US Imported Beef Market A Weekly Update

US Imported Beef Market A Weekly Update Prepared Exclusively for Meat & Livestock Australia - Sydney Volume XVIII, Issue 43 November 2, 2018 Prepared by: Steiner Consulting Group SteinerConsulting.com 800-526-4612 service@steinerconsulting.com Market Highlights for the Week: Imported beef prices continued to move higher last week on improved end user demand, lower Australia slaughter and reduced Central American imports. Australian beef exports were up 14% in October, with exports to China up 40% while exports to the US were up only 4% compared to a year ago China/Hong Kong imports are expected to continue to increase in 2019 and USDA estimates imports from these two markets have absorbed about 2/3 of the overall increase in global beef imports between 2016 and 2019 Fed cattle slaughter in the US last week was estimated at around 505,000 head, 1.6% lower than last year. Non fed slaughter was estimated at 137,000 head,3.5% higher than last year and the highest weekly slaughter so far this year (note that these numbers subject to revision). US beef imports in September were 81,425 MT, 3.6% higher than a year ago. US exports of fresh/frozen and cooked beef/veal in September were 85,513 MT, 6.2% higher than a year ago. The value of US beef exports in September was up almost 12% compared to a year ago, further evidence of excellent demand in global markets, especially in South Korea Year to date US beef exports are up almost 90,000 MT or 13% compared to a year ago. Imported Market Activity for the Week Imported beef prices were for the most part higher this week as overseas packers seemed to be well sold for product delivering in late 2018 and January of 2019. This is not that unusual for this time of year. New Zealand slaughter starts to ramp up in November but moisture conditions in the spring are highly variable. During some years a particularly dry spring can cause producers to bring more cows to market early. More often, however, cow slaughter will increase very slowly between October 1 and mid December. At this time New Zealand packers appear to be well sold through the end of the year. Year end holidays also cause disruptions for production schedules in the US and end users are looking to negotiate for deliveries after January 1, a time when product availability from New Zealand generally tends to decline. Australian slaughter has declined in the Global Beef Imports: 2016-2019 Carcass Weight Basis. '000 MT. Source: USDA-FAS 2,500 2,000 2016 2017 2018 2019 1,500 1,000 500 0 China+HK USA Japan S. Korea Russia EU Egypt Chile Other

VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 2 last two weeks, reducing the supply available for offering in the US market and helping firm up prices. Australian cattle slaughter for the week ending October 26 cattle slaughter in the four Eastern States + Tasmania was 131,171 head, down about 11,000 head or 7.7% compared to the average weekly slaughter in September. The increase in slaughter numbers during September and first half of October bolstered Australian beef exports for the month. However, even as Australian beef exports rose by more than 14% compared to the previous year, exports to the US were up only 4%. More beef was shipped to the US East Coast but those higher exports were offset by a notable reduction in West Coast shipments. The thing that stands out the most from the table to the right is the jump in Australian beef shipments to China. This is not an anomaly but rather a continuation of a pattern that we have seen develop in recent years. Indeed, the chart on page 1 illustrates a startling trend. Rising beef demand in China has soaked up much of the overall increase in global beef trade. USDA tracks imports by all key global players and a number of smaller markets. It is by no means a complete list but it includes most of the beef traded globally. In 2016, beef imports from all the countries tracked in the USDA database were a little over 7.7 million MT. This is on a carcass weight basis while the data in the USDA export statistics reflect volume on a product weight basis. While the conversion factors vary, a general rule of thumb is to use a 1.36 conversion, i.e. 7.7 million carcass weight is roughly 5.7 product weight. The reason for the conversion is that much product is traded as boneless product. Sticking with the carcass weight data from USDA, imports in 2019 are forecast to be 8.68 million MT, 984,000 MT or 12.8% higher than what they were in 2016. During this period, imports from Mainland China were 508,000 MT, accounting for more than half of the overall increase in global imports. When we account for Hong Kong imports as well, the total increase is 655,000 MT. So this region alone has absorbed about 2/3 of the total growth in beef imports. In order to fill this ever increasing demand for beef, Chinese buyers initially focused on South American beef both because of availability and price. However, Chinese purchases have expanded into Oceania and even North American. The latest USDA weekly beef export report noted a sharp jump in US beef export sales and almost half of the sales were to Hong Kong. African Swine Fever continues to spread in the region and it is Australia Beef Exports In October Monthly - 57 Destination Report - October 2018 - Tonnes Shipped Weight Destinations Beef & Veal Total Oct-17 Oct-18 Total Aus 86,279 98,888 12,609 15% Japan 23,078 26,891 3,813 17% China 11,353 15,909 4,556 40% South Korea 11,368 14,175 2,807 25% USA East 11,652 13,702 2,051 18% USA West 7,059 5,794 (1,265) -18% Indonesia 3,774 4,183 409 11% Philippines 4,259 4,102 (157) -4% Taiwan 2,819 2,926 107 4% Canada East 1,643 1,684 42 3% Total EU 1,274 1,054 (220) -17% Saudi Arabia 850 1,053 204 24% Malaysia 767 851 83 11% Hong Kong 1,243 682 (561) -45% All Other 5,140 5,881 741 14% Australia Weekly Cattle Slaughter: Source MLA Data Source: Meat & Livestock Australia. Analysis by Steiner Consulting 180,000 170,000 160,000 150,000 140,000 130,000 120,000 110,000 100,000 90,000 80,000 70,000 60,000 52wk MA 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 China Consumption of Beef, Pork, Poultry & Sheep Meat Source: OECD & FAO. Pounds per Capita. Retail wt. equiv. Poultry Meat 25% Sheep Meat 6% Beef 8% 111 lb./pp Pork 61% expected to bolster demand for all meat proteins. Currently pork accounts for over 60% of red meat and poultry consumption in China. Even a small diversification of the meat consumption patterns in the region could have significant impacts on global beef demand.

VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 3 USA September Beef Exports / Imports US September beef imports were 81,425 MT, up about 2,800 MT or 3.6% than a year ago. The increase was largely due to higher imports from Central and South America. Beef imports from Nicaragua were 5,986 MT, 2,231 MT or 59% higher than a year ago. Much of this was grinding beef and it is consistent with reports we received from importers at the time noting the increased availability of cheaper Central American beef as a reason for the general weakness in the imported grinding beef complex. It appears that imports from Nicaragua have started to slow down, however. For the week ending October 27 US imports from Nicaragua were just 657 MT, half the pace of weekly imports in late August, September and early October. Imports from Brazil were 3,509 MT in September, 2,102 MT or 149% higher than a year ago. Because of the current ban on Brazilian fresh beef imports, all this volume is cooked beef. On the other hand, imports from Australia were down 2% y/y, imports from new Zealand were down 23% and imports from Uruguay were down 15%. US beef exports continued to grow in September, albeit at a slower pace than in previous months. Total shipments of fresh/frozen and cooked beef for the month were 85,514 MT, about 5000 MT or 6.2% higher than a year ago. Exports were higher in a number of markets but South Korea was by far the largest contributor to the increase. Demand for US beef has been very strong all year as robust global growth strong competition from China in South American markets have supported US shipments. The value of US beef exports in September was $613.1 million, 11.8% higher than a year ago. Exporting more and getting world buyers to pay more for it is a textbook defi- Y/Y Ch. in Sep. 18 vs. Sep 17 US Beef and Veal Imports, MT Source: USDA/FAS Data in MT, Product Weight Basis World Total Canada Nicaragua Brazil Other Ireland Costa Rica Uruguay Australia(*) Mexico New Zealand(*) -1,659-1,772-479 -498-70 nition of stronger demand. Additionally, US beef packers and exporters shipped some $74 million worth of variety meats in September, 7.8% more than a year ago. As US beef exports have outpaced imports this year, this has limited availability in the US domestic market and helps explains robust beef pricing trends, especially for steak cuts, briskets, short plates and some thin meats 13 206-3,000-2,000-1,000 0 1,000 2,000 3,000 4,000 Y/Y Ch. in Sep. 18 vs. Sep 17 US Beef and Veal Export Volume Source: USDA/FAS Units: Metric Tons World Total Korea, South Vietnam Mexico Netherlands Taiwan Philippines Japan Egypt Hong Kong Other Canada -230-350 -6-7 -36 84 251 619 549 865 3,254 2,231 2,102 2,820 2,744 in beef imports: 3.6% -2,000 0 2,000 4,000 6,000 6.2% 4,993 in exports of fr/froz/pres beef:

VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 4 CME Cattle Feeder Index and US Cattle Markets Special Live Animal Reference Price Current Week Prior Week % CHANGE VS. Last Year WK AGO 1-Nov-18 25-Oct-18 31-Oct-17 from Last Year CME FEEDER CATTLE INDEX 153.89 155.01-0.7% #N/A #N/A 2-Nov-18 26-Oct-18 3-Nov-17 FED STEER (5-MKT AVG) 113.80 110.21 3.3% 119.33-4.6% CUTTER COW CARCASS, NATIONAL, 90% LEAN, 350-400 LB. (carcass wt.) 90.00 95.00-5.3% 102.00-11.8% BONER COW CARCASS, NATIONAL, 85% LEAN, 400-500 LB. (carcass wt.) 84.50 89.00-5.1% 95.00-11.1% BREAKER COW CARCASS, NATIONAL, 75% LEAN, 500+ (carcass wt.) 82.50 88.50-6.8% 94.50-12.7% CUTTER COW CARCASS CUTOUT, 5-DAY MA, USDA 154.07 154.35-0.2% 154.79-0.5% 260 CME Feeder Cattle Index 240 220 200 180 160 140 120 100 80 60 Source: Chicago Mercantile Exchange

VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 5 TABLE 2 IMPORTED BEEF PRICES, 7:45 DAYS, CIF From Last Current Week Prior Week Week Last Year From Last Year 2-Nov-18 26-Oct-18 3-Nov-17 US East Coast Australian/NZ Lean, CIF 95 CL Bull, E. Coast 191.0 193.0 191.0 193.0 0.0 222.0 226.0-33.0 90 CL Blended Cow 181.0 183.0 178.0 180.0 3.0 207.0 210.0-27.0 90 CL Shank 179.0 181.0 177.0 179.0 2.0 209.0 211.0-30.0 85 CL Fores 167.0 168.0 167.0 168.0 0.0 190.0 191.0-23.0 85 CL Chucks UNQ UNQ N/A UNQ N/A 95 CL Bull, W. Coast 188.0 191.0 187.0 191.0 0.0 220.0 224.0-33.0 Uruguay CFH 90CL, E. Coast UNQ UNQ N/A UNQ N/A US East Coast, Trimmings, CIF 85 CL Trimmings 166.0 167.0 166.0 167.0 0.0 188.0 189.0-22.0 80 CL Trimmings 159.0 160.0 160.0 162.0-2.0 172.0 174.0-14.0 75 CL Trimmings 156.0 157.0 UNQ N/A 161.0 162.0-5.0 65 CL Trimmings UNQ UNQ N/A 118.0 120.0 N/A US East Coast Australian Cuts, CIF Cap Off Steer Insides 265.0 270.0 265.0 270.0 0.0 275.0 280.0-10.0 Steer Insides 14/18 UNQ UNQ N/A UNQ N/A Steer Flats 210.0 215.0 205.0 210.0 5.0 UNQ N/A Steer Knuckles 230.0 240.0 225.0 230.0 10.0 245.0 250.0-10.0

VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 6 TABLE 3 IMPORTED BEEF PRICES, 7:45 DAYS, US WAREHOUSE From Last Current Week Prior Week Week Last Year From Last Year 2-Nov-18 26-Oct-18 3-Nov-17 US East Coast Australian/NZ Lean, FOB US Port 95 CL Bull, E. Coast 200.0 203.0 202.0 204.0-1.0 234.0 236.0-33.0 90 CL Blended Cow 187.0 189.0 185.0 187.0 2.0 215.0 217.0-28.0 90 CL Shank 187.0 189.0 188.0 189.0 0.0 215.0 217.0-28.0 85 CL Fores 175.0 176.0 175.0 1.0 194.0 196.0-20.0 85 CL Chucks UNQ UNQ N/A UNQ N/A 95 CL Bull, W. Coast 198.0 202.0 200.0 202.0 0.0 231.0 233.0-31.0 Uruguay CFH 90CL, E. Coast UNQ UNQ N/A UNQ N/A US East Coast, Trimmings, FOB US Port 85 CL Trimmings 174.0 175.0 174.0 175.0 0.0 193.0 195.0-20.0 80 CL Trimmings 166.0 166.0 0.0 179.0 180.0-14.0 75 CL Trimmings UNQ 155.0 156.0 N/A 170.0 N/A 65 CL Trimmings UNQ UNQ N/A 121.0 122.0 N/A US East Coast Australian Cuts, FOB US Port Cap Off Steer Insides 275.0 275.0 280.0-5.0 285.0 290.0-15.0 Steer Insides 14/18 UNQ UNQ N/A UNQ N/A Steer Flats 220.0 225.0 205.0 210.0 15.0 UNQ N/A Steer Knuckles 245.0 250.0 230.0 240.0 10.0 255.0 260.0-10.0

VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 7 TABLE 4 US DOMESTIC BEEF AND CATTLE PRICES Current Week Prior Week From Last Week Last Year from Last Year 2-Nov-18 26-Oct-18 3-Nov-17 Domestic Cutouts Low High Wt.Avg Low High Wt.Avg Low High Wt.Avg Choice Cutout 218.50 213.47 5.0 208.74 9.8 Select Cutout 201.47 198.83 2.6 193.08 8.4 Domestic Lean Grinding Beef 90 CL Boneless 181.0 200.0 188.8 182.6 205.0 190.2-1.4 212.0 220.0 213.3-24.5 85 CL Beef Trimmings 145.0 164.0 152.3 144.0 158.5 153.3-1.0 176.0 189.0 181.7-29.4 50 CL Beef Trim 70.8 70.8 64.7 65.2 65.2 54.7 10.0 86.2 86.2 73.6-9.0 Domestic Pork Trim 42 CL Pork Trim 20.0 39.5 23.4 21.0 40.0 26.6-3.2 21.3 47.6 25.4-2.0 72 CL Pork Trim 43.0 67.5 48.4 48.1 72.3 52.4-4.0 59.0 66.7 62.4-14.1 Point of Lean Values 90 CL Domestic 209.8 211.3-1.5 237.0-27.2 50 CL Beef Trimming 129.3 109.3 20.0 147.3-18.0 42 CL Pork Trim 55.7 63.4-7.6 60.4-4.6 72 CL Pork Trim 67.2 72.7-5.6 86.7-19.5 National (5 day accum. Direct wt. Fed avg. Steer 113.80 110.21 3.6 119.33-5.5 price)

VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 8 TABLE 5 FUTURES AND SLAUGHTER INFORMATION From Last Futures Contracts Current Week Prior Week Week Last Year From Last Year 2-Nov-18 26-Oct-18 3-Nov-17 Live Cattle Futures December '18 117.075 118.400-1.33 126.875-9.80 February '19 122.200 123.450-1.25 131.325-9.12 April '19 123.725 124.175-0.45 129.400-5.68 June '19 115.975 116.050-0.08 121.125-5.15 Feeder Cattle Futures November '18 152.500 154.800-2.30 160.550-8.05 January '19 149.750 149.700 0.05 161.250-11.50 March '19 148.250 147.825 0.43 158.375-10.13 May '19 149.450 149.325 0.13 158.375-8.93 Corn Futures December '18 371 1/4 367 3/4 3.50 347 3/4 23.50 March '19 383 1/4 380 3.25 361 1/2 21.75 May '19 391 1/4 388 3.25 370 21.25 July '19 397 393 3/4 3.25 377 1/2 19.50 Ch Wheat Futures December '18 508 3/4 505 1/4 3.50 422 1/2 86.25 March '19 524 524 1/4-0.25 441 83.00 May '19 535 3/4 536 3/4-1.00 454 1/4 81.50 July '19 542 3/4 543 1/2-0.75 468 1/4 74.50 From Last Slaughter Information 7 Days Ending 7 Days Ending Week 7 Days Ending From Last Year 3-Nov-18 27-Oct-18 4-Nov-17 Total Cattle Slaughter 643,000 633,000 10,000 646,000-3,000 20-Oct-18 13-Oct-18 21-Oct-17 Total Cow Slaughter 125,728 121,305 4,423 121,425 4,303 Dairy Cow Slaughter 64,924 62,477 2,447 61,495 3,429 Beef Cow Slaughter 60,804 58,828 1,976 59,930 874

VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 9 TABLE 7 - US BEEF IMPORTS (Source: USDA/AMS) YTD Imported Fresh/Frz Beef Passed for Entry in the US week 43 10/28/2017 10/27/2018 Australia 200,785 196,481 (4,304) -2.1% Brazil 9,022 - (9,022) -100.0% Canada 219,099 229,056 9,957 4.5% Chile 226 - (226) -100.0% Costa Rica 6,824 6,871 47 0.7% France - - - Honduras 360 1,516 1,156 321.1% Ireland 1,912 2,302 390 20.4% Japan 274 347 73 26.6% Mexico 153,655 165,216 11,561 7.5% Netherlands 228 - (228) -100.0% New Zealand 164,996 173,012 8,016 4.9% Nicaragua 38,143 45,740 7,597 19.9% Spain - - - Uruguay 32,997 30,300 (2,697) -8.2% Total 828,522 850,841 22,319 2.7% Source: AMS - USDA US Beef Imports. Metric Ton. Data Source: USDA/Agricultural Marketing Service Imports as of October 27, 2018 Individual Country Volume. MT & Y/Y % Ch. 300,000 250,000 2016 2017 2018 TOTAL YTD: +2.7% Total 870,000 860,000 200,000 850,000 150,000 840,000 100,000 830,000 50,000 820,000-810,000 Total -2% 5% 8% 5% 20% -8% 2.7%

VOLUME XVIII, ISSUE US IMPORTED BEEF MARKET PAGE 10 Australian Beef Quota Position Metric Ton. Australian Department of Agriculture Statistics 31-Oct-18 Quota Shipments 214,730 49.3% 2018 Quota 423,214 50.7% Balance 208,484 USA Quota Entries through Week Ending October 29 Source: US Customs 500,000 400,000 300,000 200,000 100,000 0 2017 YTD 2018 YTD % ch. Quota % cleared Australia New Zealand Uruguay Other 194,018,376 163,599,720 17,674,751 56,238,699 188,989,387 171,091,099 16,966,927 56,698,008-3% 5% -4% 1% 418,214,000 213,402,000 20,000,000 64,805,000 45% 80% 85% 87% Note: Customs did not provide an update this week. Data reflects last week s levels.