Presented by: Len Steiner Steiner Consulting Group, 800.526.4612 - PowerPoint PPT Presentation

MICA 2017 Annual General Meeting & Conference Westin Gaslamp Hotel, San Diego, CA October 24 to 27, 2017 supporting and promoting imported meat   Presented by: Len Steiner Steiner Consulting Group, 800.526.4612

Main Discussion Points Today  #1: Economic Situation in US and World  #2: Currency Markets  #3: Feed Input Costs  #4: Cattle Supplies in USA, Canada and Mexico  #5: Product Availability from Importing Partners o Special Discussion on Argentina  #6: Demand in US Domestic Market  #7: Demand in Other Markets (Competition)  #8: Supplies of Competing Proteins  #9: US Lamb Business  #10: Price Forecasts 2018 Meat Market Outlook - 1 - Presented by: Steiner Consulting Group | (800) 526-4612

Global Situation – Last Year Canada : Q2 GDP declined 1.7%, higher recession risk at this time Russia : Low energy prices and EU weak commodities are Brexit delayed big negative for growth effects remain a negative for USA : robust job Japan : 2017 growth continues to Monetary policy fails point to a more to fight deflation rapid expansion India : pace for remainder China : Economy is growing of the year Growth in Q2 was 6.7% in and inflation remains line with estimates. Mexico : GDP low Overcapacity problems will accelerated to 2.8% in continue to weigh down Brazil : Economy Q1. Growth on track contracted 6% in New Zealand : Q1. Political Q2 growth issues persist and +3.6%, helps unemployment at bolster NZD Australia : 11.6% in July Q2 growth +3.3% vs. year ago despite Argentina : slower export growth Economy continues to struggle and weak Source: Moody's Economy.com, Steiner commodity markets have added to the negative outlook 2018 Meat Market Outlook 2 Presented by: Steiner Consulting Group | (800) 526-4612

Global Situation – Current Canada : robust growth in Q1. Export growth EU remains a weak point Impact of Brexit starting to be felt in UK. North/East Russia : expanding and even Finally out of recession economy South is recovering slowly recovering. GDP +0.3%, inflation down to 4% Japan : USA : job market Modest inflation and recovery continues. weaker Yen is Growth rebounded in supportive Q2 and expansion remains on track China : Growth has recovered. Consumer spending accelerated in last two Mexico : GDP growth quarters, which is key as India : was 2.8% in Q1, up from economy relies less on heavy Growth has slowed but 2.3% in previous quarter industry expansion remains on New Zealand : track Brazil : Two Low consecutive unemployment, quarters of positive higher inflation, growth. more growth Australia : Q2 growth was up 0.8%, a Argentina : much faster pace than the Continued improvement previous quarter. in business conditions and higher commodity prices bolstering growth Source: Moody's Economy.com, Steiner - 3 - 2018 Meat Market Outlook Presented by: Steiner Consulting Group | (800) 526-4612

#1 Economic Situation in US and World Global Economic Growth Expected to Further Expand in 2018 GLOBAL GROWTH OUTLOOK REAL GDP GROWTH % 6.0 5.0 4.0 3.0 2.0 1.0 0.0 -1.0 -2.0 -3.0 -4.0 World N. Am. S. Am. Euro Asia Oceania 2015 2016 2017 Fcst 2018 Fcst World N. Am. S. Am. Euro Asia Oceania 2014 2.5 2.4 0.0 1.1 4.3 2.7 2015 2.6 2.5 -1.9 1.9 4.5 2.5 2016 2.3 1.6 -2.9 1.7 4.5 2.6 2017 Fcst 2.9 2.2 0.3 2.2 4.7 2.2 2018 Fcst 3.0 2.9 2.2 1.7 4.5 2.5 Last update: September 18, 2017 Source: Moody's Economy.com 2018 Meat Market Outlook - 4 - Presented by: Steiner Consulting Group | (800) 526-4612

#1 Economic Situation in US and World Expansion to Be Sustained in 2018 But Risks Mount Positives Near full employment - ANNUAL USA GROWTH RATE OF GDP Low rates % ch. - Annualized Quarterly Growth Rate 8.00 Weaker US$ - forecast 6.00 Income growth - 4.00 Low household debt - 2.00 Strong corporate balance sheets - 0.00 Banks in good shape - -2.00 Export demand - -4.00 Negatives -6.00 -8.00 Rising inflation pressures * Forecast: Moody’s - Qualified labor shortages -10.00 - China debt '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 - Political risk in US and Europe - Geopolitical risk (war) - 2018 Meat Market Outlook - 5 - Presented by: Steiner Consulting Group | (800) 526-4612

#1 Economic Situation in US and World US economy has added jobs consistently since 2011 USA UNEMPLOYMENT RATE: % NEW JOB CREATION: NON AGRICULTURAL, 000's 12.00 600 400 10.00 Dec 2018 200 Forecast 4.1% 8.00 THOUSAND JOBS percent 0 6.00 -200 -400 4.00 -600 September 2017 2.00 4.2% -800 0.00 -1000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 - Economy has added 1.8MM jobs in the last 12 months. Job creation contracted in September due to short term storm effects. Leisure and hospitality was down 111,000 jobs. - Foodservice has been one of the main job creators 2018 Meat Market Outlook - 6 - Presented by: Steiner Consulting Group | (800) 526-4612

#1 Economic Situation in US and World Overall foodservice dollar sales continue to grow but… FOODSERVICE $ SALES : Y/Y % CH. GROCERY STORE $ SALES : Y/Y % CH. Latest Data is for August 2017 Latest Data is for August 2017 12.0% 12.0% 10.0% 10.0% 8.0% 8.0% 6.0% 6.0% 4.0% 4.0% 2.0% 2.0% 0.0% 0.0% -2.0% -2.0% -4.0% -4.0% '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Source: Advance Monthly Sales for Retail & Foodservice, US Census Bureau Dollar sales growth has slowed down, in part due to lower food inflation. Deflation has impacted retail sales more than foodservice. 2018 Meat Market Outlook - 7 - Presented by: Steiner Consulting Group | (800) 526-4612

#1 Economic Situation in US and World Fast Food Outperformed Other Sectors In August FOODSERVICE $ SALES : Y/Y % CH. SAME STORE SALES Latest Data is for August 2017 70% 12.0% 60% 10.0% 50% 8.0% 6.0% 40% 4.0% 30% 2.0% 20% 0.0% 10% -2.0% 0% Family Casual Fine Limited Quick Dining Dining Dining Service Casual -4.0% Higher Sales 36% 31% 36% 62% 45% '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Lower Sales 34% 43% 64% 17% 55% Same Store Sales - August 2017 vs. August 2016, Tracking Survey Responses by Industry Segment Source: National Restaurant Association Source: US Census Source: National Restaurant Association 2018 Meat Market Outlook - 8 - Presented by: Steiner Consulting Group | (800) 526-4612

#1 Economic Situation in US and World One possibility for low traffic is that food at home now much cheaper Food CPI Comparisons. Jan 2008 = 100 Source: BLS. Analysis by Steiner. 130.0 Food at Limited Service 125.0 Restaurants Food away 120.0 from home 115.0 Food at 110.0 Home 105.0 100.0 95.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Bureau of Labor Statistics 2018 Meat Market Outlook - 9 - Presented by: Steiner Consulting Group | (800) 526-4612

A More Chaotic/Diverse Food Delivery System Before ore Now RETAIL/GROCERY - RETAIL/GROCERY - Cooked Meals - FOODSERVICE - Meal Kits - In-store restaurants - FOODSERVICE - Restaurant meals - Carryout Meals - Meal delivery/UberEATS - Food trucks - Online/Meal Kits/Amazon Fresh - Blue Apron, Prepared Meal - Programs 2018 Meat Market Outlook - 10 - Presented by: Steiner Consulting Group | (800) 526-4612

# 2 Currency Markets Performance of US$ vs. Imported Beef Currencies in last 12 months US Dollar vs. Currencies of Top Meat Trading Partners % change in the last 12 months (Nov 2016 - Oct 2016) 110% 105% USD/Peso Positive for US imports USD/NZD Negative for US exports 100% USD/AUD 95% Negative for US imports Positive for US exports USD/CAD 90% Nov '16 Dec '16 Jan '17 Feb '17 Mar '17 Apr '17 May '17 Jun '17 Jul '17 Aug '17 Sep '17 Oct '17 2018 Meat Market Outlook - 11 - Presented by: Steiner Consulting Group | (800) 526-4612

# 2 Currency Markets Price of Imported 90CL Beef in US$ Remains Near Levels from 2012 Price of 90CL Imported Beef in US Market (CIF) Pricein Prices in US$/cwt USD 350 300 Oct 2012 US $210/cwt 250 US $200 cwt 200 Current USD/cwt 150 100 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Meat Market Outlook - 12 - Presented by: Steiner Consulting Group | (800) 526-4612

# 2 Currency Markets Price of Imported 90CL Beef in US$ Terms & AUD Terms Price of 90CL Imported Beef in US Market (CIF East Coast). Pricein Prices in US$/cwt and AUD/cwt USD and AUD 350 +33% gain from AUD/cwt 300 currency shift $270/cwt 250 $210/cwt 200 USD/cwt 150 100 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Meat Market Outlook - 13 - Presented by: Steiner Consulting Group | (800) 526-4612

#3 Feed Input Costs Three Consecutive Years of Above Trend Yields = A lot of Corn TREND CORN YIELDS AND 2017-18 ESTIMATED YIELDS Corn Yields Since 1990. More Stable and Higher Yields in the Last Decade Point to Effect of Technological Improvements. Data from USDA. 180 2017 USDA Est. 2016 Corn yields: 170 2015 160 2012 – 123.1 bu. 2014 2013 150 2017 – 171.8 bu. 140 = 130 2012 not included in trend 120 +40% 1990 - 2016 Linear Trend 110 increase 100 90 2018 Meat Market Outlook - 14 - Presented by: Steiner Consulting Group | (800) 526-4612