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Global Outlook Symposium Asia Pacific Region

Global Outlook Symposium Asia Pacific Region. Joel Haggard Senior V.P., Asia Pacific Region October 29, 2007. U.S. Beef Exports- Asia Pacific Region. Thousand MT. Exports to the region +50%; +>160,000 MT comparing 2014 to 2003.

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Global Outlook Symposium Asia Pacific Region

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  1. Global Outlook SymposiumAsia Pacific Region Joel Haggard Senior V.P., Asia Pacific Region October 29, 2007

  2. U.S. Beef Exports- Asia Pacific Region Thousand MT Exports to the region +50%; +>160,000 MT comparing 2014 to 2003 Source: USDA and USMEF Forecasts; assuming market access mid 2008

  3. U.S. Pork Exports- Asia Pacific Region Thousand MT Exports to the region +40%; +>100,000 MT comparing 2014 to 2007 est. Source: USDA and USMEF Forecasts

  4. Key Drivers For Exports • Political Situation • Economic Situation • Domestic Production • Market Access • Consumer Trends • Competitor Developments • Specific Opportunities

  5. Asia Pacific Beef Market – Major Themes 2007-08 • Continued US industry losses associated with access constraints • Solid regional macro fundamentals = beef demand • China’s market potential grows • New markets create new demand points (e.g. Vietnam & Macau)

  6. Asia Pacific Pork Market – Major Themes 2007-08 • China Pacific market access problems/threats • US pork competitiveness increasing (esp. Aust. & China) • Korea emerges as a major US pork destination • Assessing China as a future market

  7. Asia Pacific – Political Factors Affecting the US Red Meat Trade * Upcoming elections in Korea (12/19/07), Taiwan (3/22/08), and Thailand (12/23/07), create challenges for beef and pork access. • US pork, beef, and other US agricultural export access affected by China’s food & product quality/safety crisis. • Political considerations will determine opening of Chinese & Indonesian beef markets. • Australian pork industry seeks import protection during critical election season.

  8. Asia Pacific – Economic Factors Affecting the US Red Meat Trade • Solid economic growth across the region (standouts: China, Vietnam, Macau) • Weak dollar increases UScompetitiveness; esp. – Korea: beef and pork – Australia: pork • China – Olympic surge factor • China – long-term yuan appreciation • Bubble threats (China, HK)

  9. Domestic Production Issues in the Asia Pacific Region • High feed grain prices squeezing domestic livestock producers throughout Asia, especially Taiwan, Philippines, and China. • However, strong demand for meat, reflected in high prices, keeps struggling livestock industries afloat and feed grain demand strong (e.g. Vietnam). • China: hog disease, high feed prices, cyclical lows, and strong demand create severe pork shortage & record prices. • Taiwan: hog producers seek government relief from huge losses and a plunging market. • Philippines: possible FMD-free declaration could shake up meat import market. • Disease Issues: China, Korea, Philippines, Vietnam

  10. Regional Competitor Developments • Domestic producers promote against imports: e.g. Korea’s Hanwoo industry & Taiwan pork producers with Gov’t assistance. • China: lack of North American beef imports fuels domestic grain-feeding to meet surging “marbled beef” demand. • Chinese pork shortage & US access issues spurs approval of new suppliers/new supply conditions (e.g. Denmark). • Korea: Australia continues to promote “Clean & Safe”. • Canadian bone-in beef access to HK and Philippines imminent; supply agreements with Indonesia.

  11. Current Status of Asian Pacific Beef Markets CountryCurrentOffer/orientation Korea b/less beef UTM UTM withconditions China ClosedUTM all beef; limited offal Hong Kong b/less beef UTM Phase in to OIE; no timeline Taiwan b/less beef UTM - Indonesia Closedb/less UTM + plant by-plant RAs Philippines b/less UTM some offalall beef products all ages;some offal Vietnam UTM all, no VTC - Singapore b/less beef UTM - Malaysia all products all ages - Macau b/less beef UTM likely to follow HK

  12. Asia Pacific: Existing and Potential Near-term Market Access Issues

  13. Asia Pacific Region : Increases in Import Pace (2005-2007)

  14. Korea: Pork Import Status 311,755 261,362 252,076 175,272 125,538 82,967 64,915 59,487 20,931 Note : Custom Clearance Basis

  15. Korea: Growth of Chilled Pork Sales at Retail Sector No. of Retail Stores featuring US chilled pork

  16. Korea: US Pork Sales after US beef Re-entry • Wholesale/Restaurant sales : Inconsistent US beef supply caused restaurants to retain pork menus. No major menu changes have occurred. • Retail sales • For retail chains selling US beef, US chilled pork sales decreased by 30% after US beef re-entry. • For retail chains not selling US beef, no change in US chilled pork sales (e.g. Costco Wholesale)

  17. US Pork Sales Competition at Korean BBQ Restaurants • October 1-31, 2007 • No mandatory requirement of COOL for pork at restaurant • Korean BBQ restaurants are reluctant to identify US pork. • 52 Korean traditional BBQ restaurants participated. • Evaluated sales increase and sales volume of US pork during promotion • Objective: sales + restaurant owner education

  18. Beef Import Status mt 325,823 224,036 212,765 178,221 160,096 162,113 25,427 10,518 Note : Custom Clearance Basis

  19. 2007: US Beef Access Chronology - I • March, 8, 2007 : MAF allows partial shipment rejection for bone chip findings. • April 1, 2007 : KORUS FTA negots. concluded. • May 30, 2007 : Whole rib bones found; plant suspended export eligibility suspended. • June 4, 2007 : Non-EV product found; NVRQS suspends inspection of US beef • June 8, 2007 : Suspension lifted. • June 18, 2007 : Whole bones found; plants suspended. • June 28, 2007 : USDA requests revision to health protocol after new OIE risk classification.

  20. 2007: US Beef Access Chronology - II • June 30 – July 8, 2007 : MAF conducts US on-site visits • July 16, 19 & 31, 2007 : Whole bones found; plants suspended. • August 1, 2007 : Short loin found: temporary suspension of quarantine inspection of all US beef. • August 8, 2007 : New Ag Minister appointed. • August 24, 2007 : Suspension of inspection was lifted. • September 4, 6 & 12, 2007 : Whole bones found: plants suspended. • October 5, 2007 : Total suspension re-imposed after “SRM” found (bone-in chuck roll); suspension to last until new protocol becomes effective. • October 11-12, 2007 : Technical consultations.

  21. Korea: Shifting Consumer Attitudes Toward US Beef • October 19, 2007 : 75.3% oppose import of bone-in US beef. • August 10, 2007 : 58.6% do not trust US beef. • May 4. 2007 : 55.8% said they will purchase US beef. • April 5, 2007 : 52.7% are willing to buy US beef if the price is cheap. • March 17, 2007 : 81.8% of restaurants are willing to serve US beef. • January 8, 2007 : 70.2% said they are not willing to purchase US beef • September 27, 2006 : 92% said they will eat Hanwoo even after US beef is imported.

  22. US Beef Monthly Retail Sales After Re-launch SRM finding on Aug 1 SRM finding on Oct 5

  23. Issue Advertisement – All Major Daily NewspapersSeptember 21, 2007 As much as my family loves to enjoy US beef, you can enjoy with confidence in Korea! Bones are not SRM OIE has approved the US’s ability to control BSE The taste of beef is same in Korea as you have enjoyed in the US. Our family is enjoying the beef produced by ourselves, and the same beef is exported to you. We will continue our efforts to produce tasty and high quality beef that satisfy my family, and consumers from all overthe world.

  24. China’s Many Markets:Emerging Cities China’s Average GDP growth rate: 10.1% Emerging City GDP Growth In research focusing on 14 critical emerging cities, GDP growth averaged over 16% -- far above China’s unprecedented 10.1% overall growth. Source : ATO Beijing

  25. China’s Young Middle Class Young market: Chinese growing affluence is concentrated amongst the 25-44 age group. In the West, wealth is greatest amongst those aged 45-54. Courtesy: ATO/Beijing

  26. Hotel –Tourism 210 Million China Growth in Inbound Tourism China will become the world’s top tourist destination within 12 years, with 210 million international visitors each year. 130 Million 2007 2020 2003 2004 2005 2006 World Tourism Organization Estimates Courtesy : ATO Beijing

  27. China Market Trends –Exposure Outbound Traveller Numbers • By 2020, 100 million Chinese will travel abroad each year, bringing home international tastes (estimated by CNTA) (estimated by WTO) (estimated by WTO) Source: China National Tourism Administration (CNTA) World Tourism Association (WTO) Courtesy : ATO Beijing

  28. China : Monthly Live Hog Prices Jan. 03-Apr.08 SARS ↓ → First Reports of “Blue Ear” Forecast → Present

  29. China : Pork Exports(CY : metric tons) Tons Major decreases – “North Korea”, Vietnam, Singapore

  30. Greater China – US Beef* Distribution Channels-2003 2003=US$127 million 11,651 tons USA 23,322 tons HK & Macau Hong Kong *Includes Variety Meats

  31. Greater China – US Beef Distribution Channels-2007 2007=US$50 million USA 10,000 tons to HK & Macau HK/Macau 6,000 tons to Vietnam Vietnam Includes variety meats

  32. China Pacific : Recovery of Grain-fed Beef Markets(US + Canadian Beef Exports to PRC, HK, Macau & Vietnam : 2002 – 2007) Metric Tons Total USA Excludes variety meats

  33. Greater China – US Beef Distribution Channels-2007 – Unrestricted Access 2007=US$200 million USA 40,000 tons China Direct 14,000 tons HK & Macau HK/Macau 1,000 tons Vietnam domestic usage Vietnam Includes variety meats

  34. The Rise of Macau • 2006 GDP growth 16.6%: 2nd quarter 2007 = 32%. • Macau’s gambling revenue now exceeds that of the Las Vegas Strip, and is likely to exceed that of Nevada in 2008. • Within next 2 years, Macau will add 17,000 hotel rooms, and 13 international luxury hotels. • Visitors to increase from 22 million to 36 million by 2010. • Demand increasing for HQB, primarily middle meats. • Weak import and distribution infrastructure is main constraint.

  35. HONG KONG : US Beef Chinese Fast Food Promotion

  36. Taiwan : Live Hog Price TrendsJan ’06- Oct’ 07 NT/Kg ‘000 head

  37. Taiwan : Beef Import Pace (Jan-Aug : metric tons) TOTAL 2006 - Record US Beef Imports USA

  38. Brazil Market Shares (volume) of Beef, Pork & Poultry Imports in HONG KONG, 2006 CY Beef = 205,824 Tons Pork = 452,107 Tons Poultry = 607,060 Tons * Includes v-meats

  39. Philippines : Meat & Poultry Imports (Jan-June) Pesos/$ Metric tons Appreciating↓ Depreciating ↑ Exchange Rate

  40. Philippines : New US Beef Cut Development - Roast Short Plate

  41. Australia : Pork Imports & Exports Exchange Rate (Aust $ / US$) Tonnage Appreciating ↓ Depreciating↑ ↓ Exchange Rate

  42. Thank You!

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