1. Global demand and trade conclusions 2. Key trade drivers 3. Species trade overview Pigmeat Poultrymeat Beef

1. Gira : LTM Sept 2010 1

2. Gira : LTM Sept 2010 2 1. Global demand and trade conclusions 2. Key trade drivers3. Species trade overview Pigmeat Poultrymeat  Beef Sheepmeat4. Reflection

3. Gira : LTM Sept 2010 3 2H08 was a watershed period – raising real questions of what the future may hold in store 1-3Q08 boom in global demand and in trade, pulled by increasingly affluent consumers (e.g. in Asia, Russia, MENA etc) But higher feed and oil costs created profit pressure for many producers 4Q08 banking crisis caused steep downturn, and reversal of many trends, with: fall in global trade due to a credit shortage and liquidity. Protectionism: RU, CN etc a decrease in meat demand and trading-down, due to consumers' declining disposable income and fears of recession a dramatic loss of shareholder value for all companies, including several major processors dramatic (but probably short term) cost declines in feed and oil-related costs dramatic strengthening of the USD – which changes relative regional competitiveness. Threat of human and animal health crises AI - blue tongue - CSF - dioxin ... 2009 … 2010/11 … Uncertainty over many of the drivers of world meat demand and supply

4. Gira : LTM Sept 2010 4 Economic growth, population rise, and urbanisation drive meat consumption growth … especially to BRIC

5. Gira : LTM Sept 2010 5 Global meat consumption growth dominated by poultry, driven by its relative price

6. Gira : LTM Sept 2010 6 Global meat trade grows by 18% volume (2010-20f). PY the main winner Poultry leads trade growth at over 2.4%p.a. trend, but slows from last 10 years By-products (mainly from US and EU) Wide range of competitive products from BR, and TH Beef growth at 1.2%: supply constrained Pigmeat growth stable at 1.2%: market access constrained Sheepmeat trade very slow growth as supply constrained

7. Gira : LTM Sept 2010 7 Export growth driven by increased specialisation of production and export strategy Brazil and US the big winners (>50% share of global growth) with both input cost and scale efficiencies making them competitive in PK, BF & PY

8. Gira : LTM Sept 2010 8 China: Meat consumption growth remains strong (33% of global growth) Pigmeat accounts for 37% of primary protein consumption, compared to 43% for aquaculture, which is growing faster. 13mt cwe meat consumption growth forecast (slower growth than historic) Poultry is the fastest growing meat: consumption driven by relative price

9. Gira : LTM Sept 2010 9 Chinese meat production continues to grow CN Government uses higher prices to motivate production growth, enabled by productivity increases (including feedgrain) Note that KFC has over 2000 outlets in China, compared to 1300 for McD’sNote that KFC has over 2000 outlets in China, compared to 1300 for McD’s

10. Gira : LTM Sept 2010 10 China’s increase in imports are small in terms of consumption but significant for global trade CN Government uses selective import controls to protect domestic production growth strategy Note that KFC has over 2000 outlets in China, compared to 1300 for McD’sNote that KFC has over 2000 outlets in China, compared to 1300 for McD’s

11. Gira : LTM Sept 2010 11 Rising BR prices are growth driver … to exploit ‘spare’ capacity … but limited by currency, logistics and export market sensitivities

12. Gira : LTM Sept 2010 12 Firm Brazilian meat sector growth, at home and in export Production is forecast to rise by +3.4 mio t cwe by 2020, +15% on 2010… Strong consumption growth +2 mio t cwe, pulled by poultry, beef and pork meat in declining order Export increase by +1.4 mio t cwe by 2020 pulled by poultry products +900 k tons cwe, followed by beef +380 k tons cwe

13. Gira : LTM Sept 2010 13 Decreasing Russian meat imports beef (and pork) still needed Values for domestic meat are more or less the same (5 RUB difference/kg) but we don’t have the whole serie now.Values for domestic meat are more or less the same (5 RUB difference/kg) but we don’t have the whole serie now.

14. Gira : LTM Sept 2010 14 1. Global demand and trade conclusions 2. Key trade drivers3. Species trade overview Pigmeat Poultrymeat  Beef Sheepmeat4. Reflection

15. Gira : LTM Sept 2010 15 Currency: USD assumed to weaken slightly further against most major currencies … but slightly strengthen against Euro

16. Gira : LTM Sept 2010 16 Agri-politics are a major driver for the development of the global meat industry … and for trade Horizontal analysisHorizontal analysis

17. Gira : LTM Sept 2010 17 Sustainability is on the political & commercial agenda, at all levels … including retail and consumer Renewable energy, and especially Biofuel policy is a related and important issue Ethanol from sugar cane (BR) is universally recognised as cost effective and environmentally sensible (except perhaps mono-culture issues). But how much more?what market access? US ethanol from corn is universally criticised …. But is an enormous industry EU ethanol from wheat + bio-diesel (from rapeseed) is dubious – but growing Palm Oil (from Indonesia) has been high growth – but attracting much criticism due to de-forestation and then monoculture arguments A recent report for the European Parliament argues that some standardized calculations are needed for the carbon footprint of meat production systems in the EU. In an unregulated marketplace, there is a major risk that some operators will make claims which act to the detriment of competing products. Renewable energy, and especially Biofuel policy is a related and important issue Ethanol from sugar cane (BR) is universally recognised as cost effective and environmentally sensible (except perhaps mono-culture issues). But how much more?what market access? US ethanol from corn is universally criticised …. But is an enormous industry EU ethanol from wheat + bio-diesel (from rapeseed) is dubious – but growing Palm Oil (from Indonesia) has been high growth – but attracting much criticism due to de-forestation and then monoculture arguments A recent report for the European Parliament argues that some standardized calculations are needed for the carbon footprint of meat production systems in the EU. In an unregulated marketplace, there is a major risk that some operators will make claims which act to the detriment of competing products.

18. Gira : LTM Sept 2010 18 BSE and other animal diseases have caused huge disruption and extra costs… are a continued risk…and block economic trade BSE cases continue …at low level: declining UK BSE cases and smooth recovery of OTM to food chain low vCJD incidence … thankfully! Major BSE cost consequence, and loss of 5th qtr. revenue … easing Other disease problems difficult to control in extensive livestock FMD – access & risk for S.America – PK implications BTV8 .. 1, 6, BVD, TB, Johnes other species have problems too: HPAI H5N1, PMWS, PRRS, CSF … The cost to the industry is huge: Less government compensation Revenue impact - Disrupted trade. Obstacles & Opportunities … meat industry needs to be very well organised: to anticipate and prevent To control and eradicate To communicate BSE has had a huge and largely permanent effect on production standards, food purity, trade … and consumer demand. The other key diseases need to be profiled horizontally for their strategic impact (with some scope for regional iteration) : Productivity loss and animal mortality Prevention Cost of production Impact on trade: NTB, probability of gaining access, risk of disruption Impact on demand (normally a short term issue, in terms of reaction to media storm crisis)BSE has had a huge and largely permanent effect on production standards, food purity, trade … and consumer demand. The other key diseases need to be profiled horizontally for their strategic impact (with some scope for regional iteration) : Productivity loss and animal mortality Prevention Cost of production Impact on trade: NTB, probability of gaining access, risk of disruption Impact on demand (normally a short term issue, in terms of reaction to media storm crisis)

19. Gira : LTM Sept 2010 19 Animal disease is hugely disruptive to trade. Structural advantage to the well organised and isolated

20. Gira : LTM Sept 2010 20 Suddenly the M&A stream has started again … the BR at the forefront … with trade implications

21. Gira : LTM Sept 2010 21 1. Global demand and trade conclusions 2. Key trade drivers3. Species trade overview Pigmeat Poultrymeat  Beef Sheepmeat4. Reflection

22. Gira : LTM Sept 2010 22 PK: Pigmeat prices will continue to rise in long term, but with typical cyclical volatility Long term prices should rise in real terms, reflecting increased costs (partially offset by productivity gains) Price evidence of RU and CN Gov’t policy to encourage production Industrial production systems reduce the classic 3 year supply cycle… but price volatility will remain a disruptive factor Synchronised global volatility (smoothed in protected markets)

23. Gira : LTM Sept 2010 23 Pigmeat Exports: US & Canada capture most of the export growth, but EU still important Global beef trade down by 4% in 2009, fragile recovery in 2010 Major decrease in imports in 2009: RU (-180 kt or -15%) – stabilisation expected in 2010 Lack of liquidity on the importers' side, weaker demand & devaluated RUB in 2009 AU & UY had shipped exceptional volumes to RU in 2008 (-110 kt in 2009) BR lost volumes (strong BRL), AR largely increased its shipments Stabilisation expected in 2010: falling domestic production cannot meet processors' demand The US, JP & the EU maintained their beef imports in 2009, despite recession But the US COOL program implementation (end 2008) resulted in much lower US imports of live cattle (from CA) in 2009 In the EU, increasing consumption of lower priced products (economic recession – some recovery expected in 2010) In JP, the US achieved higher exports in 2009 – and expect even more in 2010 AR was the only country able to raise its exports in 2009 (+40%) – not sustainable in 2010 Export restrictions were eased due to large supply, stable retail prices & the need of income US & CA exports still suffer from BSE-linked restrictions BR: limited supply, BRL appreciation AU suffered from increased competition from the US & South America Global beef trade down by 4% in 2009, fragile recovery in 2010 Major decrease in imports in 2009: RU (-180 kt or -15%) – stabilisation expected in 2010 Lack of liquidity on the importers' side, weaker demand & devaluated RUB in 2009 AU & UY had shipped exceptional volumes to RU in 2008 (-110 kt in 2009) BR lost volumes (strong BRL), AR largely increased its shipments Stabilisation expected in 2010: falling domestic production cannot meet processors' demand The US, JP & the EU maintained their beef imports in 2009, despite recession But the US COOL program implementation (end 2008) resulted in much lower US imports of live cattle (from CA) in 2009 In the EU, increasing consumption of lower priced products (economic recession – some recovery expected in 2010) In JP, the US achieved higher exports in 2009 – and expect even more in 2010 AR was the only country able to raise its exports in 2009 (+40%) – not sustainable in 2010 Export restrictions were eased due to large supply, stable retail prices & the need of income US & CA exports still suffer from BSE-linked restrictions BR: limited supply, BRL appreciation AU suffered from increased competition from the US & South America

24. Gira : LTM Sept 2010 24 Pigmeat Imports: show the growth of CN, but from a low base

25. Gira : LTM Sept 2010 25 PY: Poultry prices show continued upward trend … pulled by demand growth and rising feed costs In a largely commodity business, price differences explained by: Fresh meat preference … whereas 3rd country trade is mainly frozen Welfare costs, with lower stocking densities Feed cost differentials, especially factoring in transportation Labour cost (very high in the EU) Economies of scale, especially in processing … TRQs and NTBs

26. Gira : LTM Sept 2010 26 Poultrymeat exports continue to grow strongly for all the main players (except EU) Global beef trade down by 4% in 2009, fragile recovery in 2010 Major decrease in imports in 2009: RU (-180 kt or -15%) – stabilisation expected in 2010 Lack of liquidity on the importers' side, weaker demand & devaluated RUB in 2009 AU & UY had shipped exceptional volumes to RU in 2008 (-110 kt in 2009) BR lost volumes (strong BRL), AR largely increased its shipments Stabilisation expected in 2010: falling domestic production cannot meet processors' demand The US, JP & the EU maintained their beef imports in 2009, despite recession But the US COOL program implementation (end 2008) resulted in much lower US imports of live cattle (from CA) in 2009 In the EU, increasing consumption of lower priced products (economic recession – some recovery expected in 2010) In JP, the US achieved higher exports in 2009 – and expect even more in 2010 AR was the only country able to raise its exports in 2009 (+40%) – not sustainable in 2010 Export restrictions were eased due to large supply, stable retail prices & the need of income US & CA exports still suffer from BSE-linked restrictions BR: limited supply, BRL appreciation AU suffered from increased competition from the US & South America Global beef trade down by 4% in 2009, fragile recovery in 2010 Major decrease in imports in 2009: RU (-180 kt or -15%) – stabilisation expected in 2010 Lack of liquidity on the importers' side, weaker demand & devaluated RUB in 2009 AU & UY had shipped exceptional volumes to RU in 2008 (-110 kt in 2009) BR lost volumes (strong BRL), AR largely increased its shipments Stabilisation expected in 2010: falling domestic production cannot meet processors' demand The US, JP & the EU maintained their beef imports in 2009, despite recession But the US COOL program implementation (end 2008) resulted in much lower US imports of live cattle (from CA) in 2009 In the EU, increasing consumption of lower priced products (economic recession – some recovery expected in 2010) In JP, the US achieved higher exports in 2009 – and expect even more in 2010 AR was the only country able to raise its exports in 2009 (+40%) – not sustainable in 2010 Export restrictions were eased due to large supply, stable retail prices & the need of income US & CA exports still suffer from BSE-linked restrictions BR: limited supply, BRL appreciation AU suffered from increased competition from the US & South America

27. Gira : LTM Sept 2010 27 Poultrymeat import regions will change share of trade, with MENA becoming even more important

28. Gira : LTM Sept 2010 28 BF: Beef prices: Rising price trend, but different price levels for very different products Brazil represents the big low cost supplier to export markets Argentinean price suppressed by politics, but limited by supply… which has seen price jump in 2010.

29. Gira : LTM Sept 2010 29 Beef & Veal export volumes recovering for the key shippers, from current depressed demand conditions Global beef trade down by 4% in 2009, fragile recovery in 2010 Major decrease in imports in 2009: RU (-180 kt or -15%) – stabilisation expected in 2010 Lack of liquidity on the importers' side, weaker demand & devaluated RUB in 2009 AU & UY had shipped exceptional volumes to RU in 2008 (-110 kt in 2009) BR lost volumes (strong BRL), AR largely increased its shipments Stabilisation expected in 2010: falling domestic production cannot meet processors' demand The US, JP & the EU maintained their beef imports in 2009, despite recession But the US COOL program implementation (end 2008) resulted in much lower US imports of live cattle (from CA) in 2009 In the EU, increasing consumption of lower priced products (economic recession – some recovery expected in 2010) In JP, the US achieved higher exports in 2009 – and expect even more in 2010 AR was the only country able to raise its exports in 2009 (+40%) – not sustainable in 2010 Export restrictions were eased due to large supply, stable retail prices & the need of income US & CA exports still suffer from BSE-linked restrictions BR: limited supply, BRL appreciation AU suffered from increased competition from the US & South America Global beef trade down by 4% in 2009, fragile recovery in 2010 Major decrease in imports in 2009: RU (-180 kt or -15%) – stabilisation expected in 2010 Lack of liquidity on the importers' side, weaker demand & devaluated RUB in 2009 AU & UY had shipped exceptional volumes to RU in 2008 (-110 kt in 2009) BR lost volumes (strong BRL), AR largely increased its shipments Stabilisation expected in 2010: falling domestic production cannot meet processors' demand The US, JP & the EU maintained their beef imports in 2009, despite recession But the US COOL program implementation (end 2008) resulted in much lower US imports of live cattle (from CA) in 2009 In the EU, increasing consumption of lower priced products (economic recession – some recovery expected in 2010) In JP, the US achieved higher exports in 2009 – and expect even more in 2010 AR was the only country able to raise its exports in 2009 (+40%) – not sustainable in 2010 Export restrictions were eased due to large supply, stable retail prices & the need of income US & CA exports still suffer from BSE-linked restrictions BR: limited supply, BRL appreciation AU suffered from increased competition from the US & South America

30. Gira : LTM Sept 2010 30 Beef & Veal import demand recovers in most markets volumes from 2009 set back

31. Gira : LTM Sept 2010 31 Sheepmeat prices: ‘pulled upward’ by short supply Supply limits, and increasing demand from selected markets has lifted prices in the last 3 years, which will continue in the long term S.American prices are low: not motivating

32. Gira : LTM Sept 2010 32 Sheepmeat trade dominated by NZ & Australia … but both limited by supply constraints EU & US, remain the key lamb importers - with the best prices MENA and Asia growing demand for mutton (at low prices) … but supply limited

33. Gira : LTM Sept 2010 33 Closing observations The global trade in meat will grow Demand needs of some of the big importers Cost efficiency of some of the big exporters Aided by WTO and FTAs etc … eventually … but causing defensive reaction in many markets Good, sustainable trade should not just be about economics Needs to be an appropriate part of the supply portfolio ... in volume, quality and price … and broad export demand portfolio is least risky Sensitive to domestic food policy (of importing countries) Overly optimistic volumes will create problems for the exporters Better to differentiate exports than treat as a commodity Exporters need to have the highest standards … of everything … including market intelligence

34. Gira : LTM Sept 2010 34