2021 Q2 Big Picture Market Outlook Webinar

Q2 BIG PICTURE
OUTLOOK
HOSTED BY: J.S. Ferraro
DATE: April 21, 2021
Confidential. © Copyright J.S. Ferraro. All Rights Reserved, 2021. Not for distribution.
WEBINAR
ASF Resurgence - Challenges &
Effects on the Global Protein
Market

Meat Procurement Advisors.
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ABOUT J.S. FERRARO
2 |

3 | Confidential. © Copyright J.S. Ferraro. All Rights Reserved, 2021. Not for distribution.
Q2 BIG PICTURE MARKET OUTLOOK: SPECIAL REPORT
ASF RESURGENCE:
Todd Thurman
Swine Consultant | SwineTex
Challenges & The
Effects In The Global
Protein Market

PANELIST | DR. ROB MURPHY
DR. ROB MURPHY, BS, MS, PhD Agri Economics
Executive Vice President, Research and Analysis
J.S. Ferraro
www.jsferraro.com
An agricultural economist and business leader with over 27 years in the industry, Dr. Rob Murphy has
a wealth of experience in the North American meat and livestock industries studying, analyzing and
predicting market movements. His expertise spans commodity analysis, econometric modelling,
forecasting, futures markets, hedging, and risk management.
Rob holds a Ph.D. in Agricultural and Applied Economics from Virginia Tech and has developed his
market expertise over the past three decades by serving as an economist with the Chicago Mercantile
Exchange, Sparks Companies and Informa Economics.
At Informa, Rob held two senior leadership roles (Senior VP of Livestock, Meat, Dairy and Poultry
group and Vice President) over 13 years. He focused on the development of risk management
programs and directed the division’s work in commodity analysis in the protein sector. He has spoken
internationally on many topics, including agri supply chain-development and international protein
demand.
Currently, Rob is the Executive Vice President, Research and Analysis at J.S. Ferraro & Co. leading
the team in commodity analysis, financial modelling, and the development of trading and risk
management strategies.

PANELIST | KEVIN GRIER
KEVIN GRIER
Market Analyst
Kevin Grier Market Analysis & Consulting
www.kevingrier.com
Kevin Grier is a noted Canadian Agriculture & Food Market Analyst providing economic and market
outlook for livestock, meat and grocery industries over the last 20+ years. His critical market insight
and analysis helps his clients - from government and producer groups to small to large businesses -
drive profitable bottom line decisions.
Kevin is a regular contributor and respected expert across media platforms throughout North America -
Global News, CTV, National Post, Globe & Mail, National Hog Farmer and Grocery Business. Kevin
speaks with clarity on a range of topics including market analysis, economic impacts, consumer trends
and commodity analysis. He provides regular commentaries on the market and is a national and
international keynote speaker known for his approachable yet pragmatic style.
His breadth of knowledge was developed over 18 years at the George Morris Centre, a leader in
economic research in the agriculture and food industry. Prior to that Kevin was a manager with the
Ontario Farm Products Marketing Commission, the supervisory body of the provincially regulated
marketing boards. Currently, Kevin is Principal of Kevin Grier Market Analysis and Consulting, a
company specializing in livestock, meat, poultry and grocery industry market insight and analysis
working across a breadth of organizations internationally.

1. MARKET OUTLOOK | CATTLE & BEEF
• US Market
• Canadian Market
2. SPECIAL REPORT | HOGS & PORK
• ASF Resurgence:
Challenges & Effects on the Global Protein Market
3. LIVE Q&A
DISCUSSION OUTLINE

7 |
HOUSEKEEPING
Questions can submitted within the Q&A box at the bottom of your
screen
Participants video and microphones will be muted for the
presentation
Technical questions can be submitted using the CHAT box at the
bottom of the screen. Contact HELP & SUPPORT participant
Use the side-by-side view to easily see the speakers and
presentation

• SUPPLY, DEMAND & PRICING
• INSIGHTS
Q2 BIG PICTURE MARKET OUTLOOK
CATTLE & BEEF | US

9 |
US Beef Markets on Fire!
• US beef prices have surged in recent
weeks, pushing the Choice cutout over
$275
• Outside of the Covid-related disruptions
last spring, the cutout has struggled to
exceed $235 in the last two years
• Tighter-than-normal spring supplies will
play a role in further advances
• However, the major story in the beef
complex has been astounding domestic
beef demand

10 |
Cattle Prices Surge, Packer Margins Very Strong
• The cash cattle market began moving higher in late March after seven
weeks stuck at $114
• Last week’s market averaged near $122, with stronger pricing in the
Northern Plains and weaker pricing in the South
• Packers can easily afford to pay more for cattle because surging
cutouts have lifted to their profit margins to over $500/hd
• Packers could pay as much as $164 for cattle and still not have a
negative margin

11 |
Tighter-Than-Normal Spring Supply Coming
• A sharp drop in feedyard
placements back in Q4 is now
beginning to influence the supply of
market-ready fed cattle
• This drop in Q4 placements was
443,000 less than Q4 of 2019. That
amounts to about 34k fewer steers
and heifers each week
• Timing is not exact however, since
there is a lot of flexibility in when
feedyard cattle will be ready for
slaughter

Fed Slaughter Much Tighter During April & May
• Here we compare the forecast for this
year against the 2017-2019 average since
2020 was so disrupted due to Covid
• Weekly average S&H slaughter in April
looks like it will be down about 2.5% and
in May that grows to a 4.5% deficit
• By June, the industry will be beyond the
dip in cattle availability and kills during
the summer will be closer to the longer-
run averages
• Keep in mind, packer margins have been
running extremely large this year
12 |Confidential. © Copyright J.S. Ferraro. All Rights Reserved, 2021. Not for distribution.
+6.9%
-2.5%
-4.5%
$126 $124 $116 $114 $110
2017-19 Avg Cattle Pr:

Carcass Weights Starting to Raise Concerns
• In early 2021, carcass weights were running very heavy, but the
“deep freeze” event in mid February helped bring weights quickly
down to last year’s level
• Not much bad weather since then, and cattle have been gaining well
in feedyards
• The de-trended and de-seasonalized carcass weights are currently
around +10 lbs, but projected to move higher
• This raises concerns that cattle feeders might not gain the leverage
advantage expected this spring

Beef Demand is Incredibly Strong
• The price-quantity scatter diagram for April shows demand in 2021
stronger than it has ever been
• This April was even stronger than demand in April, 2015 when very
tight supplies were causing “panic” demand
• The bar chart to the right shows our calculated demand index for Q1
through time. This year is the strongest on record
• 2021 even beats 2020 Q1 demand when consumers were in stockpiling
mode due to Covid spread

Possible Causes for Current Demand Strength
• Changes in Consumer Dietary Patterns: Remember the Atkins Diet Fad back in the early 2000s? This
market is acting a lot like it did back then with unexplained demand strength across all proteins
• Increased Disposable Income: Three rounds of stimulus checks have boosted consumer purchasing
power. Biggest round signed March 11. Could be inflationary.
15 |
• Vaccination Inspires Consumer Confidence: Yes, but that is more likely to generate spending on travel,
entertainment than on a basic necessity like food.
• Foodservice Ramping Back Up: Inventories likely needed to be replenished, but that is a one- time event
and would only last a week or two. The shift away from foodservice during the pandemic boosted
demand, so if foodservice comes back that would point to weaker demand.
Most Likely Causes of This Demand Boost:
Possible, but Less Likely:

Strong Spring Pricing Should Boost Placements
• In the short-run, strong demand and
tighter-than-normal cattle supplies should
lead to rising cutout and cattle prices.
That makes the Apr and Jun futures look
too low
• Longer-term however, we expect demand
to cool somewhat and the dip in supplies
will pass
• High pricing this spring is likely to lead to
high feedyard placements which will hit
the market in Q4
• As a result, all of the 2021 contracts from
August onward look too rich

INSIGHTS: Cattle & Beef Main Take-Aways
• Super-strong beef pricing is being driven by the perfect storm of tight cattle supplies meeting
extremely strong demand
• The tight supply situation should resolve by mid June, but the strong demand environment could
continue a lot longer.
• Much improved feedyard profitability will likely drive large placements in the next few months and
those big supplies will be market ready this fall/winter.
• This demand “bubble” feels different from the typical demand cycle. It may be driven by a change in
consumer dietary habits as consumers move toward high protein diets to lose weight gained during the
pandemic
• Fall and winter futures look way too high—buyers should resist the temptation to extend forward
pricing beyond mid-summer.

• FOODSERVICE UPDATE
• SUPPLY, DEMAND & PRICING
• INSIGHTS
CATTLE & BEEF | CAD

Foodservice Update
• Foodservice tanking hard again
• New lockdowns sales back to April 2020 levels?
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
J F M A M J J A S O N D
Billions
$
Canadian Foodservice Sales
Monthly 2020, 2021, 2015-2019 Avg
2015-2019 average 2020 2021 2021 Estimate/Forecast -80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
Total
Foodservice
Special
Services
Drinking
places
Full Service Limited
Service
Foodservice Sales Change by Venue
January 2021 vs 2020

Supermarket Update
• Easing off last year’s pace,
• Food price inflation Canada vs. U.S. major difference
5.0
6.0
7.0
8.0
9.0
10.0
Billions
Canadian Supermarket Sales
Monthly 2020, 2021, 2015-2019 Average
2015-2019 Average 2020 2021 2021 Estimate/Forecast
0%
1%
2%
3%
4%
5%
6%
Mr Ap My Jn Jl Au Se Oc Nv De 2021 Fe
Year
over
Year
Change
Source: StatsCan, U.S. Bureau of Labor Stats
Food From Stores Inflation Canada and United States
Monthly Latest 12 Months
United States Canada

Cdn Quarterly Cattle Slaughter
2019-2021
• Q1 +3% (vs +2% forecast)
• Q2 getting tight -3% vs
2019
500
550
600
650
700
750
800
850
900
Q1 '19 Q2 Q3 Q4 Q1 '20 Q2 Q3 Q4 Q1 '21 Q2
Thousand
Head

Alberta and Ontario Steer Price Spread
-30
-20
-10
0
10
20
30
JA FE MR AP MY JN JL AU SE OC NV DE
C$/cwt
Live
Souce: Beef Farmers of Ontario, Texas Cattle Feeders Association
Ontario-Texas Panhandle Fed Steer Price-Spread
Weekly 2020, 2021, 2015-2019 Average
2015-19 Avg 2020 2021
-20
-15
-10
-5
0
5
10
15
JA FE MR AP MY JN JL AU SE OC NV DE
C$/cwt
Source: Canfax and Texas Cattle Feeders Association
Alberta-Texas Panhandle Price-Spread
Weekly 2020, 2021, 2015-2019 Average
2015-2019 Avg 2020 2021

Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
23
Alberta Packer Gross Margins
0
100
200
300
400
500
600
700
800
900
1000
C$/head
source: Canfax, USDA and Grier Calculations
Alberta Packer Gross Margins,
Weekly 2020, 2021 and 2015-2019 Average
2015-2019 Average 2020 2021

Weekly Beef Wholesale Price Differential vs
2017-2019 Average
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Feb 27 Mar 6 Mar 13 Mar 20 Mar 27 Apr 3 Apr 10 Apr 17
Price
Differential
Canadian Beef Versus Chicken and Pork Wholesale Price Differential
Compared to the 2017-2019 Average Differential
Beef-Chicken Beef-Pork

Retail Beef Margins vs 2017-19 Average
Latest 8 weeks
-8%
-6%
-4%
-2%
0%
2%
Feb 27 Mar 6 Mar 13 Mar 20 Mar 27 Apr 3 Apr 10 Apr 17
Margin
vs.
Average
Retail Grocery Beef Margins 2020-2021 Weekly
Compared to 2017-2019 Average

Ontario Beef Feature Share Monthly vs
2015-2019 Average
-35%
-25%
-15%
-5%
5%
Ap My Jn Jl Au Se Oc Nv De 2021 Fe Mr
Ontario Beef Features Monthly Share of Fresh Meat
Features Vs 2015-2019 Average Share

SPECIAL GUEST PANELIST | TODD THURMAN
TODD THURMAN
Swine Consultant | Founder
SwineTex Consulting Services
www.swintex.com
Todd Thurman is an International Swine Management Consultant and the owner of SwineTex
Consulting Services. With an A.S. degree from Clarendon College and a B.S. degree in
Animal Science, Production Emphasis from Texas Tech University, Todd has built a successful
career spanning over 20 years in the swine industry.
Todd’s expertise in the field have allowed him to work in 17 countries across the world. Most
notably, helping grow a 25,000 sow farrow-to-finish startup in Russia into one of the top five
pork production facilities in the country. SwineTex Consulting Services was founded in 2017
with an overarching goal to help pork producers improve actual, measurable results in farms.
He is a frequent radio and podcast guest and his works have been featured in notable
publications such as the Wall Street Journal.

SPECIAL REPORT
ASF RESURGENCE:
Todd Thurman
Swine Consultant
Challenges & The
Effects In The Global
Protein Market

29 |
AUGUST 2018 – JANUARY 2020
65% of the Chinese Herd
*Official SwineTex Estimate

30 |
THREE WAVES
• First Outbreak:
August 2018
• Wave One:
August 2018 – Spring 2019
• Wave Two:
Late Spring / Early Summer – Late Fall 2019
• Wave Three:
Winter / Spring 2021

31 |
WHAT’S DIFFERENT NOW?
• Extraordinary Pig Density
• Poor Biosecurity
• Ineffective Control Procedures:
• Panic Selling
• Improper Disposal
• “Pulling the Tooth”
• Many of the Same Issues as Before Plus:
• Mutation, likely caused by usage of rogue, illegal vaccines
• Mutated virus is less deadly, but harder to identify
FIRST TWO WAVES THIRD WAVE

32 |
WAVE 3
• Over the winter, significant losses in Northern China
• Estimates range from <20% to 50%+
• Weighted Toward North/Central China but Outbreaks in Many
Provinces Including the South
• Big producers heavily affected
• “Bad PRRS Year” Maybe ASF?
• Some wild strain outbreaks, but heavily weighted towards mutated strain

33 |
CHINESE PIG PRICE-HEADLINES
21.00
23.00
25.00
27.00
29.00
31.00
33.00
35.00
37.00
39.00
1/1/2021 2/1/2021 3/1/2021 4/1/2021
Weekly China Pig Price (RMB/kg)
©SwineTex Consulting Services, LLC, ALLRIGHTS RESERVED Source Data: China Pig
“Chinese Hog Prices Down 30%+ Since January”
“Chinese Pork Industry to Fully Recover by Mid 2021”
Source Data: China Pig Network

10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
WEEK
ENDING
3/15/2019
4/5/2019
4/26/2019
5/17/2019
6/7/2019
6/28/2019
7/19/2019
8/9/2019
8/30/2019
9/20/2019
10/11/2019
11/1/2019
11/22/2019
12/13/2019
1/3/2020
1/24/2020
2/14/2020
3/6/2020
3/27/2020
4/17/2020
5/8/2020
5/29/2020
6/19/2020
7/10/2020
7/31/2020
8/21/2020
9/11/2020
10/2/2020
10/23/2020
11/13/2020
12/4/2020
12/25/2020
1/15/2021
2/5/2021
2/26/2021
3/19/2021
4/9/2021
Weekly China Pig Price 3/15 to Present (RMB/kg)
©SwineTex Consulting Services, LLC, ALLRIGHTS RESERVED Source Data: China Pig Network
COP
Previous
Record
SwineTex Analysis
Source Data: China Pig Network
“Normal” Prices
CHINESE PIG PRICE IN CONTEXT
34 |

35 |
CURRENT STATUS
• Government reports last December indicated rapid
recovery (80-90% of Pre-ASF) with full recovery expected in
mid 2021
• We believed those numbers to be overstated at the time:
• Poor reproductive productivity-poor quality breeding
stock
• Inaccurate reporting
• No lag between sow and growing pig population
increases
• Prices 2-3X pre-ASF levels
• Recent developments essentially guarantee that recovery
will be significantly delayed.
11.5
33.8
0
5
10
15
20
25
30
35
40
Dec (2018) Dec (2020)
China Average Pig Price*
Source : SwineTex *RMB/KG

36 |
THIS SUMMER
• Will we see a repeat of 2019 with a waning problem in North China going into
summer but a growing outbreak in the South?
• Some similar indicators:
• Pig Prices
• Geographical Patterns
• Also differences:
• Less widespread use of illegal vaccines
• Different disease characteristics

37 |
SHORT-TERM OUTLOOK
• Continued Poor Performance
• Poor Quality Breeding Stock (20% Worse Reproductive
Performance than Normal)
• Ongoing Disease Challenges
• Two Steps Forward, One Step Back
• Periods of progress interrupted by setbacks
• Lower Prices this Spring/Summer that go back up Late Summer/Fall

38 |
CHINA IMPORTS
0
1000
2000
3000
4000
5000
6000
2018 2019 2020
China Meat/Chicken Imports (MT)
Pork Beef Chicken
Source: USDA FAS
0
20
40
60
80
100
120
January February March
China Meat Imports 2021 (10000 T)
Source: China Customs
Record

39 |
LONGER-TERM OUTLOOK
• Again, depends heavily on ASF status
• Full Recovery
• What is full recovery?
• 95% of Previous?
• What is Previous?
• Our Definition of Full Recovery: 95% of ~37 Million Sows of proper
breeding stock
• 2014 or Later
• Steady Progress After 3rd Wave
• Vaccine?

40 |
WHAT TO WATCH FOR
• Pig Prices
• Piglet Prices as a Leading Indicator
(careful)
• Genetics Imports
• Slaughter Weights
• Pork Imports
• Consider Price Differentials
• Official Chinese Government Reports
• “Directionally Correct”

41 |
Todd Thurman
Swine Consultant | Founder
SwineTex Consulting Services
www.swintex.com
.
THANK
YOU

You can email our panelists directly
at:
• Rob.Murphy@jsferraro.com
• Kevin@KevinGrier.com
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AUDIENCE QUESTIONS:
How is US pork export competitiveness in China given current prices?
DR. ROB MURPHY
The US is less competitive in pork exports to China for 2 reasons:
1) The Trump-era tariffs that were placed on US pork into China as retaliation for Trump’s steel tariffs and,
2) US domestic pork prices are currently higher than those in competing geographies such as the EU and Brazil.

AUDIENCE QUESTIONS:
How much industry cold storage capacity (retail and food service) do you think exists for pork beyond the
official USDA reported capacity in terms of days / weeks of production?
DR. ROB MURPHY
I really have no way to know this, but would guess somewhere between 20-40% more that what USDA reports on.

AUDIENCE QUESTIONS:
Is there enough “proper” genetics in the world to backfill the China/ASF hole?
TODD THURMAN
The short answer is no and it’s very difficult to ramp up production for a short term opportunity. The reality is that
producers are going to have to find a way to multiply these animals in China while maintaining health and
competitive levels of genetic progress. That is much easier said than done but it’s an enormous opportunity for
whoever can accomplish it.

AUDIENCE QUESTIONS:
Given the change in structure of the Chinese industry, how much more soybean meal per animal will be
consumed once pork production returns to normal?
TODD THURMAN
That’s a good question and I must admit it’s not something I’ve given much though. Clearly, as the trend away
from backyard production towards large, commercial production continues, there’ll be less non-users of SBM.
There are some mitigating factors like improving feed efficiency in large operations and a significant effort within
the Chinese industry to push for lower protein diets (and more extensive use of synthetic amino acids). I don’t
know that I can give a number, but it’s certainly something I’ll have my team consider.

AUDIENCE QUESTIONS:
What impact will tight feed supplies have on rebuilding effort?
TODD THURMAN
I don’t see feed supplies, or ultimately, feed costs as being much of an obstacle in the near term. If feed prices
continue to go up and pig prices drop significantly, that could change, but we don’t anticipate that will happen
anytime soon.

AUDIENCE QUESTIONS:
What’s the best source for China piglet prices, slaughter weights?
TODD THURMAN
There are several sources. It’s always best to try to find multiple sources when possible, but one little know source
is China Pig Network. The website is all in Chinese but it can be google translated with good effect.

AUDIENCE QUESTIONS:
How much of the gain in US pork export is correlated to restrictions placed on Canadian export to China?
TODD THURMAN
A small portion, maybe like 5-10%.

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