Feedgrain & Oilseed Caucus Market Overview USMEF Strategic Planning & Marketing Conference Cancun, Mexico November 2, 2006 Erin Daley Manager, Research.

Feedgrain & Oilseed Caucus

Market Overview

USMEF Strategic Planning & Marketing Conference

Cancun, MexicoNovember 2, 2006

Erin DaleyManager, Research and AnalysisU.S. Meat Export Federation

Overview Introduction Beef Exports Pork Exports Lamb Exports Corn Market/Ethanol Distillers Grains and Beef Cattle Production Conclusions

U.S. Beef Exports (000 MT)

0

200

400

600

800

1.000

1.200

1.400

1994 1997 2000 2003 2006(f)

C/ S AmericaCaribbeanEUTaiwanASEANChina/ HKRussiaCanadaS. KoreaMexicoJapan

636

Source: USDA/USMEF

U.S. Beef and Beef Variety Meat Exports (000 MT)

0

200

400

600

800

1.000

1.200

1.400

1994 1996 1998 2000 2002 2004 2006

BVMBeef

636

Beef*: 369

BVM*:267

Source: USDA/USMEF*Forecast

Jan-August

U.S. Pork Exports by Region (000 MT)

0

200

400

600

800

1.000

1.200

1.400

1994 1997 2000 2003 2006(f)

Oceania

E Europe

C/ S Am.

Caribbean

EU

Taiwan

ASEAN

China/ HK

Russia

Canada

South Korea

Mexico

Japan

Source: USDA/USMEF

U.S. Pork Exports (000 MT)

0

200

400

600

800

1.000

1.200

1.400

1994 1996 1998 2000 2002 2004 2006(f)

PVMPork

* ForecastSource: USDA/USMEF

U.S. Lamb & Mutton Exports MT

0

2,000

4,000

6,000

8,000

10,000

12,000

1994 1996 1998 2000 2002 2004 2006

LVMLamb

13,800

Source: USDA/USMEF

Total Feedgrains and Soybean Meal Exported through Beef and Pork (million bushels)

0

100

200

300

400

500

600

'96'97 '98'99 '00'01 '02'03'04 '05'06 '07'08 '09'10

SBMFeedgrains

Source: USDA/USMEF

Changing Corn Demand: Feed, Fuel, and Exports Livestock feeders largest corn users

Feed & Residual Use predicted around 55 percent of corn production in 2006/07

6 billion bushels Use per GCAU projected down in 2006/07 GCAUs are up slightly???

Drought, bird flu, strong demand… Cattle on feed inventory up 9% but placements were 5% lower

during October Beef, pork, and poultry production projected higher in 2007

Co-products make up the difference?

U.S. Ethanol Production

Renewable Fuels Association (RFA). 2006. From Niche to Nation Ethanol Industry Outlook. Washington DC, February.

105 ethanol plants = 5 BGY44 under construction= total 8.3 BGY

Cattle on Feed

Which feeders don’t have WDGS?

Will more corn go to ethanol production than is exported?

Top 10 U.S. Corn Export Markets

USDA; 1000 MTApprox 2 Billion bushels

Trade-offs between increasing corn prices and increasing supply of distiller’s grains Availability and variety of ethanol co-products Transportation and handling costs

Additional investments Consistency Cattle Performance Environmental regs

Changing co-products/ethanol production innovations

WDGS TransportWDGS 35% Dry MatterHow far can we haul all that water? ~ 35-40% increase in feed weight

WDGS Storage Additional storage

costs Preservatives Silage bags

Use w/in 3 to 5 days Concrete Slab Front-end loaders

Quick Note on Pork & Poultry More difficult to feed distillers grains Can only feed at low inclusion rates (< 15% of the ration on dry matter basis) Generally cannot feed WDGS, only DDGS which partially replaces corn & soybean meal

Soybean meal higher quality protein source more consistent

Economic Returns from Feeding WDGS

Trucking costs: $2.50 per loaded mile

10 year average corn prices Assuming $0.05 to

$0.10/bu basis at plant WDGS 95% price of

corn on equal DM basis

Vander Pol et al. (2006)

At plant optimum WDGS inclusion rate 30 to 40% on dry matter basis

$10-$23 per head return

Changes When ethanol production arrives:

Turn off the steam chest Feed WDGS with dry rolled corn

Increase cattle performance Decrease Natural Gas costs Invest in Roto-mix® trucks If already feeding silage shouldn’t need additional equipment (front end loaders) Increase labor, fuel and maintenance

Feed lower quality forages Vegetarian diets= $$$

Distant from ethanol production 15% DDGS (dry matter basis)

Railed in similar to corn Save processing costs Positive cattle performance results

Also Corn gluten feed…

Finally… Cost effective use of WDGS

depends on inclusion rate, distance from ethanol plant, cattle performance

Even with extra costs, still affordable feed ingredient

Livestock feeders and ethanol producers can co-exist!

Thank You!

Questions?

For more information: [email protected] 303-623-6328

Or visit:www.usmef.org