Presented by: Len Steiner

Transcription

1 2018 Annual General Meeting & Conference Diplomat Beach Resort, Hollywood, FL supporting and promoting imported meat October 8-11, 2018 Presented by: Len Steiner Steiner Consulting Group,

2 Main Discussion Points Today #1: Economic Situation in US and World #2: Currency Markets #3: Feed Input Costs #4: Cattle Supplies in USA, Canada and Mexico #5: Product Availability from Importing Partners Special Update on: Brazil, Argentina and Ireland #6: Demand in US Domestic Market #7: Demand in Other Markets (Competition) Special Discussion about China and Impact on World Protein Market: Trade War, African Swine Fever #8: Supplies of Competing Proteins #9: US Lamb Business #10: Price Forecasts 2019 Meat Market Outlook -1-

3 Global Situation Last Year Canada: robust growth in Q1. Export growth remains a weak point USA: job market recovery continues. Growth rebounded in Q2 and expansion remains on track Mexico: GDP growth was 2.8% in Q1, up from 2.3% in previous quarter EU Impact of Brexit starting to be felt in UK. North/East expanding and even South is recovering Brazil: Two consecutive quarters of positive growth. Argentina: Continued improvement in business conditions and higher commodity prices bolstering growth Russia: Finally out of recession economy slowly recovering. GDP +0.3%, inflation down to 4% India: Growth has slowed but expansion remains on track Australia: Q2 growth was up 0.8%, a much faster pace than the previous quarter. Japan: Modest inflation and weaker Yen is supportive China: Growth has recovered. Consumer spending accelerated in last two quarters, which is key as economy relies less on heavy Source: Moody's Economy.com, Steiner industry New Zealand: Low unemployment, higher inflation, more growth 2019 Meat Market Outlook -2-

4 Global Situation Current Canada: Q2 growth accelerated to 2.9% from 1.3% in Q1. Negotiations with USA continue over a revised NAFTA. That remains a key risk USA: US GDP revised higher in Q2 and low unemployment should continue to bolster wages/spending. Mexico: GDP improved to 2.6% in Q2 compared to 1.3% in Q1. Unemployment rate increased to 3.5% but remains below year ago levels Argentina: GDP growth declined a stunning 4.2% in Q2 compared to +3.6% in Q1. The economic activity index continues to head lower and unemployment is now 9.1% compared to 7% at the end of last year EU Brexit negotiations are approaching some key deadlines and no deal appears imminent. Brazil: Growth estimates have been revised lower following the trucker strike and election uncertainty. Unemployment rate has been trending lower, however. Russia: The Russian economy has recovered from the impact of sanctions and expanded 1.3% in Q1 compared to 0.9% in late India: Economy has recovered as impact from demonetization has faded. Australia: GDP growth in Q2 was +0.9% compared to +1% in the previous quarter but still much faster than in 2016 and Source: Moody's Economy.com, Steiner Japan: Q2 growth was higher than expected and surprised the market. Robust private investment supported growth China: Exports remain resilient despite trade war with USA but risks are heavily weighted to the downside. Equity markets are down 20% YTD New Zealand: Q2 growth numbers have yet to be released by expectations are for more robust growth as export pace accelerated 2019 Meat Market Outlook 3

5 #1 Economic Situation in US and World Global Economic Growth Expected to Further Expand in 2019 REAL GDP GROWTH % GLOBAL GROWTH OUTLOOK Fcst 2019 Fcst World N. Am. S. Am. Euro Asia Oceania World N. Am. S. Am. Euro Asia Oceania Fcst previous revised Fcst previous revised Last update: September 12, 2018 Source: Moody's Economy.com 2019 Meat Market Outlook -4-

6 #1 Economic Situation in US and World Robust growth but more risks in the horizon Positives 8.00 % ch. ANNUAL USA GROWTH RATE OF GDP Annualized Quarterly Growth Rate forecast - Financial system more robust - Full employment - Rising consumer wealth Consumer Confidence Strong corporate balance sheets Banks in good shape Export demand * Forecast: Moody s '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 Negatives - Trade war with China - Emerging market financial crisis - Brexit - Geopolitical risks and oil price volatility 2019 Meat Market Outlook -5-

7 #1 Economic Situation in US and World US economy has added jobs consistently since NEW JOB CREATION: NON AGRICULTURAL, 000's Data Updated through September USA UNEMPLOYMENT RATE: % THOUSAND JOBS percent Dec 2019 Forecast 3.6% September % Payrolls in September were up 134k, lower than in previous months as Hurricane Florence impacted growth. - Job gains for July and August were revised higher, however. Economy has added million jobs since the start of the year Meat Market Outlook -6-

8 #1 Economic Situation in US and World Foodservice sales jumped in 2018, a sign of a booming economy 12.0% GROCERY STORE $ SALES : Y/Y % CH. Latest Data is for August % FOODSERVICE $ SALES : Y/Y % CH. Latest Data is for August % 10.0% 8.0% 8.0% 6.0% 6.0% 4.0% 4.0% 2.0% 2.0% 0.0% 0.0% -2.0% -2.0% -4.0% -4.0% '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Source: Advance Monthly Sales for Retail & Foodservice, US Census Bureau Foodservice dollar sales have increased sharply this year, a sign of the booming economy but also rising price inflation in the segment. Grocery dollar sales were also higher this year 2019 Meat Market Outlook -7-

9 #1 Economic Situation in US and World Fast Food Outperformed Other Sectors In August 12.0% FOODSERVICE $ SALES : Y/Y % CH. Latest Data is for August % SAME STORE SALES 10.0% 8.0% 80% 70% 60% 6.0% 50% 4.0% 40% 2.0% 0.0% -2.0% -4.0% '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 30% 20% 10% 0% Family Casual Limited Quick Fine Dining Dining Dining Service Casual Higher Sales 50% 52% 77% 63% 58% Lower Sales 25% 24% 10% 31% 0% Same Store Sales - August 2018 vs. August 2017, Tracking Survey Responses by Industry Segment Source: National Restaurant Association Source: US Census Source: National Restaurant Association 2019 Meat Market Outlook -8-

10 #1 Economic Situation in US and World Foodservice inflation reflects higher labor/operational costs Food CPI Comparisons. Jan 2008 = 100 Source: BLS. Analysis by Steiner Food at Limited Service Restaurants Food away from home Food at Home Data updated through: August Meat Market Outlook -9-

11 # 2 Currency Markets Performance of US$ vs. Imported Beef Currencies in last 12 months US Dollar vs. Currencies of Top Meat Trading Partners % change in the last 12 months (Oct Sep. 2018) 135% 130% 125% USD/BRL 120% Positive for US imports Negative for US exports 115% 110% 105% 100% 95% USD/Peso USD/AUD USD/NZD USD/CAD USD/EURO Negative for US imports Positive for US exports 90% Oct '17 Nov '17 Dec '17 Jan '18 Feb '18 Mar '18 Apr '18 May '18 Jun '18 Jul '18 Aug '18 Sep '18 Oct ' Meat Market Outlook -10-

12 # 2 Currency Markets Price of Imported 90CL Beef in US$ Has Been Trending Lower 350 Pricein USD Price of 90CL Imported Beef in US Market (CIF) Prices in US$/cwt Oct 2012 US $200 cwt US $190/cwt USD/cwt Current Meat Market Outlook -11-

13 # 2 Currency Markets Price of Imported 90CL Beef in US$ Terms & AUD Terms Pricein USD and AUD +40% gain from currency shift Price of 90CL Imported Beef in US Market (CIF East Coast). Prices in US$/cwt and AUD/cwt AUD/cwt $265/cwt $190/cwt USD/cwt Meat Market Outlook -12-

14 #3 Feed Input Costs Four Consecutive Years of Above Trend Yields = A lot of Corn CORN YIELDS SINCE 1990 AND USDA FORECASTED YIELDS Corn Yields Since Latest USDA Forecast is from September 2018 WASDE USDA Est. Corn yields: bu bu Linear Trend 2012 not included in trend = +47% increase Meat Market Outlook -13-

15 #3 Feed Input Costs Corn Acres Lower in 2018 But Expected at 93M next Year million acres US CORN PLANTED ACRES Since 2007 planted acres have averaged 91 million. + Above average yields = Corn production outpacing consumption 1980/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / Meat Market Outlook -14-

16 #3 Feed Input Costs Corn supplies will be plentiful for another 12 months U.S. Corn Supply and Use 2016/ /18 USDA Actual USDA Est USDA Aug Est 2018/19 USDA Sep Est % Change vs. 2016/17 vs. 2017/18. Planted % -1.2% Harvested % -1.1% Yield per harvested acre % 2.7% Beginning stocks 1,737 2,293 2,027 2, % -12.7% Production 15,148 14,604 14,586 14, % 1.5% Imports % 25.0% Supply, total 16,942 16,937 16,664 16, % -0.3% Feed and residual 5,470 5,450 5,525 5, % 2.3% Ethanol for fuel 5,432 5,600 5,625 5, % 0.4% Food, seed and residual 1,453 1,460 1,480 1, % 3.1% Domestic use, total 12,355 12,510 12,630 12, % 1.6% Record Yield Higher feed use Exports 2,294 2,425 2,350 2, % -1.0% Use, total 14,649 14,935 14,980 15, % 1.1% Ending stocks 2,293 2,002 1,684 1, % -11.4% Avg. farm price ($/bu) % 2.9% Ending Stocks/Use 15.7% 13.4% 11.2% 11.7% Source: USDA Monthly WASDE Report. ** Corn crop marketing year starts September 1. Lower s/u ratio implies modest price increase 2019 Meat Market Outlook -15-

17 #3 Feed Input Costs Ethanol Demand Is Flat, Limiting Demand for Corn in Domestic Market MIL BU. 6,000 CORN USED FOR ETHANOL PRODUCTION IN USA % OF TOAL USE CORN USED FOR ETHANOL AS % OF TOTAL USE 45% 5,000 40% 35% 4,000 30% 3,000 25% 20% 2,000 15% 1,000 10% 5% 0 0% 2019 Meat Market Outlook -16-

18 #3 Feed Input Costs Nearby corn futures The difference between bu/acre and bu/acre = more than double the price 2019 Meat Market Outlook -17-

19 #3 Feed Input Costs Filling the gap - feed use highest in a decade million bu. 6,500 US CORN GOING INTO LIVESTOCK & POULTRY FEED (+ residual) 6,000 5,500 5,000 4, ,128 4, ,575 Amount of corn going into livestock/poultry consumption is at highest point in 10 years 4,000 3,500 3, Meat Market Outlook -18-

20 #3 All time record meat protein production in 2018 and expected to continue in 2019 and 2020 Combined USA Beef, Pork, Broiler and Turkey Production Million Pounds. Carcass Wt. Basis. USDA Actual + Steiner Forecasts 110, , % 104,597 90,000 90,929 80,000 70,000 60,000 50,000 40, Meat Market Outlook -19-

21 #3 Protein Growth Expected to Remain Broad based through % CH % CH % CH. BEEF 25,221 26,187 27, % 27, % 27, % PORK 24,941 25,584 26, % 27, % 27, % BROILERS 40,260 41,217 42, % 42, % 42, % TURKEYS 5,905 5,905 5, % 5, % 6, % LAMB % % % VEAL % % % TOTAL 96,553 99, , % 103, % 104, % 2019 Meat Market Outlook -20-

22 #4 USA Cattle/Beef Supplies Cattle Inventory Growth Has Slowed Down JANUARY 1st U. S. CATTLE INVENTORY INVENTORY (000 OMITTED) % Ch. vs Estimate % Ch. vs ALL CATTLE AND CALVES 95,018 96,342 96,573 96,035 94,721 94,081 92,887 91,160 90,095 88,526 89,143 91,918 93,705 94, % 94, % COW AND HEIFERS THAT HAVE CALVED 41,678 41,806 41,789 41,692 41,127 40,526 40,068 39,517 38,853 38,293 38,609 39,476 40,559 41, % 41, % BEEF COWS 32,674 32,703 32,644 32,435 31,794 31,440 30,913 30,282 29,631 29,085 29,302 30,166 31,213 31, % 31, % DAIRY COWS 9,004 9,104 9,145 9,257 9,333 9,087 9,156 9,236 9,221 9,208 9,307 9,310 9,346 9, % 9, % HEIFERS 500LBS. AND OVER 19,445 19,950 20,074 19,855 19,604 19,778 19,650 19,445 19,256 18,969 19,261 19,907 20,132 20, % 20, % BEEF COW REPLACEMENT 5,638 5,864 5,835 5,647 5,550 5,443 5,135 5,281 5,429 5,551 6,086 6,340 6,368 6, % 5, % DAIRY COW REPALCEMENT 4,117 4,298 4,325 4,415 4,410 4,551 4,577 4,618 4,546 4,549 4,710 4,814 4,754 4, % 4, % OTHER HEIFERS 9,690 9,788 9,914 9,793 9,644 9,784 9,938 9,546 9,281 8,869 8,464 8,753 9,010 9, % 9, % STEERS 500 LBS. AND OVER 16,466 16,988 17,185 17,163 16,809 16,568 16,394 15,957 15,931 15,668 15,630 16,315 16,384 16, % 16, % BULLS 500 LBS. AND OVER 2,214 2,258 2,214 2,207 2,188 2,190 2,165 2,100 2,074 2,038 2,109 2,142 2,244 2, % 2, % HFRS, STRS AND BULLS UNDER 500 LBS 15,215 15,339 15,311 15,118 14,994 15,019 14,610 14,141 13,983 13,558 13,534 14,077 14,386 14, % 14, % ANNUAL CALF CROP 37,106 37,016 36,759 36,158 35,939 35,740 35,357 34,469 33,730 33,522 34,087 35,093 35,808 36, % 2019 Meat Market Outlook -21-

23 #4 USA Cattle/Beef Supplies Four Years into the Current Cycle Comparing US Cattle Cycles of the Last +50 Years Y/Y Change in Cattle Inventories. 6.0% % 2.0% Current 0.0% -2.0% -4.0% -6.0% # of years from the start of the cycle 2019 Meat Market Outlook -22-

24 #4 Cattle/Beef Supplies US Cattle Inventories were +0.7% in 2018 and Forecast +0.5% in , ,000 CATTLE INVENTORIES, 000 HEAD, Forecast 1975 = 132, , , = 103,548 TOTAL INVENTORIES, 000 OMITTED 100,000 90,000 80,000 70, = 91, = 95, = 94, = 96,573 Jan 1, mil head 60,000 50,000 40, Meat Market Outlook -23-

25 #4 Cow/Bull Slaughter Capacity Daily Cow and Bull Slaughter in the US: Source: USDA-AMS. 40,000 35,000 30,000 daily slaughter 25,000 20,000 15,000 25,906 10,000 5, Meat Market Outlook -24-

26 #4 Cow/Bull Slaughter Capacity WEEKLY COW & BULL SLAUGHTER. '000 HEAD Source: USDA Yr Avg Highest daily cow/bull slaughter in 2018 was ~26,000 head 5.5day week = 26,000 x 5.5 = 143, Average slaughter during Oct/Nov/early Dec 2017 = 128,000 head or 89% of capacity 90 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2019 Meat Market Outlook -25-

27 #4 Cattle/Beef Supplies Steer Weights Have Been Trending Lower on Lighter Calves / Higher Turnover 860 FI CATTLE AVERAGE DRESSED WEIGHTS: Dressed Carcass Weights. Weekly. USDA 830 DRESSED WEIGHTS, POUNDS Meat Market Outlook -26-

28 #4 Cattle/Beef Supplies US Productivity (feedlot based) vs. Other Key Producers/Exporters BEEF KILOGRAM PRODUCED (DRESSED WT.) PER ANIMAL IN THE HERD. ANNUAL SOURCE: USDA USA Australia N. Zealand Argentina Uruguay Brazil Meat Market Outlook -27-

29 #4 Cattle/Beef Supplies US Cattle Volatile But No Longer in Down Trend 2019 Meat Market Outlook -28-

30 #4 Cattle/Beef Supplies Lower Feed Costs, Higher Feeder Values Could Result in Modest Profit in ESTIMATED AVERAGE COW-CALF RETURNS Returns over cash costs (includes pasture rent), Annual, US$/cow forecast Source: LMIC 2019 Meat Market Outlook -29-

31 #4 Cattle/Beef Supplies Female Slaughter Ratio Indicates Expansion is Slowing Down But Not Over Yet Rebuilding Liquidation 2019 Meat Market Outlook -30-

32 #4 Cattle/Beef Supplies Cow Slaughter Outlook for rest of 2017 & in 2018 Total cow slaughter for Jan Aug = 4.108MM head, +8.2% higher than a year ago. Forecast for cow slaughter in 2018 = +7.6% Forecast for cow slaughter in 2019 = +5.8% 2019 Meat Market Outlook -31-

33 #5 Imported Beef Key Metrics for Major Global Beef Importers Cattle Population Human Population Cattle/ Person Cattle Slaughter Cattle Sltr./ Cattle Inv. Beef Production Prod. KG / Cattle Sltr. 000 head mil. People 000 head MT, CWE KG, CWE Beef Exports Beef Exports / Beef Prod. USA 93, , , ,298 11% CANADA 11, , , % MEXICO 16, , , % AUSTRALIA 24, , , ,486 69% N. ZEALAND 10, , % BRAZIL 226, , , ,856 19% URUGUAY 11, , % ARGENTINA 53, , , % INDIA 303, , , ,849 44% Data source: USDA 2019 Meat Market Outlook -32-

34 Year & Quarter BEEF QUARTERLY SLAUGHTER, PRODUCTION, IMPORTS, EXPORTS AND DISAPPEARANCE =A x B A B C D E F G =C+D-E+F+G Commercial Slaughter Percent Change From Year Ago Average Carcass Weights Percent Change From Year Ago Commercial Meat Production Percent Change From Year Ago Imports Percent Change From Year Ago Exports Percent Change From Year Ago Farm Production Adjustments to Ending Stocks to Balance Total Disappearance (1,000 Head) Lbs. (Million Lbs.) (Million Lbs.) (Million Lbs.) (Million Lbs.) (Million Lbs.) (Million Lbs.) st Qtr. 7, % % 5, % % % , % 2nd Qtr. 7, % % 6, % % % , % 3rd Qtr. 7, % % 6, % % % , % 4th Qtr. 7, % % 6, % % % , % Year 30, % % 24, % 2, % 2, % , % st Qtr. 6, % % 5, % % % , % 2nd Qtr. 7, % % 5, % % % , % 3rd Qtr. 7, % % 6, % % % , % 4th Qtr. 7, % % 6, % % % , % Year 28, % % 23, % 3, % 2, % , % st Qtr. 7, % % 5, % % % , % 2nd Qtr. 7, % % 6, % % % , % 3rd Qtr. 7, % % 6, % % % , % 4th Qtr. 7, % % 6, % % % , % Year 30, % % 25, % 3, % 2, % , % st Qtr. 7, % % 6, % % % , % 2nd Qtr. 8, % % 6, % % % , % 3rd Qtr. 8, % % 6, % % % , % 4th Qtr. 8, % % 6, % % % , % Year 32, % % 26, % 2, % 2, % , % st Qtr. 7, % % 6, % % % , % 2nd Qtr. 8, % % 6, % % % , % * 3rd Qtr. 8, % % 7, % % % , % * 4th Qtr. 8, % % 7, % % % , % * Year 33, % % 27, % 2, % 3, % , % 2019 * 1st Qtr. 7, % % 6, % % % , % * 2nd Qtr. 8, % % 6, % % % , % * 3rd Qtr. 8, % % 7, % % % , % * 4th Qtr. 8, % % 7, % % % , % * Year 33, % % 27, % 2, % 3, % , % 2020 * 1st Qtr. 7, % % 6, % % % , % * 2nd Qtr. 8, % % 7, % % % , % * 3rd Qtr. 8, % % 7, % % % , % * 4th Qtr. 8, % % 7, % % % , % * Year 33, % % 27, % 2, % 3, % , % * Estimates Percent Change From Year Ago 2019 Meat Market Outlook -33-

35 #5 Imported Beef Availability January Inventory trends in Australia, New Zealand, Uruguay & Brazil 30,000 29,000 28,000 27,000 26,000 25,000 24, head AUSTRALIA CATTLE INVENTORIES: JANUARY 1 STOCKS Source: USDA Foreign Agricultural Service 29,102 27, % 24, % 25, % 25, % 25, % 10,500 10,400 10,300 10,200 10,100 10,000 9,900 9, head NEW ZEALAND CATTLE INVENTORIES: JANUARY 1 STOCKS Source: USDA Foreign Agricultural Service 10,368 10, % 10,152 10, % 1.2% 10, % 10, % 12,200 12,000 11,800 11,600 11,400 11, head URUGUAYCATTLE INVENTORIES: JANUARY 1 STOCKS Source: USDA Foreign Agricultural Service 11,903 12, % 11, % 11, % 11, % 11, % 23,000 9,700 11,000 22, F 2019F 2020F 9, F 2019F 2020F 10, F 2018F 2019F 250, , , , , head BRAZIL CATTLE INVENTORIES: JANUARY 1 STOCKS Source: USDA Foreign Agricultural Service 213, , , % 232, % 238, % 243, % 55,000 54,000 53,000 52,000 51, head ARGENTINA CATTLE INVENTORIES: JANUARY 1 STOCKS Source: USDA Foreign Agricultural Service 51,545 52,565 53, % 53, % 54,215 54, % 0.9% 22,000 21,000 20,000 19, head MEXICO CATTLE INVENTORIES: JANUARY 1 STOCKS Source: USDA Foreign Agricultural Service 200,000 50, , , , ,000 49,000 48,000 47,000 46,000 18,000 17,000 16,000 17,120 16,615 16,490 16, % -0.8% 16,809 17, % 1.4% 150, F 2019F 2020F 45, F 2019F 2020F 15, F 2019F 2020F 2019 Meat Market Outlook -34-

36 #5 Imported Beef Availability Australia Beef Exports to the US & US Market Share AUSTRALIAN MONTHLY BEEF SHIPMENTS TO THE US , metric ton, shipped wt. Source: Australian Department of Water and Agricultural Resources % OF AUSTRALIAN MONTHLY BEEF EXPORTS GOING TO USA , metric ton, shipped wt. Source: Australian Department of Water and Agricultural Resources 50,000 metric ton, shipped wt. 60% % of all shipments 45,000 40,000 50% 35,000 40% 30,000 25,000 30% 20,000 15,000 20% 10,000 10% 5, % Meat Market Outlook -35-

37 #5 Brazil Access Status Maybe things will change after the election At this point no public announcements but MICA indicates that USDA will audit Brazil again before making a decision With resurgent China demand, Brazil has expanded exports rapidly despite lack of access to USA market Brazilian Exports of Fresh/Frozen Beef to China/Hong Kong and Rest of World (ROW) Data Source: Comex 160, , , ,000 80,000 60,000 40,000 20,000 0 ROW China/HK Meat Market Outlook -36-

38 #5 Argentina USDA has completed review of Argentine system Likely no determination until after the election Current political climate makes it difficult to grant access MICA also suggests that US is waiting for Argentina to approve US beef No knowledge when/if Argentina will be able to ship fresh beef to US in 2019 Argentine Exports of Fresh/Frozen Beef Monthly Shipments. Data Source: Indec. Analysis by: Steiner Consulting 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - ROW China YTD 51.2% Share 2019 Meat Market Outlook -37-

39 #5 Ireland Shipments to the US market remain limited It is our understanding that manufacturing beef can be shipped to the US but we are not sure all suppliers have put in place lotting procedures that satisfy USDA requirements Imports of Irish Beef into the US Shipped Weight, MT. USDA Jan MarMay Jul Sep Nov Jan MarMay Jul Sep Nov Jan MarMay Jul Sep Nov Meat Market Outlook -38-

40 #6 Demand in US Domestic Market Wealth Effect: Post Recession Recovery S&P 500 Index Data updated through: September 19, 2018 All-Transactions House Price Index Index 1980: Q1 = 100. Quarterly. Not Seasonally Adjusted 3, , , , , , Meat Market Outlook -39-

41 #6 Demand in US Domestic Market Willingness to Spend: Depends if you have a job USA UNEMPLOYMENT RATE: % Job Gains 720 NRA Restaurant Performance Index vs. Monthly Job Gains/Losses Rest. index percent Dec 2019 Forecast 3.6% restaurant index (R) September % monthly job gains/losses (L) Meat Market Outlook 40

42 #6 Demand in US Domestic Market Demand Drivers: Income 46,000 Real Per Capita Disposable Income, US$ Latest data is for: August ,000 43,819 42,000 40,000 38,000 36,000 34,000 recession 32,000 30, '01 '02 '03 ' '06 '07 '08 ' '11 '12 '13 ' '16 '17 ' Meat Market Outlook -41-

43 #6 Demand in US Domestic Market USA Per Capita Meat Protein Consumption 290 TOTAL BEEF, PORK, POULTRY PER CAPITA DISAPPERANCE (Carcass Wt. Basis) Forecast 280 POUNDS PER PERSON PER YEAR Meat Market Outlook -42-

44 #6 Demand in US Domestic Market USA Per Capita Beef Consumption BEEF PER CAPITA DISAPPERANCE (Carcass wt. Basis) Forecast POUNDS PER PERSON PER YEAR 2019 Meat Market Outlook -43-

45 #6 Demand in US Domestic Market USA Per Capita Lamb Consumption LAMB, PER CAPITA CONSUMPTION (Carcass wt. Basis) Forecast POUNDS PER PERSON PER YEAR 2019 Meat Market Outlook -44-

46 #7 Demand in Other Markets China/Hong Kong Are Now the Top Beef Markets in the World 2, mt TOP GLOBAL BEEF BUYERS. USDA. 000 METRIC TON. CWE 2017 China Imports: 1,800 1,600 China/ Hong Kong +19.9% 1,400 1,200 USA +252k MT 1, RUSSIA 2018 China Imports 400 JAPAN % k MT 2019 Meat Market Outlook -45-

47 #7 Demand in Other Markets China/Hong Kong Share of Key Suppliers Brazil: Argentina: Uruguay: Australia: New Zealand: 45% (Jan-Aug) 52% (Jan-Jul) 53% (Jan-Aug) 14% (Jan-Aug) 24% (Jan-Aug) 2019 Meat Market Outlook -46-

48 #8 African Swine Fever Russia/Soviet Republics/Africa Eastern Europe/Baltics/China/Belgium 2019 Meat Market Outlook -47-

49 #8 African Swine Fever Dangerous for people NO Dangerous for hogs YES, deadly Easily transmitted - Extremely Is there a vaccine NO 2019 Meat Market Outlook -48-

50 #8 African Swine Fever World Pork Consumption 2017 Global Pork Consumption. Selected Countries. Billion Lb. (cwe) Data Source: USDA-FAS China European Union United States Russia Brazil Japan Vietnam Mexico Korea, South Philippines Taiwan Canada Ukraine Argentina Hong Kong Australia Colombia Chile Serbia Belarus South Africa Ecuador Angola Cuba Norway Singapore Dominican Republic New Zealand Kazakhstan Guatemala Uruguay Panama Honduras Congo (Kinshasa) Haiti Macau Montenegro Macedonia Cote d'ivoire Bosnia and Herzegovina El Salvador Meat Market Outlook -49-

51 #8 African Swine Fever Global Pork Exporters 2019 Meat Market Outlook -50-

52 #8 African Swine Fever Exports as % of National Production 2019 Meat Market Outlook -51-

53 #8 Per Capita Consumption of Meat in China & USA China Consumption of Beef, Pork, Poultry & Sheep Meat Source: OECD & FAO. Pounds per Capita. Retail wt. equiv. USA Consumption of Beef, Pork, Poultry & Sheep Meat Source: OECD & FAO. Pounds per Capita. Retail wt. equiv. Poultry Meat 25% Sheep Meat 6% Beef 8% 111 lb./pp Broiler 42% 217 lb./pp Turkey 8% Other *** 1% Beef 26% Pork 61% Pork 23% *** Other includes ducks, geese, lamb, veal, etc Meat Market Outlook -52-

54 #9 Competing Proteins Pork Situation and Outlook Supplies ( Y/Y % change) Production: +4.0% in % in % in ,000 27,000 25,000 PORK PRODUCTION: MILLION POUNDS 26,596 25,584 24,501 24,941 27,252 27,657 Exports: +5.2% in ,000 23,347 23,000 22,436 22,785 23,253 23,187 22, % in , % in ,000 Per Capita: +2.4% in % in % in ,000 15, Meat Market Outlook -53-

55 #9 Competing Proteins Ratio of Beef Cutout vs. Pork Cutout Wholesale Beef Prices Have Returned to More "Normal" Levels Relative to Pork Ratio of Weekly Choice Beef Cutout vs. Pork Cutout Value Meat Market Outlook -54-

56 #9 Competing Proteins Price Ratio of Ground Beef vs. Pork Chops 2.50 Ratio Ratio: 78CL Meat Block / 1/4" Pork Loins, USDA Wt Avg Avg = wk Mo. Avg Meat Market Outlook -55-

57 #8 Competing Proteins Long Run Price of B/S Chicken Breasts Price History and Forecast for B/S Chicken Breast Price. USDA-AMS. $/cwt $/cwt 310 LONG TERM PRICE CHART: Meat Market Outlook -56-

58 #9 Competing Proteins Broiler Situation and Outlook Supplies ( Y/Y % change) Production: +2.3% in 2018 BROILER PRODUCTION: MILLION POUNDS +1.1% in % in ,000 42,000 40,000 42,619 42,870 42,147 41,217 40,260 39,636 Exports: +3.1% in % in % in 2020 MILLION POUNDS 38,000 36,000 38,154 37,425 36,511 36,523 36,803 36,641 35,131 34,000 Per Capita: +1.4% in , % in % in , Forecast Source: Steiner Consulting Group 2019 Meat Market Outlook -57-

59 #8 Competing Proteins Ground Beef vs. Chicken Breasts 2.50 Ratio Ratio: 78CL Meat Block / Bnls Skinless Chicken Breast wk Mo. Avg CL Meat Block = 70% 90CL Boneless Beef, Central, Fresh, USDA, Wt. Avg. + 30% 50CL Beef Trim, Fresh, National, USDA, Wt. Avg. Chicken Breast = USDA N.E. Broiler Breast Boneless, Skinless, Wt. Avg. Forecast Source: Steiner Consulting Group 2019 Meat Market Outlook -58-

60 # Competing Proteins Broiler Supplies '000 60,000 59,000 58,000 57,000 56,000 55,000 54,000 53,000 LAYERS ON 1ST OF MONTH: BROILER TYPE HATCHING Source: USDA/NASS Chicken and Eggs Monthly Report US WEEKLY BROILER EGG SETS Source: USDA Broiler Hatchery Report 245, , , , , eggs 52,000 51,000 5-Yr. Avg. 195,000 5 Yr. Avg ( ) ,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 185,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2019 Meat Market Outlook -59-

61 #10 USA Lamb Market Situation US Lamb Inventories Remain Flat 12,000 mil head US LAMB INVENTORY 10,000 8,000 6,000 4,000 2, Meat Market Outlook -60-

62 #10 US Lamb Market Situation Sheep and Lamb Slaughter Higher in July and August Data Source: USDA-AMS Livestock Marketing Information Center 2019 Meat Market Outlook -61-

63 #10 US Lamb Market Situation Domestic Lamb Prices Down 15% in August Slaughter Lamb Price, Sioux Falls, SD Basis Monthly Average Prices, lb., $ per 100 lb Yr. Avg Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2019 Meat Market Outlook -62-

64 #10 USA Lamb Market Situation Imports Share at All Time Record High: 63.4% of Supply 450 mil lb. Domestic Lamb Production + Imports Imports US domestic production Meat Market Outlook -63-

65 #9 USA Lamb Market Situation Lamb Trade Flows so Far in ,000 19% 50,000 USA LAMB IMPORTS, USDA, MT, PRODUCT WEIGHT BASIS 40,000 30,000 20,000-11% 10,000 - Australia New Zealand -40% -64% Canada Chile Uruguay United Kingdom Ireland Brazil Other YTD Imports = 69,554 MT Jan-Jul, +9% 2019 Meat Market Outlook -64-

66 CURRENT FORECAST 2019 Meat Market Outlook -65-

67 Forecast Performance for 90CL Dom/Imp 2012 Presentation 2013 Presentation 2014 Presentation 2015 Presentation 2016 Presentation 2017 Presentation 2013 Forecast 2013 Actual 2014 Forecast Y/Y ch Actual Y/Y ch Forecast Y/Y ch Actual Y/Y ch Forecast Y/Y ch Actual Y/Y ch Forecast Y/Y ch Actual Y/Y ch Forecast Y/Y ch Actual Y/Y ch. Domestic 90CL Q % % % % % % 200-4% 209 0% 225 8% 215 3% Q % % % % % % % 224 3% 225 1% 219-2% Q % % 297 1% 281-5% % % % 230 9% 225-2% 213-7% Q % % 286-3% % 219 2% % 178-8% % 216 2% 208-2% Annual % % % 272 1% % % 191-8% 219 5% 223 2% 214-2% Imported 90CL Q % 213-1% % % 250 2% % 200 0% 213 6% 225 5% 217 2% Q % % % 237 9% 245 4% % 196-5% % 225 0% 210-7% Q % % 293 4% % 233-5% % % 221 5% 225 2% 203-8% Q % % 303 7% % 219 6% 208 0% % 217 4% 216 0% 207-4% Annual % % % 233-6% 237 2% % 191-8% 219 6% 223 2% 209-5% 2019 Meat Market Outlook -66-

68 Price Forecasts: 2018 and 2019 LIVE STEERS Sep 28, 2018 Q1 Q2 Q3 Q4 Annual FIVE AREA DIRECT AVERAGE LIVE STEER 5-YR AVERAGE HISTORY HISTORY FORECAST % CHANGE FROM % -11.4% -2.2% -0.1% -2.9% % CHANGE FROM 5-Yr Avg. -8.9% -15.9% -15.5% -9.7% -12.5% 2019 FORECAST % CHANGE FROM % 3.7% 3.5% 1.7% 1.4% % CHANGE FROM 5-Yr Avg % -12.8% -12.5% -8.2% -11.3% 90% BONELESS BEEF, CENTRAL, FRESH, WT. AVG., USDA 5-YR AVERAGE HISTORY HISTORY FORECAST % CHANGE FROM % -1.9% -8.6% -8.1% -4.0% % CHANGE FROM 5-Yr Avg. -7.9% -7.7% -13.9% -12.0% -10.4% 2019 FORECAST % CHANGE FROM % -2.4% 3.8% 8.5% 2.2% % CHANGE FROM 5-Yr Avg. -8.4% -9.9% -10.6% -4.5% -8.4% 2019 Meat Market Outlook -67-

69 Price Forecasts: 2018 and 2019 Sep 28, 2018 Q1 Q2 Q3 Q4 Annual 50CL BEEF TRIM, FRESH, OMAHA BASIS, WT.AVE, USDA 5-YR AVERAGE HISTORY HISTORY FORECAST % CHANGE FROM % -40.4% -1.8% -10.2% -17.1% % CHANGE FROM 5-Yr Avg. -6.7% -21.2% -20.4% -24.4% -18.0% 2019 FORECAST % CHANGE FROM % 12.2% 12.4% 25.9% 9.9% % CHANGE FROM 5-Yr Avg % -11.6% -10.6% -4.8% -9.9% 7:45, E. COAST 90CL AUSTRALIAN BLENDED COW, TOP, YELLOW SHEET 5-YR AVERAGE HISTORY HISTORY FORECAST % CHANGE FROM % -7.4% -9.2% -10.6% -6.4% % CHANGE FROM 5-Yr Avg. 0.1% -3.3% -12.7% -13.4% -7.5% 2019 FORECAST % CHANGE FROM % -3.2% 5.6% 11.7% 1.1% % CHANGE FROM 5-Yr Avg. -8.3% -6.3% -7.8% -3.3% -6.4% 2019 Meat Market Outlook -68-

70 Price Forecasts: 2018 and 2019 Sep 28, 2018 Q1 Q2 Q3 Q4 Annual NATIONAL WHOLE BIRD PRICE, USDA, WTD AVG 5-YR AVERAGE HISTORY HISTORY FORECAST % CHANGE FROM % 10.0% -1.4% -2.0% 3.9% % CHANGE FROM 5-Yr Avg. 1.3% 9.7% 2.1% -3.6% 2.7% 2019 FORECAST % CHANGE FROM % -13.4% -3.3% 3.6% -5.4% % CHANGE FROM 5-Yr Avg. -4.6% -5.0% -1.2% -0.1% -2.9% N.E. BROILER BREAST BONELESS-SKINLESS, WT.AVG., USDA 5-YR AVERAGE HISTORY HISTORY FORECAST % CHANGE FROM % -14.7% -22.4% -17.4% -13.7% % CHANGE FROM 5-Yr Avg. -9.9% -19.8% -27.6% -24.5% -20.7% 2019 FORECAST % CHANGE FROM % 7.0% 22.0% 17.4% 9.3% % CHANGE FROM 5-Yr Avg % -14.1% -11.6% -11.3% -13.3% 2019 Meat Market Outlook -69-

71 Price Forecasts: 2018 and 2019 Sep 28, 2018 Q1 Q2 Q3 Q4 Annual USDA, Carcass Cutout, FOB Plant 5-YR AVERAGE HISTORY HISTORY FORECAST % CHANGE FROM % -12.1% -17.6% -3.2% -9.8% % CHANGE FROM 5-Yr Avg. -7.5% -18.8% -21.1% -9.7% -14.6% 2019 FORECAST % CHANGE FROM % 11.8% 17.5% 3.5% 8.3% % CHANGE FROM 5-Yr Avg. -6.8% -9.2% -7.3% -6.5% -7.5% IA/MN, Base Market Hog 185 lb Carcass Basis, Plant Dlv., WT. AVG, 5-YR AVERAGE HISTORY HISTORY FORECAST % CHANGE FROM % -6.8% -22.3% -5.2% -9.7% % CHANGE FROM 5-Yr Avg % -23.1% -33.6% -16.4% -22.0% 2019 FORECAST % CHANGE FROM % 15.9% 34.8% 6.6% 14.8% % CHANGE FROM 5-Yr Avg. -9.4% -10.9% -10.6% -10.9% -10.4% 2019 Meat Market Outlook -70-

72 Price Forecasts: 2018 and 2019 Sep 28, 2018 Q1 Q2 Q3 Q4 Annual TOM TURKEYS, EAST, FROZEN 16-22LBS, TOP, 5-YR AVERAGE HISTORY HISTORY FORECAST % CHANGE FROM % -18.1% -16.8% -6.1% -15.2% % CHANGE FROM 5-Yr Avg % -21.0% -23.5% -21.3% -21.4% 2019 FORECAST % CHANGE FROM % 9.5% 14.6% 14.9% 11.1% % CHANGE FROM 5-Yr Avg % -13.4% -12.4% -9.6% -12.7% UB BONELESS-SKINLESS TURKEY BREAST, TOM, FRESH, TOP, 5-YR AVERAGE HISTORY HISTORY FORECAST % CHANGE FROM % 19.2% 29.6% 38.7% 21.0% % CHANGE FROM 5-Yr Avg % -28.0% -34.6% -30.1% -33.0% 2019 FORECAST % CHANGE FROM % 14.3% 28.1% 22.0% 22.6% % CHANGE FROM 5-Yr Avg % -17.6% -16.2% -14.8% -17.8% 2019 Meat Market Outlook -71-

73 Live Cattle Prices US$/CWT FIVE AREA DIRECT AVERAGE LIVE STEER JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 5-YR AVERAGE HISTORY 2018 HISTORY 2018 FORECAST 2019 FORECAST 2019 Meat Market Outlook -72-

74 US Domestic 90CL Boneless Beef Prices US$/CWT % BONELESS BEEF, CENTRAL, FRESH, WT. AVG., USDA JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 5-YR AVERAGE HISTORY 2018 HISTORY 2018 FORECAST 2019 FORECAST 2019 Meat Market Outlook -73-

75 US Domestic 50CL Beef Trim US$/CWT CL BEEF TRIM, FRESH, OMAHA BASIS, WT.AVE, USDA JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 5-YR AVERAGE HISTORY 2018 HISTORY 2018 FORECAST 2019 FORECAST 2019 Meat Market Outlook -74-

76 Imported 90CL Australian Beef US$/CWT :45, E. COAST 90CL AUSTRALIAN BLENDED COW, TOP, YELLOW SHEET JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 5-YR AVERAGE HISTORY 2018 HISTORY 2018 FORECAST 2019 FORECAST 2019 Meat Market Outlook -75-

77 Spread, Domestic - Imported US$/CWT DOMESTIC 90CL FRESH, FOB CENTRAL US MINUS 90CL IMPORTED, FROZEN, FOB US EAST COAST JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 5-YR AVERAGE HISTORY 2018 HISTORY 2018 FORECAST 2019 FORECAST 2019 Meat Market Outlook -76-

78 Whole Broiler Prices US$/CWT N.E. BROILER BREAST BONELESS-SKINLESS, WT.AVG., USDA JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 5-YR AVERAGE HISTORY 2018 HISTORY 2018 FORECAST 2019 FORECAST 2019 Meat Market Outlook -77-