1. US Pork International Trade Becca Hendricks, AVP International Marketing National Pork Board

2. Checkoff Funding in International Trade Marketing and promotion Trade servicing Market intelligence New product development “WE”

3. US Pork Industry Export Goal Compared to 2011 year-end data, by the end of 2014, US pork exports will increase by $1 billion and 0.5 million metric tons (1.103 billion pounds) We are one quarter of the way to our goal 2 nd half of 2013 to be better than 1 st half (down ~4%) Predicted 60-70% chance of meeting the value goal by the end of 2014 (up 9%) Need SPS issues resolved and increased promotions

4. January-July 2013 Exports $3.44 billion – ↓5% from J-J 2012 2.711 billion pounds (1.23 MMT) – ↓5% from J-J 2012 Issues: – High domestic supplies in importing countries – Trade access…SPS issues replacing tariffs Source: USDA statistics compiled by USMEF 2013 July exports up 8.5% over 2012

5. Top US Pork Export Markets: Jan-July 2013 Mexico 763.6 M lbs, ↑2% Japan 553.1 M lbs, ↓6% China/HK 527 M lbs, ↓5% Canada 290.3 M lbs, ↑1% South Korea 140.3 M lbs, ↓31% Japan $1.106 B, ↓6% Mexico $645 M, ↑3% China/HK $508.8 M, 0% Canada $486.5 M, ↑3% South Korea $172.9 M, ↓34% Volume Value Source: USDA statistics compiled by USMEF, compared to Jan-July 2012 ↑21% in July, ↑ham value ↑in July, customs issues, ↓domestic consumption ↑in HK, ↑variety meats High supplies, full stocks C/S Am: ↑36% ASEAN: ↑44% Carib: ↑23%

6. Exports Share of Production 21.8% of U.S. Pork (muscle cuts only) 26% of U.S. Pork and Pork Variety Meats* Value at $54/head Source: USDA *includes sausage casings

7. US Share of World Exports 33.4% of world pork exports Share lost to Mexico, Chile and Brazil US is the top exporter of pork in the world!

8. 45% Butt Northern Asia Mexico 65% Picnic 40% Leg/Ham Canada, Mexico, South America, Russia 25% Loin Northern Asia N. Asia & 7% Belly Northern Asia International Pork Primal Cut Utilization

9. Northern & Southeast Asia International Pork Variety Meat Utilization >90% Tongue, Heart, Liver, Kidney Northern & Southeast Asia >90% Stomach, Bladder, Uterus Mexico & Russia >90% Snout, Ears, Feet, Tail

10. International Opportunities

11. It’s a BIG World 96% of the world’s population lives outside of the US and pork is the world’s most consumed animal protein 2050: 9 billion people, 100% more food Over the next decade, increases in meat consumption in developing countries are projected to average 2.4% annually, compared with 0.9 % in developed countries

12. Decisions to Trade Domestic issues: – Self-sufficiency – Disease – Regulations – Prices/Currency – Price and availability of other proteins – Quality – Product mix and – Demand Cost of transport, fuel, freezer capacity Time in transport, shelf-life Duties POLITICS

13. Trans-Pacific Partnership US, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam…30% of world GDP Now, Japan…40% of world GDP Nearing “end game”…APEC Summit in Oct Most important FTA the US has ever negotiated Goals: Removal of all tariff and non-tariff barriers, resolve sanitary and phytosanitary (SPS) barriers Opportunity: 20,000 more US jobs, $3B in 10 yrs

14. Japan Pork Market Economy/consumption/yen ↓ Chicken consumption > pork Challenges with custom inspections High stocks, product not through customs, waiting for yen to adjust 75% of all US pork export profits ↑1% in July from July 2012 – Chilled pork – Seasoned ground pork US=16% of chilled pork

15. Japan Pork is sensitive in TPP: – Gate price likely to disappear – Proposed tariff elimination of 80% US would have market share advantage: chilled products, ability to send processed, lower value raw materials – EU bellies $ above gate price – Canada, Chile, Mexico – US will lose share w/o strong FTA Exports to Japan could more than DOUBLE

16. Trans-Atlantic Trade Investment Partnership EU production ↓2.5% for year Current exports at $13.3M (↑14%) Potential of $2B in 10 yrs Negotiations began in July, next in DC in Oct Goal: Eliminate TRQ (willing?) and non-tariff measures (not willing?) – Ban on ractopamine – Trichinae mitigation requirements – Prohibition on pathogen reduction treatments – Plant approvals – Other issues not currently on table: animal welfare, cloning, other

17. China Situation High domestic prices Disease Need food security, control destiny Water and phosphorus issues Ractopamine ban Impact of closure $10 immediately Strong imports from EU and Canada Imports ↑ in July Rebound in Hong Kong Variety meat imports ↑44% in value

18. China Opportunity Appear to be more open to free trade…“willing to import 5% of consumption” Increased interest in buy-outs Largest opportunity ever Increase of 1% of consumption: $1B, 1B lbs, 5% of US production, $14.88 live hog value Need for education

19. Mexico Q1 exports ↓15% – Increased poultry imports – Increased domestic slaughter – Lower domestic hog and pork prices – Slow economic growth Exports ↑2% in July from 2012, hams over $.90/lb Long-term ‘Pork Demand Enhancement Campaign’ in 500 stores, consumer media – 5% more people consuming pork, 5% increase in number of people that consume pork once a week – More restaurant featuring, expansion in retail/delis, further processing

20. South Korea Exports down due to FMD rebound Very high supplies despite government intervention Cold storage full US share is up (to 39%) due to promotion/phase out of duties – Chilled, raw material sales up – Taste demos – Influential chefs – Processors

21. Central and South America ↑34% in tonnage Population growth and GDP are driving demand Increased import demand as domestic production flat Education/training modules in 12 locations Penetration of retail segment Trichinae restrictions! Chile-Peru-Colombia-Mexico FTA, lower duties, now 20-30%

22. Russia Exports down 75% from 2012 Negotiating racto-free program Canada agreed to an “EVP”: 17% of sales, 40% of exports Impact of Russian closure is already through the market Bone-in hams, boneless rollouts, boneless picnics Exports to Ukraine up…??? EU building a fence to keep ASF out “Brink of catastrophe”

23. Other Issues Chile Safeguard Case – Investigation of all imported frozen pork – 14.3% duty proposed – 12th largest destination for US pork BUT – Domestic production = 96% of consumption – Industry research and legal analysis MCOOL – 2011: violates WTO – 2013: USDA revised rule, 6 month implementation – Industry litigation, request extension until: – WTO compliance review …2014 retaliation

24. Upcoming… 2014 strategic plan Product matrix Defending US Pork’s value proposition Variety meat research

25. International Value Proposition Session Confront international attacks Be proactive Be positive Consolidate messaging Outcome and use: marketing and defense

26. Derived Messaging US Pork is working to serve as each customer’s primary, long-term trade partner. – Consistent, high-quality, nutrient-dense meats – Unparalleled food safety history (farm-to-customer safety programs) – Reliable and versatile supply to meet your frozen & chilled meat requirements – In-country market development & education support – Transparent, responsible production methods – Producer/packer/government commitment & collaboration

27. Variety Meat Research For every $1 million of muscle meats exported, live value increases by $0.05/CWT For every $1 million of variety meats exported, live value increases by $0.20/CWT About 1 billion lbs go into rendering…blood meal, meat and bone meal, fat and grease with little value And our competitors (mainly EU) have this market

28. Variety Meat Research These products are highly valued in specific countries and in many cases sell for price premiums USDA EMP Grant RFP’s out in September Variety Meat Product Domestic Price/lb. Exported Price/lb. Bungs$0.10$1.50 Ears$1.20$2.60 Front Feet$0.40$1.00 Hind Feet$0.20$0.70 Stomach$0.80$1.50 Tongues$0.60$1.65

29. Thank You! Questions?

30. MCOOL Nov. 18, 2011 WTO Panel Rules MCOOL Violates US WTO Obligations Mar. 23, 2012 US Appeals WTO Panel Ruling June 29, 2012 WTO AB Upholds Panel Ruling May 23, 2013 Implementation Period Ends – USDA Published Final Rule 6 Month Implementation Period for Rule Canada and Mexico Initiate WTO Compliance Review 1 st Request Rejected by U.S. Aug. 2013 2 nd Request Granted Sept. 2013 Nov. 2013 USDA Final Amended Regs. Implemented (Meat Groups Request Extension in Sept. 2013) March -April 2014 WTO Compliance Panel Issues Ruling August 2014 WTO AB Issues Compliance Ruling September – December 2014 WTO Retaliation Proceedings Continue and Retaliation is Authorized