NAMP Management Conference Chicago, Illinois March 22, 2002

1
NAMP Management ConferenceChicago,
IllinoisMarch 22, 2002

• Exporting, Who, What, How, Why
• John Hinners, U.S. Meat Export Federation

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Putting U.S. Meat On The Worlds Tables
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Comments from USDA

• Expanding high-value meat export sales in the
  future benefits both processors and livestock
  producers, expands economic activity and expands
  the demand base for both grains and oilseeds.
• USDA Food and Agriculture Policy- Taking Stock
  in a New Century

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USMEF Mission Statement
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Global Strategic Priorities

• Total Carcass Utilization
• Trade Support
• Buyer Education Loyalty
• Market Presence
• Industry/Product Image
• Market Access
• Food Safety

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Exports As Percent Of U.S. Pork Production
USMEF, Pork/PVM Exports As Percent of Domestic
Production
7
U.S. Global Market Share
FAO, USMEF Estimate
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Distribution of U.S. Pork Pork Variety Meat
Exports 2001
Exports By Value Volume
Percent
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Exports As Percent Of Production
20
15
10
5
0
'90
'91
'92
'93
'94
'95
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
USMEF, Beef/BVM Exports As Percent of Domestic
Production
10
U.S. Beef/BVM Market Share
30
25
20
15
10
'90
'91
'92
'93
'94
'95
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
FAO, USMEF Estimate, Global Market Share
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Distribution of U.S. Beef Beef Variety Meat
Exports 2001
Percent
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Exports Provide An Opportunity To Add Value













Short Rib






Short Plate






Liver






Tripe

TOTAL VALUE ADDED 710 MILLION EQUIVALENT TO
19.72 PER HEAD


Prices will vary over time. This example
approximates the value of the average price
spread between domestic and export prices for
these items in 2000. Based on 36 million head
slaughtered.
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Total Carcass Utilization

• Maximize returns for underutilized cuts of beef,
  pork, lamb.
• Outlet for red meat items with limited demand in
  U.S.
• Regional Chefs Competition Shoulder clod top
  blade top sirloin butt cap muscle.
• MegaBalls U.S.Meatball introduced into the wet
  markets in January 2000. Summer of 2001, Shun
  Sen introduced Pork Mega Ball.

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U.S. Pork Exports Set Records in 2001

• U.S. exports of beef and pork topped 1.8 million
  MT valued at 5 billion in 2001.
• Pork exports surged 62 between 1996 and 2001.
  Beef was up 19.
• Japan Mexico are the largest importers of U.S.
  beef and pork.

U.S. Beef Pork Exports (1,000 MT)
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U.S. Exports Expected to Continue Steady Growth

• USMEF forecasts exports of U.S. beef and pork to
  increase at an average annual growth rate through
  2004 of 7 and 12, respectively.
• Driven by continued growth in exports to Japan
  and Mexico.
• Exports to China and Russia will become
  increasingly more important.

U.S. Beef Pork Export Forecasts (1,000 MT)
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Factors Driving Growth in U.S. Red Meat Exports

• Rising Per Capita Incomes
• Growing Middle Class
• Changes in Diet
• Declining Self-sufficiency in Leading Import
  Markets
• Expanding Market Access
• USMEF/Industry Marketing Initiatives

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A Guide To Exporting

• The U.S. is a world premium producer and exporter
  of beef, lamb, pork poultry
• U.S. meat exports are being enhanced through new
  trade agreements and opening of new markets
• Opportunities to capitalize requires knowledge,
  trust and partnerships

Mexico Retail Promotion
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Questions to Ask

• Is my company export ready?
• Do I have a committed financial resource base and
  adequate support staff?
• Do I have a marketing plan for my products?
• Will my international marketing draw resources
  away from my domestic marketing program?
• Can I commit to a high level of service 5,000 to
  6,000 miles from my plant?
• Do I have worldwide knowledge of the meat trade?

Japan Retail Promotion
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Export Tools Necessary to Succeed

• An International Business Plan
• Define your goals
• Define understand your markets
• Define your current financial status
• Create a action plan timetable to measure
  success
• Create a prospect buyer list
• Know your competition

USMEF Chef Competition in Mexico
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Understanding Your Market Competition - Major
Beef/BVM
FAO, World Trade Atlas (MT)
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Understanding Your Markets Distribution of
Beef/BVM 2000
(Volume)
U.S. Department of Commerce/Trade Census Bureau
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Understanding Your MarketsDistribution of
Beef/BCM Exports 2005
USMEF Beef Beef Variety Meats, Forecast 2005
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Where Is The Growth?
Market Growth as a Percent of Total 280K MT Growth
USMEF
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Understanding Food Price Comparisons
Chuck Roll
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Buyer Identification AssistanceUSMEF Offices
Representatives
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Assistance With Identifying Buyers Trade Shows

• International trade shows facilitate contact
  between U.S. exporters and buyers in export
  markets.
• Includes translation services

USMEF Member (Proliant) exhibiting at 2002 FOODEX
show in Japan March 12-15
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Assistance with Identifying Buyers Advertise
Promote

• An avenue to find buyers is to advertise in
  international trade magazines and trade
  publications

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Assistance with Identifying Buyers Trade
Missions

• USMEF and State Department of Agriculture trade
  missions allow buyers and sellers an opportunity
  to conduct business.

USMEF led trade missions
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International Product Market Entry Options

• Direct Exporting
• Most common way used by small business
• Greater risk increased start-up cost
• Need to identify transportation companies to ship
  product
• Indirect Exporting
• Use of an export commissioned agent, management
  company or trading company
• Agents or trading companies may partner on
  product and share some risk
• Loose some control and image, and name are at
  stake

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Challenges

• Can a sale be made without offering a credit?
• Does the buyer have a good credit history?
• What are the political conditions of the country?
• Can your business survive if it did not get paid?
• Do you have a plan if your shipment is rejected?

Japan U.S. Beef Retail Promotion
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Challenges

• Food Safety Issues.
• Foot Mouth Disease.
• Bovine Spongiform Encephalopathy (BSE).
• Animal identification source verification.
• Increasing global competition from Canada, Brazil
  and Australia.
• Non-recognition of USDAs FSIS inspection system.
• High tariffs.
• Understanding biotechnology
• Payment for product
• Shipment deadlines

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Opportunities Current Future

• Improved market access.
• Global economic growth.
• Current animal health issues are bolstering U.S.
  position as a safe and high quality meat
  supplier.
• Future opportunity will continue to be in the
  Asian regions and to a lesser degree, Latin
  America.
• Half the worlds population and GDP growth to
  2005 will occur in these two regions.
• With 80 of U.S. exports already destined for
  these two regions, the U.S. is well positioned
  for future growth.
• China and Russia to become increasingly more
  important to U.S. pork and beef industries.

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Consider the UnexpectedExample.BSE in Japan
After
Before

• Complete ban on MBM usage and import
• BSE inspection on all 4,500,000 cattle
• All cattle registry system

• No MBM regulation
• No BSE inspection
• No registry system

BSE
USMEF Tokyo Japan 2001
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Japanese View
If total market shrinks, domestic production
gains share
49,819
If Total MarketShrinks 35
320,425
24,570
158,031
349,104
172,175
48MarketShare
32MarketShare
323,180
323,180
2000
2002
Domestic
U.S.
Australian
Other
MAFF Statistics
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Why Does This Matter?

• Japan is the largest export market for U.S. beef
  and beef variety meats -- 44 of the industrys
  total exports by volume and 51 on a value basis
  -- 1.8 billion in 2000.
• With beef exports to Japan off by about 50, the
  U.S. beef industry is losing 80 million each
  month.
• Cattle-Fax estimates a negative impact of
  0.50-1.00 / cwt
• Industry economists estimate that a 50 reduction
  in Japan exports for one year would negatively
  impact fed cattle prices by 2.50 per cwt.
  Short-term, it is thought the impact could run as
  high as 3.50 to 4.00 per cwt.

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Japan Objective

• Reestablish Japanese consumers confidence in
  the safety, healthiness and wholesomeness of beef
  and to rebuild sales of U.S. beef in the retail
  and foodservice sectors.

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Phase I Crisis Management
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The Competitions Efforts
Japan ?
? Australia ?
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Key Components Phase II

• Consumer Campaign
• Safety Campaign
• U.S. Beef Promotions
• Evaluation
• Implementation

USMEF will invest more than 8 million to gain
consumer trust in Japan
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Export Advice Assistance

• U.S. Meat Export Federation-Denver, CO
• USDA, Foreign Agriculture Service-Washington, DC
• USDA Transportation Marketing Division-
  Washington, DC
• USDA Commodity Credit Corporation-Washington, DC
• Agriculture Marketing Service, Livestock
  Division-Washington, DC

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Thank You For Your Attendance at the 2002 NAMP
Management Conference