Beef I Indust ustry Issue ues Tri-State Beef Conference August - PowerPoint PPT Presentation

Beef I Indust ustry Issue ues Tri-State Beef Conference August 8-9, 2013 Abingdon, VA 1

Beef Cow Inventory 45000 40000 35000 1,000 Head 30000 25000 20000 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Beef Cows Data Source: USDA National Agricultural Statistics Service through Livestock Marketing Information Center. 2

Inventory & Production 45000 13.5 12.5 40000 11.5 Million Metric Tons 35000 1,000 Head 10.5 30000 9.5 25000 8.5 20000 7.5 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Beef Cows Production Data Source: USDA National Agricultural Statistics Service and Foreign Agricultural Service PSD online. 3

Key Industry Challenges  Long-term demand challenges – Increasing relative price disadvantage – Weak consumer incomes – Changing consumer demographics – Greater export dependence  Maintaining freedom to operate – Aggressive environmental regulation – Consumer acceptance issues 4

MYA Corn Price Data Source: USDA National Agricultural Statistics Service. 5

July 24, 2012 July 26, 2011 July 23, 2013 Persistent Drought 6

Retail Beef Prices 500 480 460 cents/lb 440 420 400 * All Fresh 380 J F M A M J J A S O N D 2013 2012 2011 1.35 Retail Price (% of Jan. 2008) 1.30 1.25 1.20 1.15 1.10 Data Source: USDA Economic Research Service 1.05 through Livestock Marketing Information Center. 1.00 0.95 0.90 0.85 7

Wholesale Beef & Fed Cattle Prices Choice BBCV 135 125 115 105 $/cwt 95 85 Data Source: USDA Agricultural Marketing Service through Livestock Marketing Information Center. Fed Steers 75 65 1 4 7 101316192225283134374043464952 Week Avg. 2009-11 2012 2013 8

MED. & LRG. #1 FEEDER STEER PRICES 700-800 Pounds, Southern Plains, Weekly $ Per Cwt. 165 155 Avg. 2007-11 145 135 2012 125 115 2013 105 95 JAN APR JUL OCT C-P-49 07/29/13 Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC

360.0 205.00 Pork Broiler 200.00 350.0 195.00 190.00 340.0 cents/lb 185.00 cents/lb 330.0 180.00 175.00 320.0 170.00 165.00 310.0 160.00 300.0 155.00 J F M A M J J A S O N D J F M A M J J A S O N D 2013 2012 2011 2013 2012 2011 Competing Meat Prices Data Source: USDA Economic Research Service through Livestock Marketing Information Center. 10

7,000 7,000 Beef Pork 6,500 6,500 6,000 6,000 million lbs million lbs 5,500 5,500 5,000 5,000 4,500 4,500 4,000 4,000 1 2 3 4 1 2 3 4 Quarter Quarter 2011 2012 2013 2014 2011 2012 2013 2014 25,000 Total Red Meat & Poultry 10,500 Broilers 24,000 10,000 23,000 9,500 million lbs million lbs 22,000 9,000 8,500 21,000 8,000 20,000 7,500 19,000 7,000 18,000 6,500 17,000 1 2 3 4 1 2 3 4 Quarter Quarter 2011 2012 2013 2014 2011 2012 2013 2014 Data Source: USDA Economic Research Service. 12

million lbs. 4,000 4,500 5,000 5,500 6,000 6,500 7,000 7,500 2007.1 Data Source: USDA Economic Research Service. 2007.2 2007.3 2007.4 Quarterly Beef & Pork 2008.1 2008.2 2008.3 2008.4 2009.1 2009.2 2009.3 2009.4 2010.1 Beef 2010.2 2010.3 Pork 2010.4 2011.1 2011.2 2011.3 2011.4 2012.1 2012.2 2012.3 2012.4 2013.1 2013.2 2013.3 2013.4 2014.1 2014.2 13 2014.3 2014.4

Pig Crop 31000 30.1 million head = record quarterly pig crop. 30000 29000 1,000 head 28000 27000 26000 25000 Q1 Q2 Q3 Q4 2011 2012 2013 Data Source: USDA National Agricultural Statistics Service through Livestock Marketing Information Center. 14

Broiler Eggs Set 215,000 210,000 205,000 200,000 195,000 1,000s 190,000 185,000 180,000 175,000 170,000 165,000 160,000 1 5 9 13 17 21 25 29 33 37 41 45 49 Week Avg. 2009-11 2012 2013 Data Source: USDA National Agricultural Statistics Service through Livestock Marketing Information Center. 15

H1 Beef Cow Slaughter 85.0 80.0 75.0 70.0 1,000 head 65.0 60.0 55.0 50.0 45.0 40.0 1 4 7 10 13 16 19 22 25 Week Avg. 2009-11 2012 2013 Data Source: USDA Agricultural Marketing Service through Livestock Marketing Information Center. 16

Per Capita Meat Consumption Data Source: USDA World Agricultural Outlook Board through Livestock Marketing Information Center. 17

2600 2400 2200 COF Placements and 1,000 head 2000 1800 Avg. Placement 1600 1400 1200 Weight 1000 J F M A M J J A S O N D Month Avg. 2009-11 2012 2013 750 740 Avg. Placement Wgt. (lbs/head) 730 720 710 Data Source: USDA National Agricultural Statistics Service through Livestock Marketing Information Center. 700 690 680 670 660 650 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2012 Avg. 2009-11 2013 18

Disposable Income Growth Real PDI annual growth rate <=1% for 4 years. 19

Changing Consumers 20

Meat Exports 25% 2012 Export Volumes: 20% % of production exported Broilers: 7.3 bil. lbs. 15% Pork: 5.4 bil. lbs. 10% Beef: 2.5 bil. lbs. 5% 0% Beef Pork Broilers Data Source: USDA Foreign Agricultural Service. 21

Freedom to Operate  Regulatory freedom – Biggest concern now is probably EPA • Clean Air Act / Clean Water Act  Social license to operate – Animal rights/welfare, food safety, environmental stewardship 22

Social License Levels of Social License to Operate (Boutilier and Thomson, 2011) 4 Factors Affecting SLO Level Institutionalized Trust 1. Inter-actional Trust 2. Socio-Political Legitimacy 3. Economic Legitimacy 4. 23

How to Respond  To economic challenges – Be informed; be creative; be customer-focused  To regulatory/political challenges – Be engaged  To social challenges – Be transparent; don’t assume everyone knows what you do and why you do it 24