Taking Dead Aim At The US Cattle Taking Dead Aim At The US Cattle BusinessBusiness

AN OVER-VIEW OF THE USA AN OVER-VIEW OF THE USA CATTLE MARKET & FUTURE THREATSCATTLE MARKET & FUTURE THREATS

Global Animal Products, Inc. (US Office)Global Animal Products, Inc. (US Office)

Ken Ridenour, M.S.Ken Ridenour, M.S.

TOPICSTOPICS

The USA Feedlot – Current Cattle IndustryThe USA Feedlot – Current Cattle Industry

Beef Checkoff ProgramBeef Checkoff Program

Future ThreatsFuture Threats

Personal Opinion – Direction That The World Personal Opinion – Direction That The World Cattle Market Could Take In The FutureCattle Market Could Take In The Future

TOTAL CATTLE IN THE USATOTAL CATTLE IN THE USA97.1 million head (Jan. ’07)97.1 million head (Jan. ’07)

Average cow herd size – 35 headAverage cow herd size – 35 head

U.S. Cattle & Calves Inventory

90

92

94

96

98

100

102

104

106

'90 '91 '92 '93' '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06

Year

(mill

ion

hea

d)

97.1 million97.1 million33rdrd consecutive consecutive year of expansionyear of expansion33.3 million beef 33.3 million beef cowscowsHeifers held back Heifers held back 5.9 million5.9 millionCalf crop estimated Calf crop estimated at 37.6 million headat 37.6 million head

TOTAL CATTLE AND BEEF PRODUCTION IN THE USATOTAL CATTLE AND BEEF PRODUCTION IN THE USA

90

92

94

96

98

100

102

104

106

'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06

Year

mill

ion

head

9

9.5

10

10.5

11

11.5

12

12.5

bill

ion

, kg

Cattle Production

USA FEEDLOT MARKETUSA FEEDLOT MARKETCattle on feed February 2007Cattle on feed February 2007 11,726,00011,726,000

Cattle slaughtered – Week ending March 10, 2007Cattle slaughtered – Week ending March 10, 2007 632,000632,000

Average Live Weight – Week ending March 10, Average Live Weight – Week ending March 10, 20072007

579 kg579 kg

Average Carcass Weight – Week ending March 10, Average Carcass Weight – Week ending March 10, 20072007

348 kg348 kg

FEEDER CATTLE (Steers)FEEDER CATTLE (Steers)Amarillo, TexasAmarillo, Texas

WeightWeight Price R/kgPrice R/kg

10 MARCH 0710 MARCH 07

155kg155kg 23.3923.39

205kg205kg 22.8122.81

250kg250kg 20.7520.75

295kg295kg 17.3617.36

340kg340kg 17.3617.36

Fat cattle on hoofFat cattle on hoof 16.2816.28

Avg. Carcass priceAvg. Carcass price 24.2024.20

RATION COSTRATION COSTMARCH 2007MARCH 2007

Rand/Metric TonRand/Metric Ton

Corn (Texas Panhandle)Corn (Texas Panhandle) 1,485.001,485.00

Alfalfa HayAlfalfa Hay 1,408.641,408.64

Finisher Ration (DMB)Finisher Ration (DMB) 1,774.801,774.80

Cost of Gain with all Cost of Gain with all charges/kgcharges/kg

14.0514.05

Loss per headLoss per head 225.00225.00

ETHANOLETHANOL110 Operating Plants110 Operating Plants8 of the above are expanding8 of the above are expanding73 plants are under construction73 plants are under construction18.85 billion liters of ethanol were 18.85 billion liters of ethanol were produced in 2006produced in 200642.987 billion liters are expected to be 42.987 billion liters are expected to be produced by 2009produced by 200949 to 57 billion liters of ethanol are 49 to 57 billion liters of ethanol are expected by 2012expected by 2012

ETHANOLETHANOL2006 ethanol production required 2.56 million 2006 ethanol production required 2.56 million hectares of corn – 20% of the US corn harvesthectares of corn – 20% of the US corn harvest

An estimated 4 to 6 million more hectares of An estimated 4 to 6 million more hectares of corn will be planted in the 2007 crop yearcorn will be planted in the 2007 crop year

For the first time in history over 50% of the corn For the first time in history over 50% of the corn produced in the USA will be used for something produced in the USA will be used for something other than animal productionother than animal production

Beef Checkoff ProgramBeef Checkoff Program

Established as part of the 1985 Farm BillEstablished as part of the 1985 Farm Bill Totally funded by the beef producers and Totally funded by the beef producers and

no Government funds are utilizedno Government funds are utilized Funding is $1 USD per head on both Funding is $1 USD per head on both

domestic and imported beef domestic and imported beef Fifty cents goes to the National Fifty cents goes to the National

OrganizationOrganization Fifty cents goes to the State OrganizationFifty cents goes to the State Organization

Mission Of The Beef Checkoff Mission Of The Beef Checkoff ProgramProgram

Check program is dedicated;Check program is dedicated;To improving producer profitability To improving producer profitability Expanding consumer demandsExpanding consumer demandsStrengthening Beef position in the market Strengthening Beef position in the market

placeplaceResearch funding for all phases of the Beef Research funding for all phases of the Beef

IndustryIndustry

Beef Checkoff Program FundingBeef Checkoff Program Funding

Revenue 2006 -- $45,238,376 USDRevenue 2006 -- $45,238,376 USD Expenditures:Expenditures:

Promotion $24,800,185Promotion $24,800,185 Research $6,233,497Research $6,233,497 Consumer Information $5,637,074Consumer Information $5,637,074 Foreign Marketing $3,997,592Foreign Marketing $3,997,592 Producer Communications $2,029,143Producer Communications $2,029,143 Industry Information $1,091,269Industry Information $1,091,269 Program Evaluation $226,538Program Evaluation $226,538 USDA Oversight $143,722USDA Oversight $143,722 Program Development $123,661Program Development $123,661 Administration $1,547,899Administration $1,547,899

Beef Checkoff Program ConclusionBeef Checkoff Program Conclusion

Acts as a catalyst for Change.Acts as a catalyst for Change. Doesn’t own cattle or retail outlets.Doesn’t own cattle or retail outlets. Can’t single-handedly turn around a bad market.Can’t single-handedly turn around a bad market. Designed to stimulate others to sell more beef.Designed to stimulate others to sell more beef. Stimulate consumers to buy more beef.Stimulate consumers to buy more beef. Initiatives are accomplished by consumer Initiatives are accomplished by consumer

advertising, marketing partnerships, public advertising, marketing partnerships, public relations, education, research, and new product relations, education, research, and new product development.development.

THREATS TO THE CATTLE THREATS TO THE CATTLE INDUSTRYINDUSTRY

(BSE)(BSE)

B.S.E.B.S.E.A Closer Look At Mad Cow DiseaseA Closer Look At Mad Cow Disease

New vCJD is reported in 200 people world wideNew vCJD is reported in 200 people world wide

United KingdomUnited Kingdom 164 164

FranceFrance 2121

IrelandIreland 44

NetherlandsNetherlands 22

CanadaCanada 11

ItalyItaly 11

JapanJapan 11

PortugalPortugal 11

Saudi ArabiaSaudi Arabia 11

SpainSpain 11

Science & Research

Observations made in 100% of subjectsObservations made in 100% of subjectsAll gained weightAll gained weightTalked excessively without making senseTalked excessively without making senseBecame overly emotionalBecame overly emotionalCould not driveCould not driveFailed to think rationallyFailed to think rationallyRefused to apologize when wrongRefused to apologize when wrongCould not preform sexuallyCould not preform sexuallyHad to sit down while urinatingHad to sit down while urinating

Study presented at Europe’s annual human reproductive conference

Study design – 100 men consumed 6 pints of beer in 1hour

Conclusion of StudyConclusion of Study

There has to be There has to be female hormones female hormones

in beerin beer

Bio – TerrorismBio – TerrorismFoot and Mouth DiseaseFoot and Mouth Disease

PER CAPITA CONSUMPTION OF RED MEAT AND PER CAPITA CONSUMPTION OF RED MEAT AND POULTRY (1909-2006)POULTRY (1909-2006)

YEARYEAR U.S. Pop., U.S. Pop., millionsmillions

BEEFBEEF

kgkg

PORKPORK

kgkg

LAMBLAMB

kgkg

POULTRYPOULTRY

kgkg

19091909 90.49090.490 23.223.2 18.718.7 2.02.0 5.15.1

19161916 101.961101.961 18.418.4 19.219.2 1.71.7 4.84.8

19231923 111.947111.947 18.618.6 20.720.7 1.61.6 5.25.2

19301930 123.188123.188 15.315.3 18.618.6 2.02.0 5.65.6

19371937 128.961128.961 17.217.2 15.515.5 2.02.0 5.25.2

19441944 138.397138.397 20.920.9 24.324.3 2.12.1 8.08.0

19511951 154.287154.287 18.718.7 20.520.5 1.01.0 8.48.4

19581958 174.141174.141 25.425.4 20.520.5 1.21.2 10.910.9

19651965 194.303194.303 31.931.9 19.819.8 1.11.1 13.113.1

19721972 209.896209.896 36.536.5 21.821.8 1.01.0 16.116.1

19791979 225.055225.055 33.333.3 22.022.0 .45.45 18.218.2

19861986 240.651240.651 33.733.7 20.520.5 .45.45 21.421.4

19931993 260.255260.255 27.727.7 22.022.0 .45.45 28.128.1

20002000 282.388282.388 29.329.3 21.721.7 .36.36 30.830.8

20032003 291.049291.049 28.128.1 22.022.0 .36.36 32.332.3

20062006 300.000300.000 29.7629.76 22.322.3 .45.45 39.739.7

MATURING FEEDLOT INDUSTRYMATURING FEEDLOT INDUSTRY

3 Major Packers3 Major Packers

Cargill-ExcelCargill-Excel

Swift (Monfort – ConAgra)Swift (Monfort – ConAgra)

Tyson (IBP)Tyson (IBP)

Vertical IntegrationVertical Integration

Contract Growing for PackersContract Growing for Packers

USA CATTLE INDUSTRY – LONG TERMUSA CATTLE INDUSTRY – LONG TERM

Suburban SprawlSuburban Sprawl

Land PriceLand Price

Government LandGovernment Land

Environmental Impact and RegulationsEnvironmental Impact and Regulations

Government SubsidiesGovernment Subsidies

SUMMARYSUMMARY

30% of US feedlot head capacity is held 30% of US feedlot head capacity is held in 10 companiesin 10 companies

Three beef packers control slaughter Three beef packers control slaughter and marketingand marketing

Maturing market for the feedlot industry Maturing market for the feedlot industry – cattle business– cattle business

CRYSTAL BALL PROJECTIONSCRYSTAL BALL PROJECTIONS

Feedlot – Cattle will decreaseFeedlot – Cattle will decrease

More imports will be neededMore imports will be needed

AustraliaAustralia

South AfricaSouth Africa

BrazilBrazil

Consumption – Beef will follow LambConsumption – Beef will follow Lamb

Proud To Be Associated With Proud To Be Associated With The South Africa Feedlot The South Africa Feedlot

ConferenceConferenceBeef It’s What’s For Dinner!Beef It’s What’s For Dinner!

Global Global AnimalAnimal Products ProductsSouth AfricaSouth Africa