1. WELCOME: BEEF ECONOMICS WEBINAR Audio Announcement: all lines are currently muted and we will begin promptly at 1:30pm CST Please select your audio now. To dial the conference, select “Use Telephone” in your audio pane and enter your unique audio pin. Select “Use Mic & Speakers” to use VoIP audio. Submit questions and comments via the Chat panel Note: Today’s presentation is being recorded and will be provided within 48 hours. Audio Announcement: all lines are currently muted and we will begin promptly at 1:30pm CST Please select your audio now. To dial the conference, select “Use Telephone” in your audio pane and enter your unique audio pin. Select “Use Mic & Speakers” to use VoIP audio. Submit questions and comments via the Chat panel Note: Today’s presentation is being recorded and will be provided within 48 hours.

2. May 14, 2013 Sponsored by: Presenter: Dr. Glynn Tonsor, Kansas State University

3. WEBINAR OVERVIEW Broad Economic Outlook Overview for Industry Note take-home points of “big picture” reports: – 2012 Cow-Calf Cost and Returns Estimates – 10-year breeding herd projections

4. Overarching Current Economic Outlook Supplies – “Certain” Cattle Supplies (hd) – Less Certain Beef Supplies (lbs) Demand – Uncertain and Confused Weather Persistence or Recovery? – Corn planting growing concern – Drought management varies regionally Additional Excess Capacity Resolution?

5. Economic Outlook Overview: Cow-Calf Expansion? Feeders Available per Feeder in Feedlot: 3.41 in 1973; 2.43 in 2012 Source: USDA NASS Jan. 1 data; Tonsor tabulations

6. Economic Outlook Overview: Cow-Calf Expansion? Source: USDA NASS Jan. 1 data; Tonsor tabulations

7. Economic Outlook Overview: Cow-Calf Expansion? Feeders Available per Feeder in Feedlot: 3.41 in 1973;2.43 in 2012 No July Cattle Inventory Report Pasture conditions worst in areas of attempted heifer retention

8. Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Analysis by LMIC

9. Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Analysis by LMIC CO, KS, MT, NE, ND, SD, & WY 29.6% of Cows 34.3% of Retained Heifers (Jan. 2013)

10. Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Analysis by LMIC AZ, CA, ID, NV, NM, OR, UT, & WA 10.4% of Cows 11.3% of Retained Heifers (Jan. 2013)

11. Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Analysis by LMIC OK & TX 19.7% of Cows 16.4% of Retained Heifers (Jan. 2013)

12. Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Analysis by LMIC IL, IN, IA, MI, MN, MO, OH, & WI 14.6% of Cows 14.5% of Retained Heifers (Jan. 2013)

13. Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Analysis by LMIC AL, AR, FL, GA, KY, LA, MS, NC, SC, TN, VA, & WV 24.6% of Cows 21.3% of Retained Heifers (Jan. 2013)

14. Do some regions have an economic advantage for expansion? http://www.ers.usda.gov/data-products/commodity-costs-and-returns.aspx

15. Do some regions have an economic advantage for expansion?

18. Allocated Costs: Opportunity costs of unpaid labor, capital recovery, etc.

19. Do some regions have an economic advantage for expansion? Operating Costs: Feed (purchased, homegrown, grazed), vet/medicine, utilities, etc.

20. 20 As of: 5/13/13’ http://www.agmanager.info/livestock/marketing/graphs/cattle/prices/default.asp May FC: 5/13: $136 4/12: $141 3/13: $144

21. Economic Outlook Overview : Stockers Historically high Values of Gain (VOG) – But also historically high Costs of Gain (COG)… Salina, KS 5/13/13 situation: – Buy 550 lb steer on 10/16/13 ($159) – Sell 750 lb steer on 1/15/14 ($148) {2.2 ADG} VOG: $117/cwt – http://www.beefbasis.com/ForecastingTools/ValueofGain/tabid/113 2/Default.aspx

22. 22 http://www.agmanager.info/livestock/marketing/graphs/cattle/prices/VOG.asp

23. Economic Outlook Overview : Feedlots Excess capacity concerns remain & are growing… Closeouts have been at historically high losses… – 12 month rolling avg. thru March 13’ -$173 Watch response to shrinking available supplies… – Is “feeding country moving north” ???

24. Historical and Projected Kansas Feedlot Net Returns (as of 5/9/13’) ( http://www.agmanager.info/livestock/marketing/outlook/newsletters/FinishingReturns/default.asp ) Representative Barometer for Trends in Profitability March 13’: -$182/steer June LC: 5/13: $121 4/12: $121 3/12: $124 1/14: $130

25. Quarterly Forecasts (LMIC: 04/28/13)

27. Economic Outlook Overview : Beef Demand Demand less certain than supply currently  heightened need to monitor… Meat prices rising w/i basket of purchases… – as prices increase, public will require more quality… quality and value are in the eye of the beholder...  debates on various technologies likely will intensify within industries, with customers, and with consumers… – “Vote vs. buy” behavior differences important

28. 28 Yr-over-Yr increases in 10 of last 11 quarters (since Q3 of ’10); Q1.2013 = +1.57% Actual Quantity & Price Changes: 1990: 67.8 lbs (per capita cons.);$2.00 (real All Fresh price) 2012: 57.3 lbs (per capita cons.);$2.04 (real All Fresh price) Q1.2013: Per Capita Consumption = -1.71% (Year-over-Year) Real All Fresh Beef Prices = +3.78% ($4.91/lb nominal price) IF Real All Fresh Beef Prices +2.18% = 0% Demand Change http://www.agmanager.info/livestock/market ing/Beef%20Demand/default.asp

29. Livestock Marketing Information Center Data Source: Bureau of Economic Analysis & USDA-ERS, Compiled & Analysis by LMIC 2013, 54.8 lbs/capita, 0% Demand Change Case = $4.89/lb (+4.28% vs. 12’)

30. Longer-term projections (as of Feb. 2013) http://www.usda.gov/oce/commodity/projections/index.htm IF 2013 per capita consumption falls from 56.8 lbs to 54.8 lbs (-3.52%) AND IF 2013 All Fresh Beef price increases by +4.28% ($4.89/lb) = 0% Demand Change… 2021 Projection 1.1 million less than Feb. 12’… 2022 herd +12% (vs. 2012)

31. U.S. beef cow inventory: 29.9 million in 2012 (was 37.9 million in 1983) 29.8 million in 2013 29.5 million in 2014; net expansion starts in 2015 (29.6) 33.5 million in 2022 34.5 million in 1997; Beef Production (billion lbs): 25.4 (1997), 25.7 (2012) More beef/cow will continue = less # head throughput … If/when herd expands, likely NOT going back to 1980s levels … Longer-term projections (as of Feb. 2013) http://www.usda.gov/oce/commodity/projections/index.htm

32. “Developing World” Changes (2012-2022) Increasing global $, pop., & per capita meat cons. Africa & Middle East (3.8 - 4.9% GDP/yr) Region accounts for >40% of meat import growth. Yet arguably the least understood growth market… Latin America (4.0% GDP/yr) Growing producer & consumer… China (7.8% GDP/yr) Canada has access but US does not … South Korea (3.5% GDP/yr – but 10x per capita inc. of China) US has access but Canada does not… Longer-term projections (as of Feb. 2013) http://www.usda.gov/oce/commodity/projections/index.htm

33. “Developed World” Changes (2012-2022) Declining global economic prevalence, populations, & per capita meat consumption US/Canada (2.4 – 2.6% GDP/yr) Different dependence on domestic consumption… Japan (1.1% GDP/yr): Major meat importer currently (changes in age restriction a +) but will exporters care less going forward? Europe (1.7% GDP/yr): Will influential role as “food thought leader” persist? Longer-term projections (as of Feb. 2013) http://www.usda.gov/oce/commodity/projections/index.htm

36. Sponsored by: Mark your calendars for remaining 2013 webinars (all begin at 1:30 pm CST): August 13 November 5

37. What will U.S. beef cow herd size be in 10 years?

38. How much “excess capacity” currently exist in U.S. feedlot industry? 1. None 2. 1-10% 3. 11-20% 4. 21-30% 5. Over 30%

39. Questions typed by participants during the webinar presentation which were not directly responded to are addressed in the remaining subsequent slides.

40. Sponsored by: