22-
#4 Feed Input Costs Corn Prices Remain Supportive of Beef Supply Expansion -54% -23-
#4 Feed Input Costs Soybean Meal Prices at 2010/11 Levels -24-
#4: Ratio of Soybean Meal to Corn -25-
#5 Cattle/Beef Supplies 3.7 MILLION MORE CATTLE IN LAST TWO YEARS JANUARY 1st U. S. CATTLE INVENTORY INVENTORY (000 OMITTED) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 % Ch. vs. 2014 2016 Estimate % Ch. vs. 2015 ALL CATTLE AND CALVES 96,100 94,403 95,018 96,342 96,573 96,035 94,721 94,081 92,887 91,160 90,095 88,526 89,800 1.4% 92,235 2.7% COW AND HEIFERS THAT HAVE CALVED 42,125 41,519 41,678 41,806 41,789 41,692 41,127 40,526 40,068 39,517 38,853 38,293 39,000 1.8% 40,120 2.9% BEEF COWS 32,983 32,531 32,674 32,703 32,644 32,435 31,794 31,440 30,913 30,282 29,631 29,085 29,693 2.1% 30,800 3.7% DAIRY COWS 9,142 8,988 9,004 9,104 9,145 9,257 9,333 9,087 9,156 9,236 9,221 9,208 9,307 1.1% 9,320 0.1% HEIFERS 500LBS. AND OVER 19,629 19,282 19,445 19,950 20,074 19,855 19,604 19,778 19,650 19,445 19,256 18,969 19,240 1.4% 19,800 2.9% BEEF COW REPLACEMENT 5,624 5,508 5,638 5,864 5,835 5,647 5,550 5,443 5,135 5,281 5,429 5,551 5,777 4.1% 6,100 5.6% DAIRY COW REPALCEMENT 4,114 4,018 4,117 4,298 4,325 4,415 4,410 4,551 4,577 4,618 4,546 4,549 4,615 1.5% 4,650 0.7% OTHER HEIFERS 9,891 9,756 9,690 9,788 9,914 9,793 9,644 9,784 9,938 9,546 9,281 8,869 8,847-0.2% 9,050 2.3% STEERS 500 LBS. AND OVER 16,554 16,201 16,466 16,988 17,185 17,163 16,809 16,568 16,394 15,957 15,931 15,668 15,779 0.7% 16,190 2.6% BULLS 500 LBS. AND OVER 2,248 2,201 2,214 2,258 2,214 2,207 2,188 2,190 2,165 2,100 2,074 2,038 2,104 3.3% 2,135 1.5% HFRS, STRS AND BULLS UNDER 500 LBS. 15,545 15,200 15,215 15,339 15,311 15,118 14,994 15,019 14,610 14,141 13,983 13,558 13,677 0.9% 13,990 2.3% ANNUAL CALF CROP 37,593 37,260 37,106 37,016 36,759 36,158 35,939 35,740 35,357 34,469 33,730 33,900 34,300 1.2% -100.0% Note: Shaded numbers represent Steiner estimates -26-
#5 Cattle/Beef Supplies Turn in North America Cycle Due to US Recovery 66,000 64,000 USA + CANADA + MEXICO BEEF/DAIRY COW INVENTORY 1994 64,519 140% 130% BEEF + DAIRY COW INVENTORY: JANUARY 1 1990 INVENTORY = 100% 120% 62,000 60,000 110% 100% CANADA 58,000 56,000 54,000-18% Fcast 90% 80% 70% 60% USA MEXICO 52,000 2013 53,143 50% 50,000 40% We expect inventories to be up about 1.3% in 2015 and 2.2% higher in 2016. Shift in exchange rates and weather has favored rapid expansion in the US at the expense of Canada and Mexico. 2015 - Brisbane Presented by: Steiner -27- Consulting Group (800) 526-4612
#5 Cattle/Beef Supplies US Cattle Inventories Forecast up 2.7% on Jan 1, 2016 CATTLE INVENTORIES, 000 HEAD, 1920-2016F 140,000 130,000 1975 = 132,028 120,000 110,000 1996 = 103,548 TOTAL INVENTORIES, 000 OMITTED 100,000 90,000 80,000 70,000 1958 = 91,176 1990 = 95,816 2004 = 94,403 2007 = 96,573 Jan 1, 2016 Estimate 92.2 mil head 60,000 50,000 40,000-28-
#5 Cattle/Beef Supplies Steer Weights at Record High Levels 930 FI STEER AVERAGE DRESSED WEIGHTS, 25 YEAR TREND 910 890 DRESSED WEIGHTS, POUNDS 870 850 830 810 790 770 750 730 710 690 2015 SATURDAY DATES -29-
#5 Cattle/Beef Supplies 2015 Beef Production at Lowest Level Since 1993 28,000 BEEF PRODUCTION: MILLION POUNDS 27,000 26,000 25,000 1993 Prod 22.9 Bil 2015 Prod 23.8 Bil 24,000 23,000 22,000 21,000 20,000 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016-30-
#6 Imported Beef Availability Top Global Beef Exporting Countries: Cattle Inventory Status Update, January 1st Stocks, 000 Head 2013 2014 2015F % ch. vs. 2014 % ch. vs. 2013 2016F % ch. vs. 2015 % ch. vs. 2013 2017F % ch. vs. 2016 Australia 29,000 29,290 27,600-5.8% -4.8% 26,150-5.3% -9.8% 25,750-1.5% Brazil 203,273 207,959 213,035 2.4% 4.8% 219,093 2.8% 7.8% 224,846 2.6% USA 90,095 88,526 89,800 1.4% -0.3% 92,900 3.5% 3.1% 95,200 2.5% New Zealand 10,180 10,183 10,368 1.8% 1.8% 10,283-0.8% 1.0% 10,122-1.6% Uruguay 11,384 11,903 12,053 1.3% 5.9% 12,063 0.1% 6.0% 11,923-1.2% Canada 12,305 12,220 11,920-2.5% -3.1% 11,930 0.1% -3.0% 12,135 1.7% Mexico 18,521 17,760 17,120-3.6% -7.6% 16,450-3.9% -11.2% 16,015-2.6% Argentina 51,095 51,545 51,545 0.0% 0.9% 51,995 0.9% 1.8% 53,245 2.4% Source: USDA 2015 - Brisbane Presented by: Steiner -31- Consulting Group (800) 526-4612
#6 Imported Beef Availability Australia Beef Shipments in 2015 metric ton shipped wt. 50,000 AUSTRALIAN MONTHLY BEEF SHIPMENTS TO THE US 1998-2015, metric ton, shipped wt. 45,000 40,000 35,000 Aug 2005 28,348 MT Sep 2015 29,528 MT 30,000 25,000 20,000 15,000 Q4 2015 10,000 5,000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-32-
#6 Imported Beef Availability As Australia Supplies Decline, USA will have more competition -33-
#6 Imported Beef Availability % of Australian Shipments going to USA % of total 60% % OF AUSTRALIAN MONTHLY BEEF EXPORTS GOING TO USA 1998-2015, % OF TOTAL. SOURCE: DAFF 50% 40% 30% 20% 10% 0% -34- Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12
#6 Imported Beef Availability Australia Beef Supplies Expected to Decline 30,000 29,000 000 head AUSTRALIA CATTLE INVENTORIES: JUNE 30 STOCKS Source: Meat and Livestock Australia, Mid-year update 29,100 10.6% drop in inventory by June 2016 28,000 27,300 27,000-6.2% 26,100 26,000-4.4% 25,000 24,000 2010 2011 2012 2013 2014F 2015F 2016F 2017F -35-
#6 Imported Beef Availability Australian Slaughter at Unsustainable Levels 180,000 170,000 160,000 150,000 140,000 130,000 120,000 110,000 100,000 90,000 80,000 70,000 60,000 Australia 4 State Weekly Cattle Slaughter 52wk MA 2008 2009 2010 2011 2012 2013 2014 2015 2016 Australia slaughter in Sep-Oct was down 10% from year ago The inventory base will be much smaller on January 1, limiting overall numbers coming to market -36-
#6 Imported Beef Availability Weather Shifts Could Dramatically Impact Supplies NINO 3.4 SST INDEX VS. AUSTRALIAN CATTLE SLAUGHTER Nino anomaly data from NOAA. Y/Y Change in Australian Cattle Slaughter, 6-wk Moving Average 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% -10.00% -15.00% -20.00% -25.00% Slaughter (left) Nino (right) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0-0.5-1.0-1.5-2.0-2.5-3.0-3.5 La Nina El Nino 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017-37-
#6 Imported Beef Availability Few Other Major Players Available to Increase Supplies 000 Mt Shipped Wt. 450 400 350 300 250 200 150 100 50 Entries of FR/FZ Imported Beef Into US Market Based on US Customs Data for Product Entering In-Quota and Out-of-Quota, Product Weight Basis, 000 MT 6.1% 36.3% 14.9% Cummulative through Nov 19, 2012 Cummulative through Nov 18, 2013 Cummulative through Nov 17, 2014 Cummulative through Nov 16, 2015 28.2% -7.9% 1,000 900 800 700 600 500 400 300 200 100 20.6% - CANADA AUSTRALIA NEW ZEALAND MEXICO OTHER - TOTAL -38-
#6: Product Availability from Importing Partners Status of Brazil and Argentine Exports to US Brazil 14 states allowed to ship. FSIS currently visiting plants in a number of states. BUT legislation expected to be introduced to further delay resumption of trade. Unlikely FSIS will certify plants until the issue works its way through Congress Argentina Northern Argentina. No plants have been certified by APHIS. Election of Macri and a more friendly stance with the US may help move the process along. Similar Congressional hurdles as with Brazil. -39-
#7 USA Meat Production and Exports TOTAL BEEF, PORK, BROILER AND TURKEY PRODUCTION Forecast Note: MILLION POUNDS 45,000 40,000 35,000 30,000 25,000 20,000 15,000 BROILERS BEEF PORK TURKEY 39,952 24,579 23,795 41,100 24,890 24,709 41,886 25,462 25,539 In 2015, pork production in the USA will exceed beef production for the first time in at least a century or so. Beef will move to third place following chicken and pork 10,000 5,506 5,000 0 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 5,640 5,887 2015 2016 2017 YEARS -40-
#7 USA Meat Production and Exports Commercial Meat Production by Species Million Pounds. USDA + Steiner Forecasts 2014 2015 % CH. 2016 % CH. 2017 % CH. BEEF 24,252 23,795-1.9% 24,709 3.8% 25,539 3.4% PORK 22,843 24,579 7.6% 24,890 1.3% 25,462 2.3% BROILERS 38,139 39,952 4.8% 41,100 2.9% 41,886 1.9% TURKEYS 5,680 5,506-3.1% 5,640 2.4% 5,887 4.4% LAMB 156 150-4.0% 154 3.2% 158 2.3% VEAL 94 81-13.8% 76-6.9% 82 8.6% TOTAL 91,163 94,064 3.2% 96,569 2.7% 99,014 2.5% -41-
#7 USA Meat Production and Exports BROILERS BEEF PORK TURKEY 8,000 16,162 15,519 14,570-42- 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2016 2017 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 TOTAL BEEF, PORK, BROILER AND TURKEY EXPORTS Forecast TOTAL BEEF, PORK, BROILER AND TURKEY EXPORTS 9,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 YEARS MILLION POUNDS MILLION POUNDS 2011 2013 2015 2016 2017 YEARS 6,654 5,031 Forecast 7,115 5,374 2,272 2,385 612 645 7,450 5,576 2,450 686
#7 USA Meat Production and Exports 4,621 3,000 4,149 4,069-43- 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2016 2017 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 6,000 5,000 4,000 3,000 2,000 1,000 0 TOTAL BEEF, PORK, BROILER AND TURKEY IMPORTS Forecast 4,000 3,500 2,500 2,000 1,500 1,000 500 0 YEARS MILLION POUNDS 2007 MILLION POUNDS 2009 2011 2013 2015 2016 2017 BEEF AND PORK IMPORTS IN THE US BEEF PORK YEARS 3,417 1,067 Forecast 3,025 985 2,995 935
16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0-2,000-4,000 #7 USA Meat Production and Exports TOTAL BEEF, PORK, BROILER AND TURKEY EXPORT SURPLUS (EXPORTS MINUS IMPORTS) Forecast 90,000 12,093 11,370 80,000 9,948 70,000 60,000 50,000 40,000 30,000-44- MILLION POUNDS 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2016 2017 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 MILLION POUNDS 2013 2015 2016 2017 NET TOTAL BEEF, PORK, BROILER AND TURKEY DISAPPEARANCE (ADJUSTED FOR CHANGES IN ENDING STOCKS) YEARS Forecast 84,091 85,175 86,887
#8 Demand in US Domestic Market Demand Drivers: Income 40,000 39,000 38,000 37,000 36,000 35,000 Per Capita Disposable Income, US$ 34,000 33,000 recession 32,000 31,000 30,000 2000 '01 '02 '03 '04 2005 '06 '07 '08 '09 2010 '11 '12 '13 '14 2015-45-
#8 Demand in US Domestic Market Sales are Higher But Traffic is an Issue 80% 70% 60% 50% 40% 30% 20% SAME STORE SALES 90% 80% 70% 60% 50% 40% 30% 20% STORE TRAFFIC 80% 70% 60% 50% 40% 30% 20% SALES EXPECTATIONS 6-MONTHS FORWARD 10% 10% 10% 0% Family Dining Casual Dining Fine Dining Limited Service Quick Casual Higher Sales 50% 49% 56% 53% 67% Lower Sales 27% 34% 33% 12% 8% Same Store Sales - September 2015 vs. September 2014, Tracking Survey Responses by Industry Segment Source: National Restaurant Association 0% Family Casual Limited Quick Fine Dining Dining Dining Service Casual Higher Traffic 46% 44% 33% 41% 42% Lower Traffic 31% 41% 44% 41% 25% Customer Traffic Level - September 2015 vs. September 2014, Tracking Survey Responses by Industry Segment Source: National Restaurant Association 0% Family Casual Limited Quick Fine Dining Dining Dining Service Casual Higher Sales 38% 20% 56% 41% 67% Lower Sales 4% 12% 22% 6% 17% Sales Expections in Six Months - September 2015 vs. September 2014, Tracking Survey Responses by Industry Segment Source: National Restaurant -46-
#8 Demand in US Domestic Market USA Per Capita Meat Protein Consumption 280 TOTAL BEEF, PORK, POULTRY PER CAPITA DISAPPERANCE (Carcass Wt. Basis) Forecast 270 POUNDS PER PERSON PER YEAR 260 250 240 230 257.6 257.6 260.1 220 210 200 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2016 2017-47-
#8 Demand in US Domestic Market USA Per Capita Beef Consumption BEEF PER CAPITA DISAPPERANCE (Carcass wt. Basis) 130 120 110 100 90 80 70 76.5 60-48- 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2016 POUNDS PER PERSON PER YEAR 2017 Forecast 76.7 77.2 78.6
#8 Demand in US Domestic Market USA Per Capita Pork Consumption PORK, PER CAPITA DISAPPERANCE (Carcass wt. Basis) 85 80 75 70 65 63.5 60 55 50 Forecast 62.5 62.9-49- 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 POUNDS PER PERSON PER YEAR 2016 2017
#8 Demand in US Domestic Market USA Per Capita Chicken Consumption 110 BROILERS, PER CAPITA CONSUMPTION (Carcass wt. Basis) 0 0 100 90 80 70 60 50 40 30 20 Forecast 102.1 103.2 103.5-50- 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 POUNDS PER PERSON PER YEAR 2015 2016 2017
#8 Demand in US Domestic Market USA Per Capita Turkey Consumption TURKEYS, PER CAPITA CONSUMPTION (Carcass wt. Basis) 20.00 16.00 12.00 8.00 4.00 Forecast -51-1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 POUNDS PER PERSON PER YEAR 2016 2017 15.2 15.4 15.8
#8 Demand in US Domestic Market USA Per Capita Lamb Consumption LAMB, PER CAPITA CONSUMPTION (Carcass wt. Basis) Forecast 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00-52- 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2016 2017 POUNDS PER PERSON PER YEAR 1.06 1.06 1.08
#8 Demand in US Domestic Market Exports Accounting for a Larger Share of Production 100,000 COMPARISON OF INCREASE IN COMBINED BEEF, PORK, BROILER AND TURKEY PRODUCTION, IMPORTS AND EXPORTS FROM 1990 TO 2015 90,000 80,000 1990 2015 70,000 MILLION POUNDS 60,000 50,000 40,000 30,000 20,000 10,000 - Production Imports Exports -53-
#9 Demand in Other Markets China Purchases So far in 2015 (product wt. basis) In just two months of market opening -54-
#9 Demand in Other Markets Hong Kong Purchases So far in 2015 (product wt. basis) -55-
#10 Competing Proteins Pork Situation and Outlook Supplies ( Y/Y % change) Production: +7.6% in 2015 +1.3% in 2016 +2.3% in 2017 Exports: +3.6% in 2015 +6.8% in 2016 +3.8% in 2017 27,000 25,000 23,000 21,000 19,000 PORK PRODUCTION: MILLION POUNDS Per Capita: +7.4% in 2015-1.5% in 2016 +0.5% in 2017 17,000 15,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017-56-
#10 Competing Proteins Competitiveness -57-
#10 Competing Proteins Broiler Situation and Outlook Supplies ( Y/Y % change) BROILER PRODUCTION: MILLION POUNDS Production: +4.8% in 2015 +2.9% in 2016 +1.9% in 2017 Exports: -8.9% in 2015 +6.9% in 2016 +4.7% in 2017 MILLION POUNDS 44,000 42,000 40,000 38,000 36,000 34,000 32,000 Per Capita: +6.9% in 2015 +1.1% in 2016 +0.3% in 2017 30,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Forecast Source: Steiner Consulting Group -58-
#10 Competing Proteins Fast Food Demand, Beef vs. Chicken 2.50 Ratio Ratio: 78CL Meat Block / Bnls Skinless Chicken Breast 2.00 1.63 1.50 1.00 +443% 0.50 52wk Mo. Avg. 0.30-1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 78CL Meat Block = 70% 90CL Boneless Beef, Central, Fresh, USDA, Wt. Avg. + 30% 50CL Beef Trim, Fresh, National, USDA, Wt. Avg. Chicken Breast = USDA N.E. Broiler Breast Boneless, Skinless, Wt. Avg. Forecast Source: Steiner Consulting Group -59-
#10 Competing Proteins Fast Food Demand, Beef vs. Pork 2.50 Ratio Ratio: 78CL Meat Block / 1/4" Pork Loins, USDA Wt Avg 2.00 1.74 1.50 1.00 +335% 0.50 52wk Mo. Avg. 0.40-1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-60-
#11 WHO Report WHO added processed meats to its highest risk of carcinogens. Muscle meats were in the probable category Headlines and news reports with side by side pictures of cigarettes and bacon or hot dogs So far we have not seen much of an impact although demand studies usually are done best with the benefit of a much longer time reference -61-
#12 USA Lamb Market Situation Very Modest Gains in US Lamb Inventories 12,000 mil head US LAMB INVENTORY 10,000 8,000 6,000 4,000 2,000 0-62-
#12 USA Lamb Market Situation Imports Continue to Fill the Shortfall 450 mil lb. Domestic Lamb Production + Imports 400 350 300 250 Imports 200 150 100 50 US domestic production 0-63-
#12 USA Lamb Market Situation Lamb Trade Flows so Far in 2015 USA LAMB IMPORTS, USDA, MT, PRODUCT WEIGHT BASIS USA USA LAMB LAMB EXPORTS, USDA, USDA, MT, MT, PRODUCT WEIGHT BASIS BASIS 45,000 40,000 35,000 3% 1,200 1,200 1,000 1,000-39% -39% 30,000 800 800 25,000 20,000 15,000 20% 600 600 400 400-63% -63% -39% -39% 10,000 5,000 - Australia New Zealand 45% -9% -100% -12% Canada Chile Uruguay U.K. (Wales) Ireland Brazil Other 200 200 - - 425% 425% -31% -31% -6% -6% -2% -2% -64-
#13 HPAI High Pathogenic Avian Influenza (HPAI) -65-
#13 HPAI Bird Flu Impact in the Spring Poultry Destroyed due to Avian Influenza Data through June 2, 2015. Source: USDA/APHIS Category wk end. 7/3 Since Dec. 20, 2014 Turkeys - 7,759,520 Pullet Chickens - 5,873,700 Layer Chickens - 32,453,700 Broiler Breeders - - Broilers - - Other - 2,004,373 TOTAL - 48,091,293 *** Note: Data includes both commercial and backyard operations
#13 HPAI Migratory Bird Flyways Source: U.S. Fish and Wildlife Service
#13 HPAI Broiler supply overview 8.5 Billion birds went to slaughter in 2014 Top 5 Producing States Georgia 15% Alabama 12% Arkansas 11% N. Carolina 9% Mississippi 9%
#13 HPAI Impact on Turkey Breast Prices 650 $/cwt UB BONELESS-SKINLESS TURKEY BREAST, TOM, FRESH 550 450 350 250 150 50 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-69-
#13 HPAI Impact on Egg Prices 3 UB Shell Eggs, Large, $/dozen. 6-wk MA. Urner Barry 2.5 2 1.5 1 0.5 0-70-
#13 HPAI Impact on Chicken Breast Prices $/cwt 310 N.E. BROILER BREAST BONELESS-SKINLESS, USDA 260 210 160 110 60 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-71-
CURRENT FORECAST -72-
Price Forecasts: 2015 and 2016 LIVE STEERS on Nov 27, Q1 Q2 Q3 Q4 Annual FIVE AREA DIRECT AVERAGE LIVE STEER 5-YR AVERAGE 2010-2014 118.47 120.92 121.44 128.41 122.31 2014 HISTORY 144.59 147.62 157.70 165.16 153.77 2015 HISTORY 124.56 162.00 159.69 144.94 2015 FORECAST 129.66 149.07 % CHANGE FROM 2013 12.0% 8.2% -8.1% -21.5% -3.1% % CHANGE FROM 5-Yr Avg. 36.7% 32.1% 19.4% 1.0% 21.9% 2016 FORECAST 137.33 134.33 127.67 130.33 132.42 % CHANGE FROM 2014-15.2% -15.9% -11.9% 0.5% -11.2% % CHANGE FROM 5-Yr Avg. 15.9% 11.1% 5.1% 1.5% 8.3% 90% BONELESS BEEF, CENTRAL, FRESH, WT. AVG., USDA 5-YR AVERAGE 2010-2014 202.08 207.66 210.09 205.53 206.34 2014 HISTORY 238.77 248.37 294.56 295.90 269.40 2015 HISTORY 200.24 296.42 295.35 281.10 2015 FORECAST 221.97 273.71 % CHANGE FROM 2014 24.1% 18.9% -4.6% -25.0% 1.6% % CHANGE FROM 5-Yr Avg. 46.7% 42.2% 33.8% 8.0% 32.7% 2016 FORECAST 237.33 233.67 223.67 212.00 226.67 % CHANGE FROM 2015-19.9% -20.9% -20.4% -4.5% -17.2% % CHANGE FROM 5-Yr Avg. 17.4% 12.5% 6.5% 3.1% 9.9% -73-
Price Forecasts: 2015 and 2016 Q1 Q2 Q3 Q4 Annual 50CL BEEF TRIM, FRESH, OMAHA BASIS, WT.AVE, USDA 5-YR AVERAGE 2010-2014 90.28 94.18 88.51 91.54 91.13 2014 HISTORY 117.36 124.52 130.18 109.01 120.27 2015 HISTORY 45.20 101.52 96.76 61.28 2015 FORECAST 49.32 77.22 % CHANGE FROM 2014-13.5% -22.3% -52.9% -54.8% -35.8% % CHANGE FROM 5-Yr Avg. 12.5% 2.7% -30.8% -46.1% -15.3% 2016 FORECAST 62.67 64.67 58.67 59.00 61.25 % CHANGE FROM 2015-38.3% -33.2% -4.3% 19.6% -20.7% % CHANGE FROM 5-Yr Avg. -30.6% -31.3% -33.7% -35.5% -32.8% 7:45, E. COAST 90CL AUSTRALIAN BLENDED COW, TOP, YELLOW SHEET 5-YR AVERAGE 2010-2014 199.98 199.00 206.03 214.34 204.84 2014 HISTORY 213.35 216.82 280.90 283.88 248.74 2015 HISTORY 202.00 244.08 236.20 243.72 2015 FORECAST 210.33 233.58 % CHANGE FROM 2014 14.4% 8.9% -13.2% -25.9% -6.1% % CHANGE FROM 5-Yr Avg. 22.1% 18.7% 18.3% -1.9% 14.0% 2016 FORECAST 217.67 218.67 217.00 219.00 218.08 % CHANGE FROM 2015-10.8% -7.4% -11.0% 4.1% -6.6% % CHANGE FROM 5-Yr Avg. 8.8% 9.9% 5.3% 2.2% 6.5% -74-
Price Forecasts: 2015 and 2016 Q1 Q2 Q3 Q4 Annual NATIONAL WHOLE BIRD PRICE, USDA, WTD AVG 5-YR AVERAGE 2010-2014 89.84 95.17 88.82 88.96 90.70 2014 HISTORY 98.40 113.70 104.62 102.80 104.88 2015 HISTORY 79.21 96.83 104.27 83.66 2015 FORECAST 75.18 89.98 % CHANGE FROM 2014-1.6% -8.3% -20.0% -26.9% -14.2% % CHANGE FROM 5-Yr Avg. 7.8% 9.6% -5.8% -15.5% -0.8% 2016 FORECAST 78.67 85.00 82.67 80.67 81.75 % CHANGE FROM 2015-18.8% -18.5% -1.2% 7.3% -9.2% % CHANGE FROM 5-Yr Avg. -12.4% -10.7% -6.9% -9.3% -9.9% N.E. BROILER BREAST BONELESS-SKINLESS, WT.AVG., USDA 5-YR AVERAGE 2010-2014 133.32 159.54 158.62 130.24 145.43 2014 HISTORY 133.57 186.47 190.89 147.39 164.58 2015 HISTORY 105.09 138.90 154.66 136.55 2015 FORECAST 107.65 134.44 % CHANGE FROM 2014 4.0% -17.1% -28.5% -27.0% -18.3% % CHANGE FROM 5-Yr Avg. 4.2% -3.1% -13.9% -17.3% -7.6% 2016 FORECAST 116.67 140.00 145.33 116.67 129.67 % CHANGE FROM 2015-16.0% -9.5% 6.4% 8.4% -3.6% % CHANGE FROM 5-Yr Avg. -12.5% -12.3% -8.4% -10.4% -10.8% -75-
Price Forecasts: 2015 and 2016 Q1 Q2 Q3 Q4 Annual USDA, Pork Carcass Cutout, FOB Plant 5-YR AVERAGE 2010-2014 85.79 95.19 98.60 89.03 92.15 2014 HISTORY 101.37 120.53 118.11 98.46 109.62 2015 HISTORY 72.40 74.77 78.80 85.32 2015 FORECAST 78.35 79.31 % CHANGE FROM 2014-26.2% -34.6% -27.8% -20.4% -27.7% % CHANGE FROM 5-Yr Avg. -12.8% -17.2% -13.5% -12.0% -13.9% 2016 FORECAST 72.00 84.67 84.33 76.00 79.25 % CHANGE FROM 2015-3.7% 7.5% -1.2% -3.0% -0.1% % CHANGE FROM 5-Yr Avg. -16.1% -11.1% -14.5% -14.6% -14.0% IA/MN, Base Market Hog 185 lb Carcass Basis, Plant Dlv., WT. AVG, 5-YR AVERAGE 2010-2014 81.27 92.42 92.69 80.04 86.60 2014 HISTORY 95.15 115.68 111.79 88.44 102.76 2015 HISTORY 51.57 64.11 72.94 73.45 2015 FORECAST 59.00 67.37 % CHANGE FROM 2013-32.6% -36.9% -34.3% -33.3% -34.4% % CHANGE FROM 5-Yr Avg. -21.1% -21.1% -20.8% -26.3% -22.2% 2016 FORECAST 61.33 71.67 74.33 64.33 67.92 % CHANGE FROM 2014-4.3% -1.7% 1.2% 9.0% 0.8% % CHANGE FROM 5-Yr Avg. -24.5% -22.5% -19.8% -19.6% -21.6% -76-
Price Forecasts: 2015 and 2016 Q1 Q2 Q3 Q4 Annual TOM TURKEYS, EAST, FROZEN 16-22LBS, TOP, 5-YR AVERAGE 2010-2014 96.48 101.83 107.34 111.80 104.36 2014 HISTORY 103.80 109.25 113.87 120.00 111.73 2015 HISTORY 136.00 105.00 113.48 130.20 2015 FORECAST 136.00 121.17 % CHANGE FROM 2014 1.2% 3.9% 14.3% 13.3% 8.5% % CHANGE FROM 5-Yr Avg. 8.8% 11.4% 21.3% 21.6% 16.1% 2016 FORECAST 111.00 105.67 110.00 114.33 110.25 % CHANGE FROM 2015 5.7% -6.9% -15.5% -15.9% -9.0% % CHANGE FROM 5-Yr Avg. 15.0% 3.8% 2.5% 2.3% 5.6% UB BONELESS-SKINLESS TURKEY BREAST, TOM, FRESH, TOP, 5-YR AVERAGE 2010-2014 199.70 230.43 261.89 271.60 240.90 2014 HISTORY 224.58 351.42 403.53 391.07 342.65 2015 HISTORY 585.00 317.00 375.23 551.92 2015 FORECAST 572.08 454.06 % CHANGE FROM 2014 41.2% 6.8% 36.8% 46.3% 32.5% % CHANGE FROM 5-Yr Avg. 58.7% 62.8% 110.7% 110.6% 88.5% 2016 FORECAST 453.33 340.00 356.67 366.67 379.17 % CHANGE FROM 2015 43.0% -9.4% -35.4% -35.9% -16.5% % CHANGE FROM 5-Yr Avg. 127.0% 47.6% 36.2% 35.0% 57.4% -77-
Live Cattle Prices US$/CWT 190.00 FIVE AREA DIRECT AVERAGE LIVE STEER 170.00 150.00 130.00 110.00 90.00 70.00 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 5-YR AVERAGE 2010-2014 2014 HISTORY 2015 HISTORY 2015 FORECAST 2016 FORECAST -78-
US Domestic 90CL Boneless Beef Prices US$/CWT 320.00 90% BONELESS BEEF, CENTRAL, FRESH, WT. AVG., USDA 270.00 220.00 170.00 120.00 70.00 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 5-YR AVERAGE 2010-2014 2014 HISTORY 2015 HISTORY 2015 FORECAST 2016 FORECAST -79-
US Domestic 50CL Beef Trim US$/CWT 160.00 50CL BEEF TRIM, FRESH, OMAHA BASIS, WT.AVE, USDA 140.00 120.00 100.00 80.00 60.00 40.00 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 5-YR AVERAGE 2010-2014 2014 HISTORY 2015 HISTORY 2015 FORECAST 2016 FORECAST -80-
Imported 90CL Australian Beef US$/CWT 320.00 7:45, E. COAST 90CL AUSTRALIAN BLENDED COW, TOP, YELLOW SHEET 270.00 220.00 170.00 120.00 70.00 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 5-YR AVERAGE 2010-2014 2014 HISTORY 2015 HISTORY 2015 FORECAST 2016 FORECAST -81-
Spread, Domestic - Imported US$/CWT 70.00 DOMESTIC 90CL FRESH, FOB CENTRAL US MINUS 90CL IMPORTED, FROZEN, FOB US EAST COAST 60.00 50.00 40.00 30.00 20.00 10.00 0.00-10.00-20.00 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 5-YR AVERAGE 2010-2014 2014 HISTORY 2015 HISTORY 2015 FORECAST 2016 FORECAST -82-
Whole Broiler Prices US$/CWT 210.00 N.E. BROILER BREAST BONELESS-SKINLESS, WT.AVG., USDA 190.00 170.00 150.00 130.00 110.00 90.00 70.00 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 5-YR AVERAGE 2010-2014 2014 HISTORY 2015 HISTORY 2015 FORECAST 2016 FORECAST -83-
Len Steiner Steiner Consulting Group +1.603.424.9664 len@steinerconsulting.com www.steinerconsulting.com -84-