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U.S. DOLLAR INDEX
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Source: Pacific Exchange Rate Service
-20%
0%
20%
40%
60%
80%
100%
120%
140%
Jan
-03
Jun
-03
No
v-03
Ap
r-04
Sep
-04
Feb
-05
Jul-
05
Dec
-05
May
-06
Oct
-06
Mar
-07
Au
g-0
7
Jan
-08
Jun
-08
No
v-08
% C
han
ge
Sin
ce 2
003
Monthly
Key Currencies Versus the U.S. DollarSince Jan 1, 2003
BRZ R, +56%
CAD$, +29%
JP ¥, +21%
EUR €, +20%
AUS$, +15%
SK W, -11%
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Dow Jones Average
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Crude Oil
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Cattle Industry Outlook and Strategies
Florida Cattlemen’s Institute January 2009
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+9% 500,000 HEAD IN 2008
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Down 2% (650,000) head
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U.S. Beef Trade and Forecasts
Exports
Source: U.S. Dept of Commerce, forecasts by CF
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80 82 84 86 88 90 92 94 96 98 00 02 04 06 08YEARS
20
21
22
23
24
25
26
27
28
29
30
BIL
LBS
Beef Production and Net Beef Supply
Production Net Supply
2008-2009 projected
Source: USDA
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U.S. Dollar Index
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Source: USDA, CattleFax Projections
U.S. Meat Exports in 2009
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0
10
20
30
40
50
60
70
80
90
100
50 53 56 59 62 65 68 71 74 77 80 83 86 89 92 95 98 01 04 07
Po
un
ds
YearsSource: USDA
Beef
Pork
Broiler
Turkey
-1.7lbs
+0.4lbs
2009 vs 2008-1.9lbs
-0.2lbs
Per Capita Meat Consumption2009 vs. 2008 Total Meat Consumption down 3.4 lbs
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Peak Trough Length of Recession(months)
Change in CH Retail
Price
Change in Per Capita
Supply
2008 ??? ??? +2-4% -2-3%
Mar 2001 Nov 2001 8 +10% -1%
Jul 1990 Mar 1991 8 +7% -4%
Jul 1981 Nov 1982 16 +1% +0%
Jan 1980 Jul 1980 6 +2% -2%
Nov 1973 Mar 1975 16 +2% +5%
Recessions
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Shifts in Beef Demand Change in values
90s Trimmings +15%
Chuck +10%
Round +9%
Rib +0%
Loin -7%
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FEEDGRAINS
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$344 $363$386
$414$439
$473
$557
$735
$2.55$2.42
$2.57$2.76 $2.83
$2.96
$3.48
$4.51
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
2002 2003 2004 2005 2006 2007 2008F 2009F
Brea
keve
n Co
rn P
rice
$/b
ushe
l
Tota
l Cos
ts/A
cre
Years
Estimated Corn Production Costs in Iowa
Source: Adapted from Iowa State Universityand University of Illinois Extension
Projected break-evencorn price for 2009
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Cattle Markets&
Supply
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►Fewer feeding companies will finish a higher percentage of the cattle.
►Cattle ownership in feed yards will become more highly concentrated. “The feed yards will own more cattle”
►The feeding industry will remain primarily located in the 5-state area (NE, CO, KS, OK, TX).
►To much capacity, tremendous loss of equity, access to capital, capacity will be idled, some move to grow yards, others will close
►Managing cost and price risk will be an essential ingredient for a successful business model.
Impact on Feeding Industry
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Packing Segment● Tighter fed supplies – excess packing capacity
● Hide & Offal value decline to squeeze margins
● Industry is vulnerable to the loss of more packing capacity in 2009-2010
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Role of Stocker Operator Inventory shock absorber
Add low cost of gain
Warehouse cattle
Add value and improve quality
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High Return Producers Don’t Cheat When it Comes to:
1.Animal Health
2.Nutrition
3.Genetics
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Habits of High- Return Producers$
$
$
$
$
$
$
1. Below average annual cow costs2. Lower feed costs
3. Lower than average calf breakeven prices4. Lower interest expense (less debt)
5. Lower general operating expense6. Higher averaging weaning weights7. Higher conception rates
$
8. More pounds weaned per cow exposed
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Stair Steps to
Profitability
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Strategies for 2009Stocker & Cow-Calf Operations
► Stocker operations must manage profits. It is the cattle feeders turn to make money.
► Narrow feeder to fed spreads. Does this present an opportunity to retain ownership?
► Narrow calf to feeder/fed spreads. Does this present an opportunity to retain ownership?
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Impact on Cow/Calf Producers
♦ Cost management hasn’t gone away.
♦ Value capture becomes essential (calves, bred females, open females, cull bulls, etc.
♦ Precision nutritional management when supplemental feeds are being provided.
♦ “No surprises” in terms of animal health, genetics and reproductive performance is the mantra of producers.
♦ Risk management involves long-term grass leases, supply chain contracts, and more focus on managing at least part of the calf crop through the stocker and or finishing phase.
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♦ Optimize reproduction – rising feed and input costs will increase sensitivity to the “law” of diminishing returns”, producers are de-incentivized to maximize reproductive rates.
♦ Economies of scale become increasingly important which will force additional consolidation.
♦ Producers will only adopt technologies with very distinct financial advantages.
♦ Estate planning and inter-generational asset transfer become increasingly important.
♦ Labor availability is a limiting factor.
Impact on Cow/Calf Producers
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Thank You Have a Profitable 2009