Total Protein Slides From Jessica Spreitzer, USMEF Economist USDA - - PowerPoint PPT Presentation

Total Protein Slides

From Jessica Spreitzer, USMEF Economist

USDA forecasting record production for pork and poultry in 2020 and 2021, with 2020 beef production forecast down slightly from 2019’s record

+2.6%

• 0.5%

+1.3% +0.7% +2.2% +1.4%

5,000,000 10,000,000 15,000,000 20,000,000 25,000,000

Pork Beef Poultry

Metric Tons

U.S. Production

2009 2014 2017 2019 2020F 2021F

Source: USDA/NASS & USDA/WASDE, carcass weight, does not include variety meats

The August WASDE revised the 2020 beef production forecast higher, and private analysts are forecasting slight growth for beef production in 2020 given the fast rebound in slaughter/production

Significant growth in U.S. pork production over last 5 years

10.4 10.4 11.6 12.5 12.9

8,000,000 9,000,000 10,000,000 11,000,000 12,000,000 13,000,000 14,000,000 Metric Tons

U.S. Pork Production

2009 2014 2017 2019 2020F

U.S. 2019 Pork Production:

▪ Up 21% or +2.17 mil mt (+4.79 billion pounds) from 2014 ▪ Up 8% or +931,000 mt (+2.05 billion pounds) from 2017 From 2017 to 2019, the increase in U.S. pork production was roughly the size of annual UK pork production and larger than Taiwan’s annual pork production Source: USDA/NASS, carcass weight, does not include variety meats

8 13 18 23 28

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F2021F

Million Metric Tons

U.S. Production

Beef Pork Poultry

Record U.S. production of poultry, pork, and beef expected in 2021

Source: USDA/NASS & USDA/WASDE, carcass weight, does not include variety meats

8 9 10 11 12 13 14 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F2021F

Million Metric Tons

U.S. Production

Beef Pork

Source: USDA/NASS & USDA WASDE, carcass weight, does not include variety meats

Record U.S. production of pork and beef expected in 2021

USDA expects significant growth of pork production in 2020 with beef to rebound in 2021

• 800,000
• 600,000
• 400,000
• 200,000

200,000 400,000 600,000 800,000 1,000,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F 2021F

Metric Tons

Change in U.S. Production Year-over-year

Beef Pork Poultry Source: USDA/NASS & USDA/WASDE, carcass weight, does not include variety meats

Record large exports underpinning beef and pork production growth in U.S. With double-digit growth for both U.S. production & exports from 2015 – 2019

+13%+15%

8 9 10 11 12 13 14 2015 2016 2017 2018 2019 2020F

Million metric tons

Production

Pork Beef +23% +24%

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 2015 2016 2017 2018 2019 2020F

Exports

Pork Beef

Sources: USDA/NASS, USDA/WASDE, USDA/FAS, USMEF estimates

*Production in carcass weight; exports in product weight and include variety meats *Percent change noted is 2019 compared to 2015

Exports accounting for a larger share of production even as production is record large

about 32% of pork/pvm production and >14% beef/bvm to be exported in 2020 12.3% of beef and variety

meat production exported in 2000

3.7% of beef and variety

meat production exported in 2004

14.1% of beef and variety

meat production exported in 2019

8.1% of pork and variety

meat production exported in …

26.9% of pork and variety

meat production exported in 2019

500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000

Metric Tons

Total U.S. Beef/Pork and Variety Meat Exports Beef Pork

Sources: USDA/FAS & USMEF

USDA Forecasts Summary

BEEF 2018 2019 2020F 2021F Production +2.6% +1.0%

• 0.5%

+2.2% Exports +10.3%

• 4.4%
• 4.3%

+8.4% Imports +0.1% +2.0% +2.6%

• 2.9%

Per Cap Cons. +0.4% +1.4%

• 0.3%

+0.3% PORK 2018 2019 2020F 2021F Production +2.9% +5.0% +2.6% +0.7% Exports +4.2% +7.6% +19.4% +1.4% Imports

• 6.6%
• 9.3%
• 8.9%

+3.9% Per Cap Cons. +1.4% +2.8%

• 2.3%
• 0.8%

Source: USDA August WASDE, does not include variety meats

The August WASDE revised the 2020 beef production forecast higher, and private analysts are forecasting slight growth for beef production in 2020 given the fast rebound in slaughter/production

U.S. Per Capita Disappearance

+2.4 +0.8 +1.4 +1.2

• 0.2
• 1.2

+0.9 +0.2

• 0.4

20 40 60 80 100 120 Poultry Beef Pork

Pounds per capita of meat and poultry

2016 2017 2018 2019 2020F 2021F

Source: USDA August WASDE, variety meats not included

Combined per capita consumption for the main proteins will be slightly lower in 2020 (in part due to record pork exports) but is expected to rebound in 2021

Source: USDA August WASDE, variety meats not included

+9.3+3.4 +2.5 +2.5+4.7 -0.2 +0.7

50 100 150 200 250

Lbs.

U.S. Beef, Pork, and Poultry Per Capita Disappearance Beef Pork Poultry

Source: USDA August WASDE, variety meats not included

• 0.2

+1.6 +1.4 +0.2 +0.8 -0.2 +0.2 50 52 54 56 58 60 62 64 66 68 70

Lbs.

U.S. Beef Per Capita Disappearance

U.S. beef per capita disappearance expected to tighten slightly in 2020 before rebounding in 2021

Source: USDA August WASDE, variety meats not included

+4 +0.3 +0.1 +0.7 +1.4

• 1.2
• 0.4

42 44 46 48 50 52 54

Lbs.

U.S. Pork Per Capita Disappearance

Record U.S. pork exports essential to keep U.S. pork capita pork disappearance below recent highs

Source: USDA August WASDE, variety meats not included

+5.5 +1.5 +1.1 +1.3 +2.4 +1.2 +0.9

80 85 90 95 100 105 110 115 120

Lbs.

U.S. Poultry Per Capita Disappearance

Per capita poultry consumption is expected to continue to reach new records although year-over-year growth is expected to moderate

Pork Slides

June Hog Inventory up 5%

Hogs and Pigs June Inventory 2020 (million head) Change from June 2019 (%) Change from last quarter (%)

Total Inventory 79.6 +5% +3% Breeding Inventory 6.33

• 1%
• 1%

Market Hog Inventory 73.3 +6% +3%

March - May Pig Crop and Sows Farrowed 2020 (million head) 2019 (million head) Change (%) Pig Crop 34.9 34.5 +1% Sows Farrowed 3.17 3.13 +1% Pigs Saved Per Litter 11.01 11.0 +<1%

The U.S. inventory of all hogs and pigs on June 1, 2020 was 79.6 million head, up 5% from June 2019 and up 3% from March 2020. Both the total inventory and the market hog inventory were record large for the June quarter in 2020, and the March – May pig crop and number of pigs saved per litter were also record large. Source: USDA/NASS

Record Large Hog Inventory

40 45 50 55 60 65 70 75 80 Million Head

U.S. Total Hog Inventory on June 1

Source: USDA/NASS 2018: 72.2 mil head, +1.4% 2019: 75.7 mil head, +4.8% 2020: 79.6 mil head, +5.2%

Record Large Market Hog Inventory

40 45 50 55 60 65 70 75 Million Head

U.S. Market Hog Inventory on June 1

2018: 65.9 mil head, +1.2% 2019: 69.3 mil head, +5.2% 2020: 73.3 mil head, +5.8% Source: USDA/NASS

After increasing since 2015, the June breeding inventory decreased 1%, but apart from last year was still at the highest level since 1999

5.0 5.5 6.0 6.5 7.0 7.5 8.0 Million Head

U.S. Breeding Hog Inventory on June 1

2018: 6.32 mil head, +3.5% 2019: 6.41 mil head, +1.4% 2020: 6.33 mil head, -1.3% Source: USDA/NASS

Higher Number of Pigs Saved Per Litter = Increasing Productivity

7 7.5 8 8.5 9 9.5 10 10.5 11 11.5

Pigs Saved Per Litter March - May

Source: USDA/NASS 2018: 10.63, +0.8% 2019: 11.00, +3.5% 2020: 11.01, +0.1%

Continued record large pig crops

20.0 22.0 24.0 26.0 28.0 30.0 32.0 34.0 36.0 Million Head

U.S. March - May Pig Crop

Source: USDA/NASS 2018: 32.6 mil head, +2.3% 2019: 34.5 mil head, +5.8% 2020: 34.9 mil head, +1.4%

U.S. Hog Inventory & Pork Production

5 7 9 11 13 15 17 45 50 55 60 65 70 75 80 85 90

1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028

Pork Production, million mt Hog Inventory, million head Total hogs, Dec Pork production, right axis Source: USDA/FAS, and USDA Baseline Projections Dec 2019 2014 PEDv

Forecast Production Changes: 2019: 4.8% 2025: 1.5% 2020: 4.0% 2026: 0.9% 2021: 2.4% 2027: 0.4% 2022: 1.8% 2028: 0.1% 2023: 2.5% 2029: 0.2% 2024: 1.5%

USDA expects U.S. pork production to be up 2.6% to a new record in 2020

Source: USDA/NASS & WASDE estimates

7,000,000 8,000,000 9,000,000 10,000,000 11,000,000 12,000,000 13,000,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F 2021F

Metric tons

Annual U.S. Pork Production

2016: +1.8% 11.31 MMT 2017: +2.6% 11.60 MMT 2018: +2.9% 11.94 MMT 2019: +5.0% 12.54 MMT 2020F: +2.6% 12.86 MMT 2021F: +0.7% 12.96 MMT

Quarterly U.S. Pork Production Forecast

+3.7% +3.1% +1.2% +3.5% +2.9% +4.6% +6.2% +6.4% +8.6%

• 4.6%

+6.9%

• 0.4%
• 4.2%

+10.8%

2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Million mt 2016 2017 2018 2019 2020F 2021F Source: USDA/WASDE August 2020, carcass weight equivalent, commercial production 2016: +1.8% 11.31 MMT 2017: +2.6% 11.60 MMT 2018: +2.9% 11.94 MMT 2019: +5.0% 12.54 MMT 2020F: +2.6% 12.86 MMT 2021F: +0.7% 12.96 MMT

U.S. Pork Production back above year-ago levels since the

first week of June and averaging up 7% year-over-year since June

320 340 360 380 400 420 440 460 480 500 520 540 560 580 600 620 5-Jan 19-Jan 2-Feb 16-Feb 2-Mar 16-Mar 30-Mar 13-Apr 27-Apr 11-May 25-May 8-Jun 22-Jun 6-Jul 20-Jul 3-Aug 17-Aug 31-Aug 14-Sep 28-Sep 12-Oct 26-Oct 9-Nov 23-Nov 7-Dec 21-Dec Million Pounds

2014 2015 2016 2017 2018 2019 2020

2017: +2.6% 2018: +2.9% 2019: +5.0% 2020 ytd: +2.7% Source: USDA/NASS and USDA/AMS, last two data points are preliminary estimates

U.S. Hog Slaughter

1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 1/4 2/4 3/4 4/4 5/4 6/4 7/4 8/4 9/4 10/4 11/4 12/4 Million head

U.S. Federally Inspected Hog Slaughter

2014 2015 2016 2017 2018 2019 2020

Source: USDA/NASS and USDA/AMS, last two data points are preliminary estimates

2017: +3.0% 2018: +2.3% 2019: +4.3% 2020 ytd: +1.8%

U.S. slaughter capacity has increased significantly since 2016

+7.9% +3.0% +2.4% 2.25 2.30 2.35 2.40 2.45 2.50 2.55 2.60 2.65 2.70 2.75 2.80 2016 2017 2018 2019

Million Head

Weekly Federally Inspected Hog Slaughter Capacity

Source: Kerns and Associates, USDA/NASS Annual Capacity & Increase: 2017: 137 mil head, +10 mil 2018: 140 mil head, +3 mil 2019: 143 mil head, +3.4 mil Actual Slaughter: +11.7 mil head from 117 mil head in 2016 to 129 mil head in 2019 (+10.0%) 4 new pork plants

• perating since 2016

2020 hog weights jumped in May on slower slaughter. Weights have been normalizing since June when slaughter once again exceeded year-ago levels but remain above year-ago

200 202 204 206 208 210 212 214 216 218 220 9-Jan 30-Jan 20-Feb 13-Mar 3-Apr 24-Apr 15-May 5-Jun 26-Jun 17-Jul 7-Aug 28-Aug 18-Sep 9-Oct 30-Oct 20-Nov 11-Dec 31-Dec Pounds

Barrow & Gilt Carcass Weights

5 Yr Avg 2014 2015 2016 2017 2018 2019 2020

Source: USDA/NASS

2019 hog weights averaged up 0.7% year-over-year. Year-to-date 2020 hog weights are up 0.8%.

Historical Increase in Carcass Weights

164 169 175 181 191 197 201 210 211 150 160 170 180 190 200 210 220

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Lbs.

Barrow and Gilt Carcass Weights

Average carcass weights increased from 164 lbs. in 1980 to 211 lbs. in 2019

Source: USDA/NASS

U.S. Sow Slaughter

35 40 45 50 55 60 65 70 75 5-Jan 19-Jan 2-Feb 16-Feb 2-Mar 16-Mar 30-Mar 13-Apr 27-Apr 11-May 25-May 8-Jun 22-Jun 6-Jul 20-Jul 3-Aug 17-Aug 31-Aug 14-Sep 28-Sep 12-Oct 26-Oct 9-Nov 23-Nov 7-Dec 21-Dec Thousand Head

2014 2015 2016 2017 2018 2019 2020

Source: USDA/NASS 2017: +2. 4% 2018: +2.1% 2019: +0.6% 2020 ytd: +12%

Lower feedgrain/oilseed production in 2019/20, followed by a near record year in 2020/21

5 10 15 20 25 Billion Bushels Corn Soybeans Wheat 2009/10-2018/19 Avg. U.S. corn, soybean, and wheat production averaged 19.27 billion bushels over the last 10 years. 2019/20 combined production is estimated at 19.09 billion bushels, down 7.6% year-over-year on lower corn and soybean production and down 0.9% from the 10-year average. 2020/21 production is forecasted at 21.53 billion bushels, up 13% from the previous year and up 12% from the 10-year average on a rebound in both corn and soybean production. +13%

• 0.5%

Source: USDA/NASS and August WASDE

• 7.6%

Rebound in U.S. corn and soybean production expected in 2020/21 with both corn and soybean production at or near record levels

+12%

2 4 6 8 10 12 14 16 18

Billion Bushels

U.S. Corn Production Source: USDA/NASS, USDA WASDE, marketing year +25%

0.0 1.0 2.0 3.0 4.0 5.0

Billion Bushels

U.S. Soybean Production 2020/21 soybean production is expected to rebound and be down just slightly from the 2018/19 record following a 20% decrease in production in 2019/20 when weather issues, trade concerns, and record high stocks resulted in less acres of soybeans being planted 2020/21 U.S. corn production is expected to be record large on larger harvested area and improved yields.

U.S. corn and soybean exports to rebound in 2020/21

0.5 1 1.5 2 2.5 3 Billion Bushels

U.S. Corn and Soybean Exports

Corn Exports Soybean Exports

Source: USDA/ERS, USDA WASDE, marketing year

2020 fall soybean prices are expected to rebound somewhat from the low levels since 2019, while 2020 corn futures have adjusted lower due to the slowdown in demand for ethanol due to covid-19 and a significant increase in production expected in 2020/21

$0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 $18.0 Jan-10 MAY SEP Jan-11 MAY SEP Jan-12 MAY SEP Jan-13 MAY SEP Jan-14 MAY SEP Jan-15 MAY SEP Jan-16 MAY SEP Jan-17 MAY SEP Jan-18 MAY SEP Jan-19 MAY SEP Jan-20 MAY SEP Jan-21 MAY SEP $/bushel

Farmer Price Received for Corn and Soybeans

Corn Soybeans

Source: USDA/NASS and CME closing futures on Aug 21, 2020

Higher stocks-to-use ratios moderating corn prices in recent years, with a buildup of stocks expected in 2020/21 on larger production

$0 $1 $2 $3 $4 $5 $6 $7 $8 0% 5% 10% 15% 20% 25% 30% Price/Bushel Stocks-to-Use Ratio

U.S. Corn Stocks-to-Use Ratio and Price per Bushel

Stocks-to-Use Ratio Price/Bushel

Source: USDA/ERS, August WASDE, Marketing Year from Sep - Aug

Higher stocks-to-use ratios have been moderating soybean prices in recent years, but stocks have come down from the record high in 2018/19

$0 $2 $4 $6 $8 $10 $12 $14 $16 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28% Price/Bushel Stocks-to-Use Ratio

U.S. Soybean Stocks-to-Use Ratio and Price per Bushel

Stocks-to-Use Ratio Price/Bushel

Source: USDA/ERS, August WASDE, Marketing Year from Sep - Aug

Current corn and hog futures are indicating relatively low prices in the second half of 2020 as a result of covid-19 and large supplies

$0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 $1.00 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0

Jan-10 MAY SEP Jan-11 MAY SEP Jan-12 MAY SEP Jan-13 MAY SEP Jan-14 MAY SEP Jan-15 MAY SEP Jan-16 MAY SEP Jan-17 MAY SEP Jan-18 MAY SEP Jan-19 MAY SEP Jan-20 MAY SEP 21-Jan MAY SEP

Live hog price, $/lb. Corn price, $/bushel

Farmer Price Received for Corn & Hogs

Monthly data since Jan 2010

Source: USDA/NASS and CME closing futures prices on Aug 21, 2020

Iowa State University’s estimated market hog profit shows monthly returns have been negative so far in 2020 except for May

October contract December contract

The hog futures market is trading lower on continued record large hog supplies, slower foodservice demand due to covid-19, and concerns over the trading relationship with China

Source: USDA/AMS & CME closing Lean Hog Futures prices Aug 21, 2020

Hog futures have adjusted lower in 2020 due to expected slower demand from foodservice for the rest of the year and record large hog supplies

$0.50 $0.60 $0.70 $0.80 $0.90 $1.00 $1.10 $1.20 $1.30 $1.40 $1.50 5-Jan 5-Feb 5-Mar 5-Apr 5-May 5-Jun 5-Jul 5-Aug 5-Sep 5-Oct 5-Nov 5-Dec U.S. $/pound

Weekly U.S. Pork Cutout Values

5 Year Avg 2014 2015 2016 2017 2018 2019 2020

Mid-Aug $0.75/lb.; down 9% year/year Source: USDA/AMS

The pork cutout has been trending higher since the 2nd half of July but remains below year-ago levels

The loin, rib, and picnic primals are averaging higher year-to-date in 2020, but as

• f mid-August, the rib, ham, and loin primals were higher year-over-year (with

the ham primal higher because of boneless ham values due to tight labor)

Week end: Cutout Loin Butt Picnic Rib Ham Belly Jan – mid Aug 2019 Avg 0.77 0.72 0.87 0.50 1.25 0.63 1.27 Jan – mid Aug 2020 Avg 0.74 0.84 0.87 0.55 1.37 0.55 0.92 Year-over-year Change

• 4%

16% 0% 10% 10%

• 13%
• 27%

8/23/2019 0.82 0.72 0.93 0.50 1.14 0.60 1.60 8/21/2020 0.75 0.73 0.78 0.50 1.27 0.67 1.05 Year-over-year Change

• 9%

1%

• 17%

0% 12% 11%

• 34%

Fob plant wholesale prices in U.S. dollars per pound: Source: USDA/AMS

• $25
• $20
• $15
• $10
• $5

$0 $5 $10 Loin Ham Belly Picnic Butt Rib

Change in Pork Primal Values

Per head basis Jan - mid-Aug 2020 vs. Jan - mid-Aug 2019 Week ending Aug 21, 2020 vs. Aug 23, 2019 Source: USDA/AMS

The loin primal contributed the highest year-to-date increase in value on a per head basis due to strong demand for loins at retail as consumers stocked up and increased meat purchases earlier this year, but loin values have normalized since June on increased production

Since May, prices have adjusted lower for all primals except the ham primal

Source: USDA/AMS

Source: USDA/AMS, USDA/NASS & USMEF

Bellies, loins, and hams contribute the largest shares to the hog value. In April and May 2020, the share contributed by the loin surged on strong retail demand, before adjusting lower from June - August

Source: USDA/AMS, USDA/NASS & USMEF 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Loin Butt Picnic Rib Ham Belly Primal Share of Hog Value

5-year avg 2017 2018 2019 ytd 2019 ytd 2020

Year-to-date 2020, there has been a notable in increase in value coming from the loin primal, with more moderate increases for the butt, picnic, rib, and ham primals, while the share from the belly primal is lower

Cold storage stocks were down 22% from the previous 5-year average in June and July despite rebounding production and record large exports, indicating smaller supplies of stocks held for future domestic use

Source: USDA/NASS Stocks of pork bellies continued to build up in March/April due to slower foodservice demand (where bacon is popular on QSR breakfast sandwiches), but stocks decreased from May – July (partially seasonal)

The spread between hog prices and the cutout widened in April and the first half of May as plant capacity was constrained by covid-19 related slowdowns but has

since narrowed somewhat into August with the recovery in production

Source: USDA/AMS

Processed pork dominates U.S. pork sales at foodservice

• Nearly 80% of pork sold at foodservice was processed and 21% was fresh in 2018
• Limited-service restaurants accounted for 58% of pork volume sold at foodservice in

2018 and full-service restaurants accounted for 23%

• Limited-service restaurants accounted for about 70% of the processed pork volume at

foodservice, while full-service restaurants accounted for about 60% of fresh pork

• The top pork items sold at foodservice by volume in 2018:
• Bacon – 32.3% of total volume
• Breakfast sausage -11.9%
• Ham – 9.8%
• Ribs – 8.7%
• Shoulders – 7.2%
• 74% of bacon volume sold at foodservice is sold through limited-service restaurants

Source: NPB 2019 Foodservice Volumetrics Study, Prepared by Datassential

Fresh pork accounts for the largest volume of pork sold at retail, followed by sausage and bacon

• Fresh pork accounted for 40% of pork

volume sold at retail in 2019

• The top fresh pork items are:
• Chops – 36% of total fresh pork
• Ribs – 27%
• Roasts – 10%
• Boneless loins – 9%
• Shoulders – 7%
• Although bacon only accounts for 16%
• f retail volume sales, it accounts for

23% of sales on a value basis, the second highest after fresh pork at 31%

Source: NPB, Nielsen 40% 19% 16% 10% 1% 15%

2019 Pork Volume at Retail

Fresh Pork* Sausage Bacon Ham Offal Other *includes minimally processed cuts and ground pork

Pork Retail Value

2019 annual pork retail prices averaged up 3% from 2018 at $3.84/lb. In July 2020, pork retail values eased down 2% from the record high in June but were up 6% from last year at $4.18/lb.

Source: USDA/ERS & BLS

In 2019, the annual byproduct allowance averaged 3% lower than 2018. In July 2020, the pork byproduct allowance was up 4% from the previous month but down 26% from the previous year.

Beef Slides

July Cattle Inventory Report

• All cattle and calves in the United States as of July 1, 2020 totaled 103 million

head, up 0.1% from July 1, 2019

• All cows and heifers that have calved, at 41.4 million head, were down 0.5%

from the 41.6 million on July 1, 2019

• Beef cows, 32.1 million head, down 1%
• Milk cows, 9.35 million head, up 1%
• All heifers 500 pounds and over, 16.5 million head, up 1%
• Beef replacement heifers, 4.40 million, steady
• Cattle on feed in all feedlots, 13.6 million, steady
• Calves under 500 pounds and other heifers and steers over 500 pounds outside

feedlots (to be placed on feed in the future) 37.4 mil head, up 1%

• 2020 calf crop estimated at 35.8 mil head, down 1%

Source: USDA/NASS

U.S. total cattle inventory up slightly in 2020

80 85 90 95 100 105 110 115 Million Head

U.S. Total Cattle and Calves Inventory July 1

Source: USDA/NASS *July reports not released in 2013 and 2016 due to budgetary constraints

2017: 102.1 mil head 2018: 102.8 mil head, +0.7% 2019: 102.9 mil head, +0.1% 2020: 103.0 mil head, +0.1%

Slight decrease in beef cow inventories

26 28 30 32 34 36 38 Million Head

U.S. Beef Cow Inventory on July 1

2017: 32.1 mil head 2018: 32.4 mil head, +0.9% 2019: 32.3 mil head, -0.3% 2020: 32.05 mil head, -0.8%

Source: USDA/NASS *July reports not released in 2013 and 2016 due to budgetary constraints

Beef cow replacements steady year-over-year

3.8 4.2 4.6 5.0 5.4 5.8 Million Head

U.S. Beef Cow Replacement Heifer Inventory on July 1

2017: 4.7 mil head 2018: 4.6 mil head, -2.1% 2019: 4.4 mil head, -4.3% 2020: 4.4 mil head, +0%

Source: USDA/NASS *July reports not released in 2013 and 2016 due to budgetary constraints

2020 calf crop down slightly

30 32 34 36 38 40 42 Million Head

U.S. Annual Calf Crop

2017: 35.8 mil head, +2.0% 2018: 36.3 million head, +1.6% 2019: 36.1 million head, -0.7% 2020: 35.8 million head, -0.7%

Source: USDA/NASS, 2020 calf crop is the July estimate

Cattle on feed in all feedlots steady year-over- year at record high levels in July

9 10 10 11 11 12 12 13 13 14 14 Million Head

U.S. Cattle on Feed in all Feedlots on July 1

2017: 12.8 mil head 2018: 13.3 mil head, +3.9% 2019: 13.6 mil head, +2.3% 2020: 13.6 mil head, +0%

Source: USDA/NASS *July reports not released in 2013 and 2016 due to budgetary constraints

Slightly larger supplies to still enter feedlots

22 27 32 37 42 47 Million Head

Supplies of Cattle and Calves Outside of Feedlots* on July 1

2017: 36.9 mil head 2018: 36.8 mil head, -0.3% 2019: 37.1 mil head, +0.8% 2020: 37.4 mil head, +0.8%

*Combined total of calves under 500 lbs. and other heifers and steers over 500 lbs. (outside of feedlots)

Source: USDA/NASS *July reports not released in 2013 and 2016 due to budgetary constraints

U.S. Cattle Inventory & Beef Production

7 8 9 10 11 12 13 14 80 90 100 110 120 130 140

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029

Beef Production, million mt Cattle Inventory, million head Total Cattle Beef Production, right axis Source: USDA/FAS, and USDA Baseline Projections Dec 2019 2015 2014

Forecast Production Changes: 2019: 0.3% 2025: 1.5% 2020: 2.7% 2026: 2.0% 2021: -1.2% 2027: 2.0% 2022: -2.2% 2028: 2.1% 2023: 0.3% 2029: 1.4% 2024: 0.5%

40% 41% 42% 43% 44% 45% 46% 47% 48% 49% 50% 51%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Jan-Jul 19 Jan-Jul 20

Females % Total Slaughter

Contract ing

Expand ing Expand ing

Source: USMEF calculations based on USDA/NASS data

The U.S. has been in the cow herd-rebuilding phase for the last few years, but the larger percentage of females slaughtered in 2019 and 2020 indicates expansion has stopped

Increasing beef cow and heifer slaughter (before covid-19 slowdowns) as current cattle cycle has plateaued

140 160 180 200 220 240 260 280

1/8 1/22 2/5 2/19 3/5 3/19 4/2 4/16 4/30 5/14 5/28 6/11 6/25 7/9 7/23 8/6 8/20 9/3 9/17 10/1 10/15 10/29 11/12 11/26 12/10 12/24

Thousand Head

Beef Cow & Heifer Slaughter

5-year avg 2014 2015 2016 2017 2018 2019 2020

2017: +12% 2018: +6.5% 2019: +6.5% 2020 ytd: -2.6%

Source: USDA/NASS

U.S. Beef Cow Slaughter

30 35 40 45 50 55 60 65 70 75

1/8 1/29 2/19 3/12 4/2 4/23 5/14 6/4 6/25 7/16 8/6 8/27 9/17 10/8 10/29 11/19 12/10 12/31

Thousand Head

5-year avg 2014 2015 2016 2017 2018 2019 2020

2017: +10% 2018: +8% 2019: +5.4% 2020 ytd: +3.3%

Source: USDA/NASS

USDA expects 2020 production to contract on covid-19 related disruptions before reaching a new record in 2021

Private analysts forecasting record beef production in 2020

Source: USDA/NASS & WASDE estimates

8,000,000 8,500,000 9,000,000 9,500,000 10,000,000 10,500,000 11,000,000 11,500,000 12,000,000 12,500,000

Metric tons

Annual U.S. Beef Production

2016: 11.44 MMT, +6.4% 2017: 11.88 MMT, +3.8% 2018: 12.19 MMT, +2.6% 2019: 12.32 MMT, +1.0% 2020F: 12.26 MMT, -0.5% 2021F: 12.53 MMT, +2.2%

Quarterly U.S. Beef Production Forecast

+2.6% +4.9% +1.2% +1.8%

• 0.8%

+1.3% +1.5% +2.0% +8.0%

• 11.2%

+2%

• 0.3%
• 1.8%

+16.5%

2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Million MT 2016 2017 2018 2019 2020F 2021F

Source: USDA/WASDE August 2020, carcass weight equivalent, commercial production

2016: 11.44 MMT, +6.4% 2017: 11.88 MMT, +3.8% 2018: 12.19 MMT, +2.6% 2019: 12.32 MMT, +1.0% 2020F: 12.26 MMT, -0.5% 2021F: 12.53 MMT, +2.2%

Total U.S Beef Production rebounding since early May and surpassed year-

ago levels again in mid-June, above year-ago levels for 9 out of the last 11 weeks

350 400 450 500 550 600

5-Jan 5-Feb 5-Mar 5-Apr 5-May 5-Jun 5-Jul 5-Aug 5-Sep 5-Oct 5-Nov 5-Dec

Million pounds per week

U.S. Federally Inspected Beef Production

2014 2015 2016 2017 2018 2019 2020

2017: +4.0% 2018: +2.4% 2019: +0.8% 2020 ytd: -1.7% Source: USDA/NASS and USDA/AMS, includes fed and non-fed U.S. beef production, last two data points are preliminary estimates

U.S. Cattle Slaughter

400 450 500 550 600 650 700

5-Jan 5-Feb5-Mar 5-Apr 5-May 5-Jun 5-Jul 5-Aug 5-Sep 5-Oct 5-Nov 5-Dec

Thousand Head

U.S. Federally Inspected Cattle Slaughter over 500 lbs.

2014 2015 2016 2017 2018 2019 2020

2017: +5.4% 2018: +2.3% 2019: +1.5% 2020 ytd: -4.3%

Source: USDA/NASS and USDA/AMS, last two data points are preliminary estimates

U.S. non-fed beef production

50 55 60 65 70 75 80 85 90 95 100

5-Jan 5-Feb 5-Mar 5-Apr 5-May 5-Jun 5-Jul 5-Aug 5-Sep 5-Oct 5-Nov 5-Dec

Million pounds per week

U.S. Cow and Bull Beef Production

2014 2015 2016 2017 2018 2019 2020

2017: +7% 2018: +6% 2019: +2.3% 2020 ytd: -1% Source: USDA/NASS

• 3.6%

+6.8% +3.5% +1.7% +0.5%

• 4.9%

+5.4% +6.9% +6.0% +2.3%

2 4 6 8 10 12 2014 2015 2016 2017 2018 2019

Million Metric Tons

U.S. Beef Production

Fed Beef Production Non-fed Beef Production

Fed beef production accounts for 83% of total U.S. beef production

Source: USDA/NASS, year-over-year change in production noted

U.S. fed cattle slaughter was up 5% year-over-year during the first quarter of 2020 before the covid-19 related slowdowns and neared year-ago levels again in July

300 350 400 450 500 550 600

1/8 1/22 2/5 2/19 3/5 3/19 4/2 4/16 4/30 5/14 5/28 6/11 6/25 7/9 7/23 8/6 8/20 9/3 9/17 10/1 10/15 10/29 11/12 11/26 12/10 12/24

Thousand Head

Steer & Heifer Slaughter

5-year avg 2014 2015 2016 2017 2018 2019 2020

2017: +5.2% 2018: +1.3% 2019: +1.0% 2020 ytd: -5.4% Source: USDA/NASS

800 820 840 860 880 900 920 940

1/4 2/4 3/4 4/4 5/4 6/4 7/4 8/4 9/4 10/4 11/4 12/4

Steer Carcass, pounds

5-year avg 2014 2015 2016 2017 2018 2019 2020

Early August, avg. steer weights were up 28 lbs. or +3% from 2019 Source: USDA/NASS

Cattle performance is strong and weights were already trending higher in 2020 before the counter- seasonal increase in April and May on slower slaughter and thus more days on feed. Weights have been trending seasonally higher since the summer and remain elevated with continued longer days on feed.

Historical Increase in Carcass Weights

708 726 741 769 798 817 835 892 879

600 650 700 750 800 850 900 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Lbs.

Steer Carcass Weights

Average carcass weights increased from 708 lbs. in 1980 to 879 lbs. in 2019

Source: USDA/NASS

Following a slight increase in 2019, U.S. fed beef production was up nearly 8% in the first quarter of 2020 before supplies tightened due to covid-19 Production has again been above year-ago levels again since mid-June

270 290 310 330 350 370 390 410 430 450 470

5-Jan 5-Feb5-Mar 5-Apr 5-May 5-Jun 5-Jul 5-Aug 5-Sep 5-Oct 5-Nov 5-Dec

Million pounds per week

2014 fed 2015 fed 2016 fed 2017 fed 2018 fed 2019 fed 2020 fed

Source: USDA/NASS 2016: +6.8% 2017: +3.5% 2018: +1.7% 2019: +0.5% 2020 ytd: -2.0%

The U.S. is the largest producer of grain-fed beef in the world

9.5 9.1 8.9 9.5 9.8 10.0 10.1

8.2 8.4 8.6 8.8 9.0 9.2 9.4 9.6 9.8 10.0 10.2 2013 2014 2015 2016 2017 2018 2019

Million Metric Tons

Annual U.S. Fed Beef Production

Source: USDA/NASS

Prime and Choice grading percentages continue to increase

0% 10% 20% 30% 40% 50% 60% 70% 80%

Prime Choice Upper 2/3rds Choice Select

Grading Percentages

2013-2017 Avg 2013 2018 2019 2019 ytd 2020 ytd

Source: USDA/AMS, percentages are for share of total fed beef production, *except Upper 2/3rds Choice which is the share of Choice beef production

Grade 2013- 17 Avg 2013 2018 2019 2019 ytd 2020 ytd Prime 4.9% 3.7% 7.95% 8.6% 8.4% 10.2% Choice 67.9% 63.1% 71.4% 71.0% 71.6% 72.9% Upper 2/3rds Choice* 27.6% 26.6% 31.4% 31.7% 32.4% 32.8% Select 22.2% 27.8% 17.4% 16.95% 16.6% 13.6%

Higher levels of Prime production, Choice production steady

• 0.1%

+0.8%

• 2.1%

+8.5%

• 0.1%

+0.8%

• 20%

+18% 1 2 3 4 5 6 7 8 Choice Upper 2/3rds Choice Select Prime

Million metric tons

U.S. Choice, Select, and Prime Beef Production

2013 2018 2019 2019 ytd 2020ytd

Source: USDA/AMS, USDA/NASS, USMEF estimates, year-over-year change listed, Upper 2/3rds Choice is a subset of total Choice production

More than 70% of fed cattle have been grading Choice on average since 2016 with 2020 ytd Choice grading reaching new highs

Source: USDA/NASS 2018: 71.4% 2019: 71.0% 2019 ytd: 71.6% 2020 ytd: 72.9%

2019 Choice beef production was down slightly compared to increases in recent years, but 2020 production has been significantly higher except for the April – mid- June covid-19 related slowdown

180 200 220 240 260 280 300 320 340 360

1/5 2/5 3/5 4/5 5/5 6/5 7/5 8/5 9/5 10/5 11/5 12/5

Million Pounds per Week

U.S. Choice Beef Production

2014 2015 2016 2017 2018 2019 2020

Source: Estimated based off USDA/AMS grading percentages and calculations for fed slaughter using USDA/NASS slaughter data

2016: +8.4% (+515,221 mt) 2017: +6.1% (+405,345 mt) 2018: +1.0% (+72,158 mt) 2019: -0.1% 2020 ytd: -0.1% Source: USDA/NASS

4.5 5 5.5 6 6.5 7 7.5 2013 2014 2015 2016 2017 2018 2019

Million Metric Tons

U.S. Choice Beef Production

Source: Estimated based off USDA/AMS grading percentages and calculations for fed slaughter using USDA/NASS slaughter data

2019 Choice beef production was down slightly compared to increases in recent years

The Choice/Select spread has been trending higher in July and especially late August as demand for Choice grilling cuts picks up ahead of the Labor Day holiday at the beginning

• f September

Source: USDA/AMS

Prime grading percentages continue to be record large in 2020

2018: 7.95% 2019: 8.6% 2019 ytd: 8.4% 2020 ytd: 10.2% Prime Production: 2017: +10% (+55,800 mt) 2018: +35% (+204,800 mt) 2019: +8.5% (+67,500 MT) 2020 ytd: +18%

Source: Estimated based off USDA/AMS grading percentages and calculations for fed slaughter using USDA/NASS slaughter data

Wholesale Prime ribeye prices surged from mid-April through May on limited plant capacity but have remained below year-ago levels since correcting lower in June due to increased production and slower foodservice demand

Select grading percentage lower in recent years as improved genetics and feed management lead to higher Choice and Prime percentages

2018: 17.4% 2019: 16.95% 2019 ytd: 16.6% 2020 ytd: 13.6% Select Production: 2017: -4% (-80,500 mt) 2018: -1% (-13,700 mt) 2019: -2% (-36,600 mt) 2020 ytd: -20%

Source: Estimated based off USDA/AMS grading percentages and calculations for fed slaughter using USDA/NASS slaughter data

Placements normalized in May and June as slaughter started to rebound, and July placements were higher year-over-year resulting in the highest cattle on feed inventory

• n record for the month of August

Placements for July were up 11% from 2019 and up 16% from the previous 5- year average following lower year-

• ver-year placements from Jan - May

The August cattle on feed inventory was up 1.5% from 2019 and up 6.5% from the previous 5- year average

Source: USDA/NASS

Supplies of slaughter-ready cattle (over 120 days on feed) reached record levels on June 1 due to slower marketings/slaughter in April and May. The number of cattle on feed over 120 and over 150 days adjusted lower in July and August but remained significantly higher than last year

Source: USDA/NASS & USMEF

Cattle prices were driven lower by the reduction in plant capacity, but the futures market rebounded from the March/April lows as slaughter recovered, with the rebound also supported by continued strong domestic retail demand and affordable corn prices

October live cattle contract September feeder cattle contract

Cash prices down 2% from 2019 in mid August

Source: USDA/AMS & CME closing futures prices on Aug 24, 2020

Cash and futures currently reflect the overall market concerns about covid-19 disruptions and still abundant numbers of cattle on feed, but strong retail demand and a rebound in exports in July and August are supporting prices, and the U.S. has the supply advantage with tight global protein supplies and sharply reduced Australian slaughter

$1.60 $2.10 $2.60 $3.10 $3.60 $4.10 $4.60

1/6 1/20 2/3 2/17 3/2 3/16 3/30 4/13 4/27 5/11 5/26 6/8 6/22 7/6 7/20 8/3 8/17 9/1 9/14 9/28 10/12 10/26 11/9 11/23 12/7 12/21 12/29

$/lb.

Choice Beef Cutout

2014 2015 2016 2017 2018 2019 2020 5-year avg

Mid Aug $2.23/lb.,

• 7% year/year

Source: USDA/AMS

The Choice Beef cutout has been trending higher in August on strong retail demand ahead of the Labor Day holiday

$1.60 $2.00 $2.40 $2.80 $3.20 $3.60 $4.00 $4.40

1/6 1/20 2/3 2/17 3/2 3/16 3/30 4/13 4/27 5/11 5/26 6/8 6/22 7/6 7/20 8/3 8/17 9/1 9/14 9/28 10/12 10/26 11/9 11/23 12/7 12/21 12/29

$/lb.

Branded* Choice Beef Cutout

2014 2015 2016 2017 2018 2019 2020 5-year avg

Mid Aug $2.18/lb.,

• 7% year/year

Source: USDA/AMS, includes all branded Choice - upper 2/3rds and lower 1/3rd

Branded Choice Beef Cutout

Choice Cutout & Primal Values

Week ending: 8/23/2019 8/21/2020 Year-over- Year Change Jan – mid Aug 2019 Avg Jan – mid- Aug 2020 Avg Year-over- Year Change

Choice Cutout

2.40 2.23

• 7%

2.22 2.48 +12%

Primal Rib

4.03 3.69

• 8%

3.65 3.68 +1%

Primal Chuck

1.89 1.75

• 7%

1.76 2.12 +21%

Primal Round

1.89 1.78

• 6%

1.73 2.24 +30%

Primal Loin

3.26 3.16

• 3%

3.01 3.20 +6%

Primal Brisket

2.01 1.57

• 22%

1.95 1.97 +1%

Primal Short Plate

1.68 1.40

• 17%

1.63 1.53

• 6%

Primal Flank

1.35 1.19

• 12%

1.22 1.26 +3%

50/50 Beef trimmings

1.00 0.49

• 51%

0.80 0.82 +2%

Fob plant wholesale primal values in U.S. $/pound

Source: USDA/AMS

Wholesale values for all primals except the flank (popular at foodservice) increased in August

Source: USDA/AMS

U.S. Beef Cut Prices

Cut Price ($/lb.) Change from 2019 (%)

Bone-in Short Rib $4.43

• 18%

Bone-in Chuck Short rib $4.00 +23% Chuck Roll 1 x 1 $2.94 +1% Ribeye Boneless heavy $8.30

• 8%

Strip Loin Boneless 0 x 1 (NY Strip) $6.78

• 12%

Short Plate Primal $1.40

• 17%

Source: USDA/AMS All prices are for commodity Choice cuts, FOB plant for the week ending Aug 21, 2020

The spread between the Choice cutout and live steer prices reached the widest level in years in April and May as plant capacity was constrained by covid-19 related slowdowns but narrowed from June to August as slaughter rebounded

Source: USDA/AMS

U.S. Beef Utilization at Foodservice

64% 13% 11% 6% 4% 2%

2018 Beef Volume at Foodservice

Ground Beef Pre-Cut Steaks Roasts Other Beef Pre-Cooked Roast Beef Ribs

• Domestically, about 60% of U.S. beef is

used by foodservice vs. 40% for retail

• Ground beef accounts for the largest

volume share of beef sold at foodservice at 64% in 2018

• Pre-cut steaks and roasts are the next

largest categories

• In 2018, there was increasing use of

emerging steak cuts (flat iron, petite tender medallions, tri-tips), briskets, and petite tender roasts at foodservice

Source: NCBA, 2018 Usage and Volumetric Assessment of Beef in Foodservice Study by Technomic Inc.

Ground beef is also the top beef item at retail

• 2018 retail sales volume was up 5% year-over-

year, driven by growth for ground beef, ribs, and loins

• In 2018, ground beef volume accounted for 50%
• f beef sold at retail
• For cuts only, the top ten items sold at retail by

volume from January – July 2018 were:

• Ribeye Steak
• Strip Steak
• Chuck Center Roast
• Stew Meat
• T-Bone Steak
• Top Round First Steak
• Top Sirloin Steak
• Blade Chuck Roast
• Cubed Steak
• Tenderloin Steak

50% 13% 9% 8% 7% 2% 11%

2018 Beef Volume at Retail

Ground Beef Loin Round Chuck Rib Brisket Other Source: NCBA

U.S. wholesale ground beef prices surged to new records in April/May but have since normalized, while ground beef retail prices were record high in June and remained up significantly year-over-year in July

$2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00

Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

$/lb.

Ground Beef Retail Price National Average

$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00

$/lb.

Ground Beef Wholesale Prices Ground Beef 81% National Negotiated Sales

Source: BLS, USDA/AMS; wholesale prices through August, retail prices through July

Beef Retail Values

The 2019 Choice beef retail price average was up 2% from 2018 at $6.04/lb. July 2020 beef retail prices dropped 10% from the record highs in May/June when retail prices adjusted higher to accommodate the temporary increase in wholesale values. July retail prices were up 11% from the previous year at $6.84/lb. The 2019 average beef byproduct value (which includes hides) was down 10% from 2018. In July 2020, the beef byproduct value was up 3% from the previous month but was down 23% from last year.

Source: USDA/ERS & BLS

The beef-to-pork price premium reached a record high in May and June as beef retail prices adjusted to the surge in wholesale beef prices in April/May because of covid-19 related slowdowns in production

1.20 1.30 1.40 1.50 1.60 1.70 1.80 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00

Jan-06 Jun-06 Nov-06 Apr-07 Sep-07 Feb-08 Jul-08 Dec-08 May-09 Oct-09 Mar-10 Aug-10 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Jul-13 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jan-16 Jun-16 Nov-16 Apr-17 Sep-17 Feb-18 Jul-18 Dec-18 May-19 Oct-19 Mar-20

$/lb. Retail Value

Beef & Pork Retail Values

Pork Beef Beef/Pork

Source: USDA/ERS, all fresh beef retail value