North America (US, Canada & Mexico)

MARKET SNAPSHOT BEEF North America (US, Canada & Mexico) UNITED STATES (US) The United States is the largest consumer of beef globally, with its total consumption up in 217, after a long term decline. Despite the recent decrease of Australian beef shipments to the US, it remains one of the main destinations for Australian beef in volume and value terms, and is also a growing market for Australian chilled grassfed beef. Challenges and opportunities in the US for Australian beef include: Although frozen manufacturing accounts for a large proportion of Australian beef exports to the US, the valuable chilled sector is gradually taking a greater volume share of exports, representing 27 of total exports in 217 compared to 1 in 212. Grassfed beef is a key growth area in both retail and food. Its growing profile in the US has been on the back of strong demand by consumers who perceive it as better for the environment and the welfare of animals, along with it being more natural. Population Households earning* >US$3,/year Households earning* >US$,/year 324. 333.8 74.1 82. 1. 9.6 in 217 in 221 in 217 in 221 in 217 in 221 In million In million households In million households Source: BMI Research, 217 estimate & 221 forecast Source: BMI Research, 217 estimate & 221 forecast * Disposable income Australian beef exports to the US have decreased slightly in 217 (down 3, to 234,112 tonnes swt). This drop has been driven by tight supplies of Australian cattle partnered with increased US beef production, and higher imports from North America Free Trade Agreement (NAFTA) partner s countries Canada and Mexico. Source: BMI Research, 217 estimate & 221 forecast * Disposable income Australian beef exports volume Australian beef exports value Proportion of key cuts Chilled grass 2 Chilled grain 2 Frozen grass 72 Frozen grain 1 Chilled 3 Frozen 6 Manufacturing 63 Fullset 9 Topside/inside 8 Thin flank 6 Other 1 Total 234,112 tonnes swt Source: Department of Agriculture and Water Resources (DAWR) CYTD 217 Total A$1,66. million Source: ABS/GTA. MAT (Moving Annual Total) November 216 to October 217, CY 217 Chilled grassfed beef exports to the US US meat consumption 122.1 kg per capita* total meat protein** 21,128 2,229 21,677 26,82 2,63 23,744 29,812 33,348 63,17 74,26 3,393 8,318 9.7 1.1 Pork 17.8 19.1 37.1 kg per capita* 12. 12.6.14.14 Poultry Beef Sheepmeat 217 221 26 27 28 29 21 211 212 213 214 21 216 217 In tonnes swt In million tonnes cwt Source: BMI Research, OECD * 217e per person per year ** Excluding fish/seafood Meat & Livestock Australia, 218. ABN 39 81 678 364. MLA makes no representations as to the accuracy of any information or advice contained in MLA s Market snapshot and excludes all liability, whether in contract, tort (including negligence or breach of statutory duty) or otherwise as a result of reliance by any person on such information or advice. All use of MLA publications, reports and information is subject to MLA s Market Report and Information Terms of Use. Please read our terms of use carefully and ensure you are familiar with its content. FOR FURTHER INFORMATION VISIT US ONLINE AT: www.mla.com.au or email us at: marketinfo@mla.com.au MLA INDUSTRY INSIGHTS North America January 218 1

Consumers US beef consumption has recovered slightly in 217 after a period of long-term decline. This is being strongly driven by higher US beef production which is forecast to continue in 218. The majority of US consumers would consider buying imported beef and are aware of grassfed beef. Nine out of 1 would consider buying grassfed beef. Australian grassfed beef awareness and consumption is higher in New York, Washington DC, Boston, Florida and San Francisco. Purchasers of grassfed beef are interested in quality and naturally raised beef, with concern for animal welfare and environmental sustainability also majors factor considered when purchasing beef (Source: MLA Global Tracker, 217). Awareness of types of beef Grassfed beef Organic beef Hormone-free beef Grainfed beef None of these 8 Source: MLA Global Consumer Tracker US, 217 9 8 66 Australia is well placed to meet the demands for quality and animal welfare with superior food safety, traceability protocols and unique quality grading system, Meat Standard Australia (MSA). Attributes important for all proteins and beef associations What attributes are important for US consumers (all proteins)? My/my family s favourite Most superior Guaranteed safe to eat Essential part of children s diet Consistent quality standards Source: MLA Global Consumer Tracker US, 216 and 217 78 What associations do consumers have to grassfed beef? Better for the animals Naturally raised Better quality Better for my health Better for the environment Food Manufacturing beef for burgers and other processed beef products make up a large proportion of Australian beef sold into the food sector in the US, while chilled grassfed beef is largely destined for full s and retail. Chicken and beef drive US protein menuing 1 8 6 4 2 Chicken Beef Bacon Prawn Pork Ham Fish Turkey Salmon Source: Dataessential, beef and lamb menu analysis, 217 Although grassfed beef is most common in casual dining and fine dining s, its growth is solid across all segments, particularly midscale* 1 and fast casual* 2 s (Source: DataEssential, beef and lamb menu analysis 217). Grassfed beef - penetration by segments Quick Fast casual Midscale Casual dining Fine dining All Tuna Seafood Scallop Calamari Lobster Lamb Duck. (+214) 1. (-247).8 (-323) 2.3 (+141 ) 2.1 (+16) 1.4 (+141) (Bracket percentage) = 4 year change 216 vs. 212 Source: Dataessential, beef and lamb menu analysis, 217 The US food segment is set to continue growing in the coming years, with more transactions and consumers spending driving strong growth. Outlet numbers are forecast to stagnate, demonstrating the maturity of the US food market (Source: Global Data US the future of food 221). Outlet numbers and value channel by key food channel ( out of total) 4 3 3 2 2 1 1 QSR FSR Education Service Healthcare station foodcourt Pub, club & bar Other Source: MLA Number of outlets Source: GlobalData, 217 estimate * 1 Midscale: waiter at a moderate price; often breakfast focused and generally no alcohol * 2 Fast casual: counter with focus on higher quality, fresh ingredients and customisation 2 MLA INDUSTRY INSIGHTS North America January 218

Retail Although the grassfed beef retail segment in the US is relatively small, demand for higher value chilled grassfed beef is increasing. Some of the most popular cuts include ground and steak cuts like tenderloin, striploin and rib eye. In the retail sector, supermarkets are the main purchase channel for Australian grassfed beef. However, limited country of origin labelling at point of purchase is challenging for Australian product to be differentiated in the sector. Where do shoppers buy Australian beef 217 Source: MLA Global Tracker US, 217 Supermarkets 6 Club warehouse 9 Butcher 14 Online 6 Other 6 Interestingly, Trader Joe s and Whole Foods shoppers are more likely to know the origins of their grassfed beef than the average supermarket shopper, representing an opportunity for Australian beef to increase origin awareness and preference. Australian grassfed beef is seen to provide the highest quality steak amongst imported product, with Costco and Whole Foods the most trusted sources for high quality steak (Source: MLA Global Tracker, 217). Motivation to choose and eat beef Important themes ranked by relative importance Other suppliers The main competitors for Australian beef in the US market are the US domestic beef, Canada, Mexico and New Zealand. Smaller suppliers include Uruguay and Nicaragua which have access to smaller quotas. Australia maintains its preferred access status to the US, only behind NAFTA partners (Canada and Mexico with no quota restrictions). New Zealand has a quota of 213,42 tonnes with an out-of-quota tariff of 26.4. In June 217, the U.S. Department of Agriculture (USDA) announced the immediate suspension of fresh beef imports from Brazil, as shipments failed food safety tests. The decision will remain in place until satisfactory corrective actions are taken. US beef imports by market share 217* tonnes swt Source: GTA * YTD Jan-Nov Australia 24 NZ 19 Canada 26 Mexico 22 Uruguay 3 Nicaragua Other 2 US beef Imports by major supplier 12 1 8 6 4 2 212 213 214 21 216 216 YTD* 217 YTD* Australia NZ Canada Mexico Uruguay Nicaragua Other Average import price (RHS) Source: GTA *CYTD: calendar year to Jan-Nov 7 6 4 3 2 1 US$/kg Freshness Safety Natural Nutrition Environmental Origin Recipes Halal Source: MLA Global Consumer Tracker, 217 Source: MLA MLA INDUSTRY INSIGHTS North America January 218 3

US Market access overview Trade agreements Import tariffs Competitors Volume restrictions Technical access Australia-United States Free Trade Agreement (AUSFTA) Zero within quota (17.6 above quota) Canada and Mexico NAFTA, no quota Australia to US 423,214 tonnes swt E. coli and Salmonella sampling programs, label approvals and port mark compliance Best access Major challenges Source: Trade agreements DFAT, MLA Australian beef exports to US summary table Volume in tonnes swt 217 out of total 216 out of total -year average (212-216) out of total change 217 vs -yr av. in tonnes swt Storage Meat type Storage/meat type in A$ Total 234,112 1 242,13 1 298,33 1-22 -64,421 Chilled 63,741 27 61,364 2 7,793 19 1,948 Frozen 17,372 73 18,649 7 24,74 81-29 -7,369 Grassfed 227,18 97 232,242 96 289,916 97-22 -62,78 Grainfed 6,94 3 9,77 4 8,617 3-19 -1,663 Chilled grassfed 8,318 2 3,393 22,784 17 1 7,34 Chilled grainfed,423 2 7,971 3 7,9 2-23 -1,86 Frozen grassfed 168,84 72 178,8 74 239,132 8-29 -7,292 Frozen grainfed 1,31 1 1,799 1 1,68 1 - -77 in A$ Storage Total 1,66,7 * 1 1,726,972 1 1,83,38 1-1 -192,878 Chilled 84,649* 3 92,36 34 8,14 27 1 76,9 Frozen 1,7,89* 6 1,134,616 66 1,34,24 73-2 -269,387 Source: ABS/GTA. 217* = Moving Annual Total (MAT), November 216 to October 217. Australian beef exports to US by major cut in tonnes swt Volume in tonnes swt Manufacturing 147,27 63 1,679 62 2,23 67-27 -3,248 Fullset 2,83 9 6,979 3 1,397 1391 19,438 Topside/inside 18,6 8 18,431 8 2,1 7-1 -2,4 Thin flank 13,9 6 19,861 8 22,629 8-39 -8,724 Silverside/outside 8,667 4 1,728 4 13,479-36 -4,813 Other 2,36 11 3,33 1 4,41 14-37 -1,3 Total 234,112 1 242,13 1 298,33 1-22 -64,421 Australian beef exports to Canada by major cut in tonnes swt Volume in tonnes swt Manufacturing 13,42 67 14,247 74 19,1 74-3 -,67 Silverside/outside 2,811 14 1,698 9 2,732 11 3 79 Cube roll/rib eye roll 1,29 6 667 3 639 2 12 61 Other 2,428 12 2,74 14 3,214 13-24 -786 Total 19,94 1 19,316 1 2,684 1-22 -,73 Australian beef exports to Mexico by major cut in tonnes swt Volume in tonnes swt Thin flank 122 99 96 1 481 98-7 -39 Other 1 1 9 2-87 -8 Total 124 1 96 1 491 1-7 -367 4 MLA INDUSTRY INSIGHTS North America January 218

CANADA Overall meat consumption is declining in Canada, driven by changing demographics (growing number of immigrants) and an ageing population concerned about their health. Beef remains the second most popular protein in Canada, with per capita consumption averaging 17kg/year, behind poultry (3kg/year). Challenges and opportunities in Canada for Australian beef include: The proportion of high income households in Canada is increasing steadily and can represent a growth opportunity for high quality beef through high-end retailers and food. Australian beef exports to Canada is mostly comprised of frozen manufacturing beef, and is currently limited by a quota and an above-quota tariff. The US remains the main imported beef supplier to Canada, Consumers accounting on average for more than of total imports. The US and Mexico benefits from neither a tariff nor quota restrictions as part of North America Free Trade Agreement (NAFTA). Imports from Australia, New Zealand and Uruguay declined in 217 as imports from the US increased. Most Canadian consumers already buy imported beef, and a growing majority of grassfed beef buyers are aware of the country of origin (68), and most would consider buying imported beef (82) (MLA Global Tracker 217). Compared to global consumers, Canadian beef buyers are more concerned about natural produce, price and no added hormones. When purchasing beef, naturalness is something buyers look for and grassfed is seen as an authentic differentiator. However, the appeal of grassfed beef has plateaued at the same time that newer descriptors have become more prevalent like organic, hormonefree, non-gmo and antibiotic-free. It appears consumers are not fully aware of the differences between these types of beef. Motivation to choose and eat beef Important themes ranked by relative importance Freshness Safety Natural Origin Environmental Nutritional Halal Recipes Source: MLA Global Tracker US, 217 1 Food and retail The full and quick channels lead the Canadian food sector, generating a combined 64 of total revenue in 216. Beef is the most valuable meat category in the quick segment, representing 39 of the channel s total animal protein value* 3 in 216. (Source: GlobalData Canada, The future of food to 221). Outlet number and value by key food channel ( out of total) At the retail level, Australian beef is mainly purchased from supermarkets, and as the retail sector is quite fragmented in Canada, each city has a different leader in claimed total beef sales (Source: MLA Global Tracker US, 217). Main supermarkets for purchasing beef TORONTO VANCOUVER 4 3 3 2 2 1 1 Full Quick Education Healthcare Coffee & tea shop Hotel & motel Other Loblaws 23 Metro 17 WholeFoods 1 Longos 6 Sobeys 6 Other 47 Source: MLA Global Tracker US, 217 Safeway Canada 33 Fairway 2 Buy Low 2 IGA 6 Urban Fair 1 Other 2 Number of outlets Source: GlobalData, 217 estimates Canada Market access overview Trade agreements Import tariffs Competitors Volume restrictions Technical access No agreement Zero within quota (26. above quota) US and Mexico NAFTA, no quota 3, tonnes/year swt 26. tariff apply over quota E. coli and Salmonella sampling programs, label approvals and port mark compliance Best access Major challenges Source: Trade agreements DFAT, MLA * 3 On-base percentage MLA INDUSTRY INSIGHTS North America January 218

MEXICO Mexico has experienced stable economic growth over recent years, which has fuelled an expanding middle class who are expected to increase their appetite for beef. Challenges and opportunities in Mexico for Australian beef include: Australian beef exports to Mexico have historically consisted of small volumes of frozen product used for further processing. Prior to March 217, Australian beef faced tariffs which aren t payable by larger North American beef importers. The relaxation of tariffs, which has been extended to December 219, and the superior shelf-life of Australian chilled beef have present opportunities in this market, particularly considering that Mexican consumers have a growing appetite for premium, high quality fresh meat. Rising incomes and an expansion of urban lifestyles have boosted growth prospects for products of high quality and value in Mexico through both the food and retail channels. (Source: BMI) Consumers Mexicans are expected to consume approximately 1.86 million tonnes cwe of beef in 218 and demand is projected to rise, as the peso strengthens and the middle class grows. (Source: United States Department of Agriculture USDA) Young, wealthy consumers are driving beef consumption growth in Mexico. Younger consumers with more money to spend are fuelling demand for high quality food and more formal dining experiences. The number of households with a higher income (above US$7,/year) is expected to register notable growth by 221. In addition, hotel and expenditure is also set to increase, creating new opportunities for high value products such as Australian beef and lamb. Food and retail Food spending in Mexico is forecast to grow 6 in the next five years, with the growing working-age population and urbanisation lifting demand for more convenience among food customers. Full s is the largest segment within food, holding a 43 share of sales in 216. The channel is set to be the main beneficiary of Mexico s positive economic scenario, with rising discretionary incomes allowing families to trade up from quick s and being more receptive to higher value imported Australian beef. In the retail sector, hypermarkets are the most prevalent outlet type in the country. Retailers will increasingly target the uppermiddle class segment in the coming years, through premium formats that offer popular imported produce (Source: BMI). Outlet number and value by key food channel ( out of total) 4 4 3 3 2 2 1 1 Trade access Quick Full Education Healthcare Other mobile operators Pub, club & bar Other In late 217, the Mexican government extended the agreement establishing detailed provisions on unilateral tariff rate quotas, which allows 2, tonnes/year of beef to enter Mexico duty-free from any exporting countries until the end of 219. The annual quota will be shared with other non- NAFTA countries. Number of outlets Source: GlobalData, 217 estimates Mexico Market access overview Trade agreements Import tariffs Competitors Volume restrictions Technical access No agreement Australia is an associate member of Pacific Alliance and is in the early stages of negotiating a FTA Zero within quota (2-2 above quota) US and Canada NAFTA, no quota 2, tonnes/year swt shared with other non- NAFTA countries until December 219 Listing restrictions on who has approval to send to Mexico, labelling and language issues on carton and inner packaging, sample tests on arrival for all consignments, port of entry options limited Best access Major challenges Source: Trade agreements DFAT, MLA 6 Meat & Livestock Australia, 218. ABN 39 81 678 364. MLA makes no representations as to the accuracy of any information or advice contained in MLA s Market snapshot and excludes all liability, whether in contract, tort (including negligence or breach of statutory duty) or otherwise as a result of reliance by any person on such information or advice. All use of MLA publications, reports and information is subject to MLA s Market Report and Information Terms of Use. Please read our terms of use carefully and ensure you are familiar with its content.