1. USMEF “New Cuts” Seminar Carcass Utilization: The “New” Japan Market Brett Stuart Director of Trade Analysis Omaha, Nebraska November 29, 2005

2. BSE Impact on Japan Beef Market 1.Eating less, yet paying more 2.Losers: N. America, domestic industry 20032005 (f) % change Consumption (mt)903,781810,300-10.3% Expenditures (yen)¥ 6,639¥ 6,723+1.3% Imports (mt)520,096483,600-7.0% –Australia289,123435,000+50.5% –N.Z.18,05147,600+163.7% Production (mt)353,695348,600-1.4% Source: ALIC, USMEF

3. BSE Impact on Japan Market Japan BSE 9/01 US BSE 12/03 BSE was a major impact to U.S. beef …

4. BSE Impact on Japan Market … but not to Japanese meat supplies

5. Cuts Analysis

6. U.S. Beef Cuts to Japan “Methodology and Results of the Value of Beef Exports Analysis, USMEF, 2002

7. U.S. Beef to Japan - Cuts USMEF Estimates These 7 cuts only represent 15% (87 pounds) of red meat per carcass

8. Eligible Cattle Supplies - 2006

9. U.S. Supplies? A-40 Maturity –USDA Estimated at 7.7% of U.S. slaughter –Could be much lower Source Verified – documentation –Estimates range from 15-30% QSA Approved? _____ (fill in the blank) % of steer/heifer slaughter? Seasonality Keep in mind: ONLY 2.4% of U.S. beef production was exported to Japan in 2003 -- Cuts are KEY! --

10. Available Cattle: Impact on Cuts Example:

11. U.S. Beef to Japan - Cuts USMEF Estimates 15% 20%

12. “New” Cuts

13. New Cuts Lbs/ HdNew Cuts Lbs/ Hd Brisket 24Bttm Srln, Butt Flap6 Pectoral Meat4Bttm Srln, Ball Tip6 Shoulder Clod24Bttm Srln, Tri Tip6 Top Blade 11Top Sirloin, Cap Off18 Chuck Tender6 Sirloin Cap (coulotte) 6 Lifter Meat6Top Rd, Cap Off32 Inside Skirt8 Top Cap 6 Flank Steak4Outside Rd, Flat25 Knuckle, peeled20 TOTAL LBS/HEAD212 USMEF Estimates

14. ‘Potential’ Available Supplies 20032006 (A)2006 (B) Eligible Cattle28.0 mil4.8 mil Key cuts exported (lbs/hd)87 212 Supply potential (mt)1,104,000189,388461,497 Source: Cattle-Fax, USMEF

15. “New Cuts” The majority of U.S. production of these new cuts will not be used for Japan However, they do provide opportunities to enhance value on underutilized cuts and expand supplies for Japan What about prices?

16. Current Prices 11/05 U.S. wholesale ( +tariff,frt) 9/05 Japan Imports Aus/N.Z. Japan Import $ as a % of U.S. $ Full Set – short fed $2.29 cutout $3.32145% Loin $3.21 $4.27133% Chuck, Round $1.91 $2.16113% Ribs $1.93 $2.07108% Chuck Roll $2.73 $2.81103% Brisket - flat $3.34 $2.9990% Striploin $6.70 $4.8973% Topside $2.62 $2.2787% Source: USDA, ALIC, USMEF; US price includes frt and 38.5% duty

17. Japan Beef Prices Source: ALIC, Trader’s Price $0.92

18. Cut Prices Brisket Shoulder clod, Ball tip, knuckle Source: USDA, USMEF Flap The question to ask yourself is: “What will short plates, tongues, etc, be worth when the market opens?”

19. What About Demand? 3 rd Quarter 2005 Survey –Diet and price are most common reasons for eating less beef –Significantly fewer referring to BSE as cause for eating less beef USMEF, Ipsos

20. Demand Points to Consider 1.Similar results in 2001 survey 2.26% of 122* million= 31.7 million consumers 3.Foodservice beef is not labeled country of origin; US beef is used widely in foodservice 4.Australian beef has been high-priced 5.Domestic beef remains very high-priced 6.Retail sales will likely be most difficult to recover 7.Two years of negative press about US beef USMEF Estimate: 4-5 years to recover to 2003 levels * 127 million total population in 2005, 4% vegetarian

21. Summary Japan is hugely significant to the industry Traditionally, the U.S. has sent a few cuts from a lot of cattle, to Japan; supply of these cuts will be severely limited Demand for some segments will recover quickly, overall demand will take years to recover “New” cuts provide an opportunity to enhance supplies and profits

22. For more information: www.usmef.org Brett Stuart bstuart@usmef.org

23. ‘Potential’ Available Supplies 20032006 Eligible Cattle28.0 million4.8 million Key cuts exported (lbs/hd)87212 Supply potential (mt)1,104,000461,497 Total exports to Japan (mt)375,45591,600 Qualified Supply Exported34%20% Source: Cattle-Fax, USDA, USMEF