1. EXPORT OPPORTUNITIES WHERE TO GO AND WHAT TO AVOID

2. MODERATOR Janie Gabbett Executive Editor, Meatingplace

3. Opportunities for Exporting Beef & Pork Erin Borror Economist for the U.S. Meat Export Federation

4. Longer Term Pork Export Trends Source: OECD/FAO Ag Outlook 2011; thousand MT carcass weight equivalent Global exports account for a relatively steady 6% of global consumption; excluding Chinese consumption exports account for 11-12% of consumption

5. U.S. Pork & Variety Meat Exports by Market Source: USDA/FAS and USMEF Forecast, metric tons Metric Tons 2011F export value: $5.45 billion, record breaking

6. 2010 U.S. Pork Exports Top Value Markets & Main Export Items Source: USDA/FAS, USMEF Loins, picnics, butts, bellies, backribs, tenderloins, jowls Bone-in hams, picnics and offals Offals and small volumes of butts, loins, ribs Bone-in hams and picnics Butts, picnics 3 Piece & boneless hams

7. Top Growth Markets for U.S. Pork China/Hong Kong Korea Japan Mexico Central/South America

8. Major Markets: Pork & Variety Meat Imports from All Suppliers, Jan-Aug Japan $3.85 Billion Metric Tons Million USD Jan-Aug 2011 Import Value Source: GTA

9. Per Capita GDP and Pork Consumption U.S. Canada Australia EU-27 S. Korea Russia Mexico Brazil China GDP USD/capita Red Meat Consumption Kg/Capita Taiwan Philippines Many countries will rely on imported pork to support growth in per capita consumption and/or to maintain current levels Source: World Factbook and USDA S. Korea Taiwan Canada Australia S. Korea Taiwan Mexico Canada Australia S. Korea Taiwan Philippines Mexico Canada Australia S. Korea Japan Taiwan

10. China Pork Potential Supply fluctuations (account for half of world’s pork production and consumption) Soybean imports Corn prices Import trends to date – Domestic production and market access are the big variables, including disease issues /subsidies/corn prices/etc and – market access issues like ractopamine

11. Short Term Pork Production Change in Metric Tons World 2011: -1.62 MMT 2012F: +2.3 MMT China 2011: -1.57 MMT 2012F: +1.78 MMT Source: USDA/FAS Fall PS&D, Carcass weight equivalent

12. Growing Correlation Between U.S. Exports to China & U.S. Pork Prices $/cwt Metric Tons Source: USDA/ERS and FAS

14. Korea Pork Potential – FMD, how much will the industry recover – Per capita consumption growth potential – Elimination of duties – U.S. market share of total pork consumption and imported pork – The growing chilled market—competing with domestic – Processing sector switch to U.S. frozen pork after FMD – EU specifications for single ribbed belly

15. Korea Hog Industry Outlook

16. Korea Pork Import Status Source: Global Trade Atlas 2011est 2011 est: total imports up 80% to 545,000 MT

17. Korea Tariff Reduction for Key Frozen Items

18. Korea Tariff Reduction for Key Chilled Items

19. Chilled U.S. Pork at Korean Retail

20. Japan Pork Potential – U.S. dominant market share of imported pork – Domestic production slow decline – Per capita consumption relatively steady – Unlikely change in gate price system without a DDA agreement or without Japan’s participation in TPP – U.S. advantage in supplying chilled high value cuts – U.S. advantage in supplying chilled and frozen cuts for processing

21. Japan Pork Situation Source: USDA/FAS Fall PS&D, Carcass weight equivalent

22. Japan’s Pork Imports U.S. pork exports to Japan have more than doubled in value since 2003; reaching $1.646 Billion in 2010 and expected to set another record this year. Japan’s total imports are relatively flat but the U.S. has gained market share. Source: Global Trade Atlas

23. Mexico Pork Potential – Duty-free and proximal market – U.S. dominates Mexico’s pork imports – Domestic production continues to grow but pending transition to larger commercial producers and subject to corn prices – Imports also grow with U.S. as dominant supplier – Per capita consumption grows slowly + population growth – Continued need for U.S. bone-in hams – Price (and currency) sensitive

24. Mexico Pork Situation Source: USDA/FAS Fall PS&D, Carcass weight equivalent

25. Central/South America – Diverse region – Free trade agreements – Income growth – Imports also grow with U.S. as dominant supplier – Per capita consumption grows with income & population – Some markets are relatively small but opportunities for the niche suppliers

26. Top Exporters: Beef & Variety Meat Export Status U.S. was the largest beef & variety meat exporter in Jan-Sept 2011! Data for Jan-August exports: U.S. 857,680 MT, +26% Australia 728,073 MT, +1% Brazil 671,996 MT, -19% India ??? likely >390,000 MT – Depending on Egypt ban, etc (export data only available through March) New Zealand 301,447 MT, -5% EU-27 295,359 MT, +110% – Turkey and Russia Canada 224,808 MT, -21% Uruguay 165,248 MT, -15% Argentina 164,048 MT, -11% Paraguay 139,189 MT, -13% Source: Global Trade Atlas

27. Major Markets: Import Status 2011 Beef & Beef Variety Meat Import Status January through Aug 2011 unless otherwise noted (yr/yr change) U.S. 500,767 MT, -15% Russia 493,011 MT, +11.5% Middle East Jan-June ~465,330 MT, -2% – depending on India’s exports and excluding Iran Japan 373,787 MT, +6% Hong Kong 255,979 MT,+4.5% – Greater China ~310,900 MT, +8% depending on India Korea 228,039 MT, +20% EU-27 166,700 MT, -17% Mexico 145,446 MT, -12% *Jan-July Canada 142,685 MT, +18% Iran 106,220 MT, -6% Turkey 91,023 MT Chile 80,309 MT, -6% Taiwan 65,440 MT, -5% Source: GTA Source: Global Trade Atlas

28. U.S. Beef Exports to Top Markets Source: USDA/USMEF Fall 2011 Forecast, includes variety meats 2011 Exports expected to surpass $5 billion for first time ever, with exports to Japan & Korea still lagging 2003

29. Per Capita GDP and Beef Consumption U.S. Australia Canada EU-27 S. Korea Russia Mexico Brazil China Source: World Factbook and OECD/FAO; GDP USD/capita Red Meat Consumption Kg/Capita Japan Taiwan Countries where growth in consumption will come from growth in imports GDP USD/capita

30. Beef Outlook Largest Potential Growth Markets Japan Korea China Middle East Mexico

31. Japan Beef Potential – U.S. market share of imported beef, back to dominant position of pre-BSE – Per capita consumption recover to pre-BSE level – Domestic production slow decline – Potential change in the current LT21 months age limit – Preference for U.S. grain-fed, including high Choice – Takes large volumes of “Asia cuts” including short plate – No change in duties likely without Doha or TPP agreement (38.5 percent ad valorem plus risk of triggering safeguard)

32. Japan Beef Situation Source: USDA/FAS Fall PS&D, Carcass weight equivalent

33. Japan’s Beef Imports Source: Global Trade Atlas 2011 total imports estimated +5% to 581,000 MT

34. Korea Beef Potential – U.S. market share of imported beef, back to dominant position of pre-BSE – Demand for U.S. grain-fed, especially certain mix of Asian cuts but USMEF working to build demand for more cuts – Per capita consumption recover to pre-BSE level with further expansion possible – Elimination of duties through KORUS, from 40% to zero over 15 years – Slow decline in domestic production

35. Korea’s Beef Situation Source: USDA/FAS Fall PS&D, Carcass weight equivalent

36. Korea’s Beef Imports Source: Global Trade Atlas 2011 total imports estimated +24% to 361,500 MT

37. China Beef Potential – Once the U.S. regains access, assume tremendous growth potential (some diversion of current exports) – Rampant foodservice growth – Lack of domestic production, especially of high quality beef – High prices indicate tight supplies – U.S. ability to supply specific high quality cuts in large, consistent volumes – Expect demand to build for a wide array of cuts and offals – Middle class population and urbanization – GDP growth – Cold chain & infrastructure development – Slowly appreciating currency – Low per capita consumption compared to pork and poultry

38. China Challenges Duties + VAT = 27% De facto import licensing (AQSIQ) Quota management (MOFCOM’s ARF) Excessive labeling requirements Opaque port inspection procedures Potential plant-by-plant registrations Undervalued currency Sanitary barriers – BSE related beef ban – Ractopamine & beta agonist ban plus hormone ban on the books for beef – Zero tolerance for pathogens on fresh/frozen raw meat

39. Beef Exports to China/Hong Kong/Vietnam, January-August Source: Global Trade Atlas

40. Middle East Beef Potential – High income growth; business travelers – Beef fits religious requirements (halal can have challenges) – Generally good U.S. access to the region – Range of products from offals to muscle cuts for processing to HQB – U.S. competitive supplier of certain cuts and growing demand for high quality – General lack of domestic production – Foodservice growth and cold chain development – Continue as large offal market (Egypt) – Region as a whole is already top beef importer

41. Mexico Beef Potential – Growing consumption and production over longer-term – Domestic production will depend on drought and feed prices – NAFTA= favorable access; U.S. dominates Mexico’s beef imports – Price is a challenge but preference for beef – Beef round demand to supplement domestic – Live cattle exports to U.S.

42. Mexico’s Beef Situation Source: USDA/FAS Fall PS&D, Carcass weight equivalent

43. Mexico Dynamics Mexican feeder cattle exports to U.S. up 21% to 994,027 head (Jan-Oct 22) Imports of beef from Mexico also on a record pace at 40,790 mt through August, up 60% – Now the fourth-largest supplier to U.S. after Canada, New Zealand & Australia, with 8% market share – Mexico is shipping mostly chilled middle meats to the U.S. Cow inventory & calf crop relatively steady ~expansion not expected Source: USDA/FAS Fall PS&DSource: USDA/FAS Fall PS&D, Carcass weight equivalent Thousand Head

44. The Beef Challenge, Similar to U.S. Scenario Mexico’s Per Capita Consumption Source: USDA/FAS Fall PS&D, Carcass weight equivalent

45. Other Points What about Russia?? Likely to be another continued significantly important market…WTO accession and participation in the rules-based trading system will partially determine the future for U.S. red meat exports The Faux Medium-Term Potential Boom Market for U.S. Red Meat India – Barriers to entry – Lack of cold chain – Incredibly high duties – Religious challenges – Highly fragmented market – Etc

46. Opportunities for Exporting Poultry Jim Sumner, President USA Poultry and Egg Export Council International Poultry Council

47. Opportunities for Exporting Poultry Topics in today’s presentation: USAPEEC and its mission An overview of U.S. poultry exports Challenges facing U.S. poultry exports Opportunities for U.S. poultry export growth Conclusions

48. USAPEEC and its mission

49. USAPEEC Locations Mexico City Monterrey Hong Kong Singapore Moscow Beijing Central Asia Shanghai Tokyo Seoul Middle East South Africa Europe Based in Stone Mountain, Georgia, USAPEEC has 13 international offices in major export markets:

50. USAPEEC Membership Processors48 Trading Companies89 Commodity Groups (corn, soybean groups) 15 Associate Members (shipping, cold storage, port authorities, etc) 71 Total223

51. An Overview of U.S. Poultry Exports

52. U.S. and Brazil: Top Broiler Exporters (In 1,000 metric tons) Source: the Global Trade Atlas

53. USA is the Top Turkey Exporters in the World Source: Global Trade Atlas

54. U.S. Broiler Exports in the Past Decade Source: USDA/FAS An average annual increase of 2.1% in volume and 7.1% in value during 2001-2010

55. Share of U.S. Broiler Production Exported Source: USDA/FAS

56. Top U.S. Broiler Export Markets 2010 Broiler exports in 2010 down 5.2% in volume and 1.6% in value from 2009, despite the major losses in China and Russia 2009

57. Top U.S. Broiler Export Markets (In 1,000 metric tons) Source: USDA/FAS

58. Source: USDA/AMS

60. U.S. Demographic Change Helps Drive Up CLQ Prices Percent of Population Change 2000 - 2010 Hispanic or Latino 16.3%+43% Non-Hispanic or Latino 83.7%+4.9% Asian alone 4.8%+43.3% White alone 72.4%+5.7% Black or African American alone 12.6%+12.3% Other10.2%+26.2% Source: US Census 2010

61. Turkey Exports in the Past Decade Source: USDA/FAS An average annual growth of 2.0% in volume and 6.8% in value in 2001-2010.

62. Share of Turkey Production Exported Source: USDA/FAS Share of production exported is expected to increase in 2011 as exports tend to increase faster than production.

63. Top U.S. Turkey Export Markets (In 1,000 metric tons) Source: USDA/FAS

64. Challenges facing U.S. poultry exports

65. Challenge of High Feed Grain Prices The prolonged economic downturn is a challenge for the world poultry industry because it has led to higher unemployment, lower consumer income, and lower consumption, which translates into a weak market demand for meat protein. Our biggest challenge remains high feed grain prices. But, as the most efficient converter of feed to meat, the impact on poultry is less than other meats. Record corn and soybean prices, combined with depressed sales, have put nearly every U.S. poultry company in an unprofitable situation. The global situation is similar.

66. Animal diseases such as AI impact trade While earlier AI consumer scares have subsided, incidents of HPAI is on the rise….Asia, Africa and Europe. U.S. and Brazil remain free of HPAI. In Asia and Africa, the prevalence of backyard flocks and the inability of governments to implement appropriate control measures could spell a major production disaster. Even though OIE says trade should not be restricted on basis of LPAI ….many countries still do……China, Taiwan, Philippines, Kuwait, Cuba, Russia…….affecting such states as Virginia, Arkansas, Texas, N. Carolina, Missouri, and Minnesota.

67. Religious and Cultural Barriers This sort of barriers to entry are often encountered in predominately-Muslim countries. For example, entry to Malaysia and Indonesia, and Saudi Arabia must meet the halal regulations, meaning animals should be raised, slaughtered and processed in accordance with Muslim rites. But definitions, interpretations, and regulations of halal vary widely from country to country in both print and practice. The ambiguous regulations combined with cost- inefficient in halal production have dissuaded U.S. poultry processors from selling products to those markets.

68. Trade Barriers in Major Export Markets  The EU has banned U.S. poultry products since the EU began prohibiting the use of chlorine in chill water in 1997. And the expansion of EU since 1997 has eliminated U.S. key export markets in Eastern Europe.  South Africa launched AD investigation against U.S. chicken bone-in cuts in 1999, and has imposed punitive anti-dumping duties since July 2000.  In apparent retaliation, China launched AD/CVD investigations in September 2009 against U.S. broiler products, and has imposed punitive AD/CVD duties since February 2010.  Bachoco in Mexico joined the anti-dumping frenzy in February 2011. Preliminary determination yet to be announced.

69. Russia Continues to Cut Poultry Import Quota thousand MT

70. Opportunities for U.S. poultry export growth

71. Next Decade: A Great Growth Period for Poultry, Globally GDP will grow faster in developing countries, implying more import demand for broiler meat. World population hit 7 billion on October 31, 2011. In particular, increased population in the Muslim countries will favor poultry consumption. Energy and feed costs are expected to remain high everywhere in the next decade, but poultry is the most energy efficient protein as well as the most efficient converter of feed. Also, poultry production demands less water, uses less arable land, and emits less greenhouse gases.

72. Average Annual GDP Growth Rate Source: USDA/ERS

73. Over quarter of the world will be Muslim by 2030 Source: Report on “ The Future of the Global Muslim Population ”, Jan. 2011

74. World Broiler Net Exports in the Next Decade Source: FAPRI Net exports is expected to increase at an average rate of 3.0 percent throughout 2020.

75. Opportunities in the Chinese Market China’s potential is huge because: – low per capita consumption ( <10 kg) – large population and rapid urbanization. – rapid increase in consumer income. – increasing dependence on imports of feed grains. – shortage of water resources on per capita basis. In particular, China provides the best market opportunities for U.S. chicken paws and wing tips, which has limited alternative markets in the world. But opportunities for broiler exports in the near term are limited due to the punitive AD/CVD duties imposed on U.S. chicken products.

76. Per Capita Income of Rural and Urban Household in China Source: National Bureau of Statistics of China

77. U.S. Broiler Exports to China Source: USDA/FAS Exports to China in 2009 accounted for 20% of U.S. total exports, but due to the punitive AD/CVD duties, 2010 exports fell to 3%. And so far this year, exports to China were further down 16% year on year.

78. About the Chinese AD/CVD case USTR took the dispute to the WTO on Sept. 20, 2011. We believe that the U.S. will win the case as the Chinese methodology was seriously flawed and the anti-dumping proceeding did not comply with WTO rules. It’s unfortunate that this dispute has to be addressed through the formal WTO process, but we believe it is necessary that the incorrect methodology be challenged and that U.S. trading rights under WTO be protected. The U.S. industry has been cooperating with the Chinese industry and government on other initiatives to improve conditions of two- way poultry trade. Our commitment to those initiatives will not be affected by this separate WTO case.

79. Mexico: Our Major Market to the South Mexico is our new No. 1 market, after loss of Russia and China. Shipments to Mexico in 2010 reached 438,584 metric tons, accounting for 13% of U.S. total broiler exports and 50% of turkey exports worldwide. Exports to Mexico have increased rapidly since 2007 with full implementation of NAFTA (all U.S. poultry products now enter duty free, no quota). In the long run, potential in Mexico is huge because: – population is projected to increase constantly throughout 2030. – per capita real GDP (in 2005 US$) is projected to increase from $7,374 in 2010 to $9,568 in 2020 and $12,567 in 2030. – increasingly depends on imports of feed grains. – Mexican domestic production tends to further lag behind consumption.

80. Mexican Broiler Production Lags Behind Consumption Source: USDA/FAS

81. BUT….Mexico has now joined the Anti-Dumping Frenzy  As a result of a petition from its largest producer, Bachoco, Mexico initiated AD case against U.S. chicken leg quarters on February 8, 2011.  The U.S. industry as well as the Mexican Poultry Producers Association (UNA) and many public officials in Mexico were surprised, as the U.S. and Mexican poultry industries have a long history of cooperation. Our lawyers insist that this case lacks justification. Our calculations show that U.S. companies were not selling their chicken to Mexico at prices below the U.S. price, which is the definition of dumping, but we must go through the fight. U.S. CLQ exports to Mexico in the foreseeable future are subject to uncertainties due to the AD case.

82. Opportunities in the Middle East U.S. poultry shipments to the Middle East increased at an average rate of 18.9 percent in the past decade ending in 2010. Exports to the Middle East are expected to maintain a double-digit growth in the near term. Currently, the key importers in this region including Iraq, UAE, Qatar, Kuwait, and Jordan. In the long run, potential in the Middle East is huge because: – relatively low per capita consumption ( <20 kg) – population is projected to increase from 289.5 million in 2010 to 334.3 million in 2020 and 373.9 million in 2030. – Per capita real income is projected to increase at an average annual rate of 2.8 percent. – Domestic production is not competitive due to shortage of water, dependence on imports of feed grains, and halal regulations.

83. U.S. Poultry Exports to the Middle East Source: USDA/FAS Grew at an average annual rate of 18.9% in volume and 16.8% in value in 2001-2010.

84. Opportunities in South Korea Poultry shipments to South Korea in the near term are expected to grow at a double-digit rate. In the long run, potential in South Korea is high because: – relatively low per capita consumption ( 15 kg) – per capita real income is projected to increase at an average annual rate of 3.6 percent throughout 2020. – domestic production is not competitive due to shortage of water and heavy dependence on imports of feed grains. – implementation of the KORUS FTA will result in expanded U.S. poultry exports both because of higher Korean poultry import demand and market share gains from other exporter competitors in the market.

85. U.S. Poultry Exports to South Korea Source: USDA/FAS

86. Opportunities in Other Markets Ghana, Gabon, Congo, Nigeria, India, Indonesia, Malaysia, etc. Potential In these markets are high in the long run because: – low per capita consumption (e.g. India <3 kg, Indonesia < 4 kg). – large and upwardly mobile population. – Per capita real GDP is predicted to increase at relatively faster throughout 2020. – heavy dependence on imports of feed grains (except India). But the opportunities in the near term are limited due to either protectionism (e.g. India) or the halal regulations (e.g. Indonesia, Malaysia). USAPEEC has been working closely with the relevant government organizations both at home and abroad to strive towards goals of improved access with clear rules.

87. Despite many trade obstacles we are facing, we are still making progress on expanding export markets and our exports are continuing to grow. Biggest challenges are maintaining disease free status and persistent high feed and energy cost. In the long run, more people will eat more poultry meat as poultry efficiency in energy and feed conversion prevails. To feed the world ’ s ever-growing population, we must  Change our food policies, such as food for fuel.  Fight EU-style regulatory environment: animal welfare, cage-free, GMO’s, etc.  Do a better job delivering our positive message to consumers and government.  Support trade based on sound science, not political science. Conclusions

88. QUESTIONS & ANSWERS

89. FOR MORE INFORMATION Jim Sumner: JSumner@usapeec.orgJSumner@usapeec.org Erin Borror: eborror@usmef.orgeborror@usmef.org Janie Gabbett: jgabbett@meatingplace.comjgabbett@meatingplace.com Webinar recording and PowerPoint presentation will be emailed to you within 48 hours. For more information: www.meatingplace.com/webinars www.meatingplace.com/webinars