Optimizing Cost, Production and Marketing

Change in Beef Cow Operations & Numbers From 1993-2006 Number operations with less than 99 cows declined 20% The percentage of beef cows in operations with less than 99 cows declined from 52% to 46% Number of operations with more than 100 cows increased 9% The percentage of the beef cows in operations with a 100 head or more increased from 48.5% to 54% Fifteen percent of the cows are in herds greater than 500 head as of 2006

Weekly Spot Corn Futures Last winters high of $4.37 in late February Last summer’s low of $3.09 in late July

2006 Regional Cow Costs Region Cash Cash + Non- cash Northwest $399 $476 Southwest $380 $453 Midwest $366 $483 South Plains $359 $430 Southeast $328 $425 U.S. Cash costs exclude depreciation, opportunity costs and returns to management

LOW Calf Breakeven $75 $148 Grazing & Feed Cost $139 $216 HIGH - RETURN vs. LOW RETURN PRODUCERS LOW Calf Breakeven $75 $148 Grazing & Feed Cost $139 $216 Annual Cow Cost $343 $595 Difference $252 Per Cow Source: Texas A&M, Southwest Cow Calf SPA 1991 2005

HIGH- RETURN vs. LOW-RETURN PRODUCERS HIGH LOW Weaning Percent 85% 80% Avg Weaning Wt. 539 lbs 502 lbs Lbs Weaned per Exposed Cow 458 lbs 403 lbs Net Return Per Cow $141 -$250

Does Pre-Conditioning Pay? During 2005-2006, weaned pre-conditioned calves brought $5-$8/cwt ($35-$40/hd) premium to bawlers! Does Pre-Conditioning Pay?

+ Stair Steps to Profitability Average Cattle = Average Price Performance History (Feedlot/Carcass) +$2 - $5/cwt Pre Conditioned Weaned/Healthy +$4 $8/cwt Source & Age Verified +$10 $25/hd Natural Programs Premium Programs + Average Cattle = Average Price Under Managed Cattle Stair Steps to Profitability +$3 $7/cwt

Role of Stocker Operator Inventory shock absorber Add low cost of gain Warehouse cattle Add value and improve quality

Where’s the Profit Avg. fed cattle price 1981-2006 $70. 78 Avg Where’s the Profit Avg. fed cattle price 1981-2006 $70.78 Avg. fed cattle breakeven 1981-2006 $70.06 In the long run, commodity business offer profit opportunities only to those that have lower than average costs of production, superior performance, or better than average returns.

2008 Outlook “Keep an Open-Mind in these Changing Times” Cattle inventory growth stalled: Growth to remain slow Beef production cycle continues: 2008 production up nearly 2% Beef exports to grow during 2008-2009: Long-Term growth potential with access Cattle and beef price to remain strong: Long-Term trend remains higher More growth in outside capital invested in markets: “Commodity Funds” Corn prices to remain elevated for several more years: “Fight for Food or Fuel” Acreage battle in 2008 will be fierce: Corn stocks to use ratio to shrink Weak dollar will continue to stimulate commodity exports Industry consolidation will accelerate especially in the feeding industry Packer market share battle: “One for the ages” Beef branding and market differentiation will continue: “Opportunity” The business environment is changing rapidly: Stay tuned! “Keep an Open-Mind in these Changing Times”

Thank You for Attending