USA Beef and Lamb Market Review 6/19/2015 1 June 22, 2015
Production in Million Pounds 2014 2015 % CH. 2016 % CH. 2017 % CH. BEEF 24,252 23,887-1.5% 24,260 1.6% 24,930 2.8% PORK 22,844 24,396 6.8% 24,836 1.8% 25,237 1.6% BROILERS 38,139 40,146 5.3% 41,472 3.3% 42,286 2.0% TURKEYS 5,680 5,663-0.3% 5,863 3.5% 6,052 3.2% LAMB 156 153-1.9% 160 4.6% 158-1.3% VEAL 94 80-14.9% 76-5.2% 82 8.0% TOTAL 91,165 94,326 3.5% 96,667 2.5% 98,744 2.1% Source: USDA + Steiner Consulting Forecast 2
1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2016 2017 MILLION POUNDS Since 1990 (million lb.) TOTAL BEEF, PORK, BROILER AND TURKEY PRODUCTION Forecast 45,000 40,000 BROILERS BEEF 40,146 41,472 42,286 Chicken: +19,709 35,000 30,000 25,000 20,000 PORK TURKEY LAMB 24,396 23,887 24,836 24,260 25,237 24,930 Pork: +7,491 Turkey: +1,544 Beef: +1,509 15,000 10,000 5,663 5,863 6,052 But 5,000 0 156 160 158 Lamb: -200 YEARS Veal: -222 3
1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2016 2017 MILLION POUNDS TOTAL BEEF, PORK, BROILER AND TURKEY EXPORTS Forecast 9,000 BROILERS BEEF PORK TURKEY 8,000 7,000 6,572 6,930 7,260 6,000 4,929 5,284 5,543 5,000 4,000 3,000 2,350 2,475 2,540 2,000 1,000 710 739 799 0 YEARS 4
1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2016 2017 MILLION POUNDS 16,000 TOTAL BEEF, PORK, BROILER AND TURKEY EXPORT SURPLUS (EXPORTS MINUS IMPORTS) Forecast 14,000 12,000 10,000 10,049 11,294 12,073 8,000 6,000 4,000 2,000 0-2,000-4,000 5
50,000 48,000 Calf Crop '000 head CALF CROP AND US BEEF PRODUCTION: 1980-2015F Beef Prod. (right axis) Beef Prod mil lb. 27,800 26,700 46,000 25,600 44,000 24,500 42,000 40,000 2015 Prod. Fcst. 23.9 bil. lb.; -1.5% 23,400 22,300 38,000 21,200 36,000 34,000 Calf Crop (left axis) 20,100 19,000 32,000 2015F =34.0 mil. +0.3% or 102k head 17,900 30,000 16,800 6
DRESSED WEIGHTS, POUNDS 910 890 870 850 830 810 790 770 750 730 FI STEER AVERAGE DRESSED WEIGHTS. POUNDS. USDA Average Steer weight in 1990: 740 pounds Average weight in 2014: 872 pounds 710 690 +18% 7
1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 POUNDS PER PERSON PER YEAR 100 BEEF PER CAPITA CONSUMPTION, RETAIL WEIGHT BASIS + USDA FORECASTS 94.6 90 80 70 60 54.6 50 8
1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 POUNDS PER PERSON PER YEAR 65 PORK PER CAPITA CONSUMPTION, RETAIL WEIGHT BASIS + USDA FORECASTS 60 60.6 55 50 49.4 45 40 9
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 POUNDS PER PERSON PER YEAR 100 90 CHICKEN PER CAPITA CONSUMPTION, RETAIL WT BASIS + USDA FORECASTS 90.0 80 70 60 50 40 38.5 30 20 10 10
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 POUNDS PER PERSON PER YEAR 6.0 VEAL PER CAPITA CONSUMPTION, RETAIL WT BASIS + USDA FORECASTS 5.0 4.0 1.80 3.0 2.0 1.0 0.22 0.0 11
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 POUNDS PER PERSON PER YEAR 5.0 LAMB PER CAPITA CONSUMPTION, RETAIL WT BASIS + USDA FORECASTS 4.5 4.0 3.5 3.0 2.93 2.5 2.0 1.5 1.0 0.91 0.5 0.0 12
Source: Steve Meyer and Len Steiner www.dailylivestockreport.com has stayed relatively strong, with a rich, upper echelon of consumers boosting ribeye-steak and tenderloin prices, and rest of US consumers surprisingly "paying up" to boost prices of other cuts and ground beef Ground beef prices have doubled in past 10 years at retail level - exacerbated in past 2 years by COOL rules causing many retailers to avoid costly label problems by omitting imported ingredients from their ground beef - causing huge discounts of nearly a dollar per-lb for imported 90CL boneless beef below fresh 90CL cow beef). Foodservice processors (not subject to COOL rules) have derived huge benefit from using cheaper imported 90s 13
Pork demand was good last year but it has been struggling recently Source: Steve Meyer and Len Steiner www.dailylivestockreport.com 14
Chicken has come to rely increasingly on foodservice demand for growth As foodservice sales have been steadily improving, so has chicken demand Source: Steve Meyer and Len Steiner www.dailylivestockreport.com 15
May be repealed although there is some talk of further modifications. This could further enrage Canada and Mexico who have prepared stiff tariffs Huge discount between domestic and imported grinding beef, in part because retailers do not want to deal with the label complications Foodservice processors (who are not subject to COOL rules) have derived a huge benefit from using cheaper imported 90CL) 16
40.0 cent/lb. SPREAD BETWEEN IMPORTED AND DOMESTIC LEAN BEEF PRICES 90CL FROZEN IMPORTED MINUS 90CL FRESH DOMESTIC 20.0 0.0-20.0-40.0-60.0 discount to domestic -80.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 17
Food Safety Recalls E.coli is now causing fewer recalls of ground beef Excessive use of antibiotics in animal feed (and drug use for weight gain and hormone use to a lesser extent) has created growing public (& some international) criticism Animal welfare issues (and instances of animal abuse) are often in the news. Livestock producers and meat industry groups try (with difficulty) to project a virtuous image of their care for animals SOCIAL MEDIA RUMORS and propaganda (especially among millennial generation) have afflicted meat with false criticism Big Fat Surprise book, named one of the books of the year in 2014 by The Economist. Country of Origin Labelling (COOL) 18
A. Quality grass-fed primal cuts from UK could find niche outlets in U.S. supermarkets (like similar product from Uruguay - subject to clear origin labeling - which is not a problem) and through medium-profile foodservice channels - also for use in industrial cooking for corned or roast beef (for which Irish beef hind cuts were widely used in USA back in 1960s) B. Frozen bulk-packed beef trimmings (from 50% up to 90% chemically lean) are welcomed by US grinders and manufacturers - but nearly always would be blended with domestic beef materials for different formula purposes 19
Despite all of the above negative factors - and the loss of some consumer patrons - beef still commands strong palate appeal to millions of US consumers - who have been paying record high retail prices, without apparent protest or resistance. The reason for high prices has been mainly lower supply of lot-fed (marbled) beef, due to reduction of US cattle herds in recent years - caused by drought in southwest regions - and slowly rebuilding. There has been significant increase in imports OF live cattle from Canada and Mexico, but suffering economic disparities due to the COOL issue mentioned above. On the positive side - from a UK and Irish viewpoint - a growing proportion of US consumers believe grass-fed beef has virtues, and seem willing to pay for it - if it is govt-certified and clearly labeled. 20
12,000 mil head US LAMB INVENTORY 10,000 8,000 6,000 4,000 2,000 0 21
450 mil lb. Domestic Lamb Production + Imports 400 350 300 250 Imports 200 150 100 50 US domestic production 0 22
Most commercially-marketed lambs are finished by grain feeding (often with bland flavor) and include very large breeds weighing up to 150-lb live. There are 3 major slaughter plants in California, Colorado and Texas, with smaller ones in Midwest & Eastern states. A significant halal plant is at Dearborn, Michigan (in Detroit, where largest Islamic human population lives) and it tends to handle smaller-medium-size lambs, often transported 1,000+ miles Daily national lamb slaughter rarely exceeds 10,000 head, which is a small supply base for over 300 million people - but most of them don't eat lamb Per capita consumption of lamb in US is less than one pound - nearly half of which is imported. Almost 75% of lamb imports coming from Australia (~47k MT), which is now exporting lamb from heavier-carcasses to US. New Zealand lamb imports in 2014 were ~17k MT, largely product from light to medium-weight carcasses Virtually all imported lamb is grass-fed - but is rarely certified as such - and is mostly sold as legs or chops, with ground lamb (mince) sometimes promoted Mutton is rarely consumed in US. Many older (breeding) sheep are sold to Mexico for slaughter, or sometimes sold illicitly to Islamic people for backyard slaughter. Mutton imports mostly from Australia at ~2800 MT last year 23
Lamb is mostly eaten in big cities. Consumers mainly are in ethnic categories, including Jewish (traditional customs) and other Middle East people who often buy halal. Greeks and Italians often like lamb at Easter or Christmas. British and Aust- NZ expatriates tend to like or buy lamb, but it is often hard to find in supermarket meat cabinets. Lamb tends to have either an "expensive image" - or "no image Restaurants and foodservice channels are gradually putting lamb on menus (Outback restaurant chain regularly offers lamb chops (from New Zealand). Individual rib chops (nick-named "lollipops") are gaining popularity as "finger food" at cocktail parties. 24
cent/lb. 400 US LAMB CARCASS PRICES. USDA WEEKLY WT. AVG. PRICE 350 300 250 200 150 100 2007 2008 2009 2010 2011 2012 2013 2014 2015 25
Since late 1960s, US, Australian and New Zealand bodies have formed joint promotion committees to publicize generic attributes of lamb - often nutrition. They now have a Tri-Lamb Committee (comprising US Sheep Industry Council, Meat and Livestock Australia and Beef- Lamb New Zealand). Each contributes $100,000 per annum to a joint budget. 26
The Washington-based Meat Importers Council of America Inc (MICA) has many members who are longstanding beef importers, and would welcome CIF offers of beef product from overseas suppliers - in container loads approximating 40,000 lbs (Australia & NZ ship 20,000-lb containers). MICA welcomes exporter members and provides excellent information services, including monthly price and marketing data. Exporters customarily guarantee their product (by insurance) to pass USDA import inspection for entry into US commerce. Lamb importers are smaller-size and cover niche markets. 27
There is certainly prospective buying interest in USA for British beef and lamb to justify the costs for UK exporters to undertake serious marketing exploration! Personal communication with US importers will naturally be helpful and needed! Product specifications must be clearly stated, clearly understood by all parties, and clearly labeled - IF and when when placed on display at retail level - LIKE YOU SEE IN THE PICTURE HERE! BEEF trade will be essentially commodity-style - for trimmings and cuts used in grinding and industrial processing. Your Irish neighbors have this year set precedents and guidance for this. Hopefully they can continue their beef exports, without animal health problems. LAMB is a niche market prospect, needing importer guidance and support - specially to find US retail outlets whose customers include expatriates with UK and Commonwealth backgrounds - where lamb was/is part of their diets - plus other ethnic lamb-lovers who can be attracted to the great taste & virtuous attributes (including strict animal welfare rules - all clearly labeled with promotional material) of genuine British lamb! And REMEMBER there is also a growing market in USA for certified halal lamb! FINALLY - a recent national survey by the US food retailers trade association - found that a huge 83% - of all 330 million people living in USA - now participate at various times in food shopping! They are increasingly discerning, ask many questions, and want good factual information! SO BE PREPARED TO TELL THEM YOUR GOOD STORY. 28
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Thank you for your attention 31