Meat Price Outlook. MPO15-29 Weekly Update and Forecasts for Livestock, Meat and Poultry Professionals Jul 24, 2015

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1 MILLIONS 07-Jan 28-Jan 18-Feb 11-Mar 01-Apr 22-Apr 13-May 03-Jun 24-Jun 15-Jul 05-Aug 26-Aug 16-Sep 07-Oct 28-Oct 18-Nov 09-Dec 30-Dec Thousand Head 07-Jan 28-Jan 18-Feb 11-Mar 01-Apr 22-Apr 13-May 03-Jun 24-Jun 15-Jul 05-Aug 26-Aug 16-Sep 07-Oct 28-Oct 18-Nov 09-Dec 30-Dec $/CWT Meat Price Outlook MPO15-29 Update and Forecasts for Livestock, Meat and Poultry Professionals Jul 24, Choice Cutout Beef News and Trends: The downward spiral in beef prices continued this week, but at a more moderate pace, with the blended cutout slipping to near $230 at week s end, down about $2 from last week and nearly $25 under the late June peak. Amid the continuing slide in beef prices and deteriorating operating margins, bidding interest on this week s showlists remained tepid, while the strong basis spurred seller interest, culminating in a lower cash trade, which slipped to $145, compared to mostly $148 a week earlier. USDA s monthly Cattle on Feed report indicated a modest rise in feedlot placements during June, at 101% of last year; marketings at 95%; and the July 1 feedlot inventory at 102% of a year earlier. The mid-year Cattle inventory report confirmed aggressive herd expansion efforts are underway. After bottoming in 2014, the July 1 inventory count was over 2 mil head or 2% larger than a year earlier, spurred by a larger beef cow herd, up 3%, and 7% more beef heifers being held as herd replacements. Pork News and Trends: The hog and pork complex was a bit of a mixed bag this week with hogs firming and then setting back again while pork product chopped around in the low/mid-$80 range. Hog producers continue to respond to profitable sales prices with slaughter this week advancing 25K head and staying 13% above year-ago. It appears producers remain in a mindset to kill off additional weight with a strong basis encouraging the movement of hogs now. Weights are now running about 2% under year prior levels although average FI carcass weights are only down a bit from last year due to more heavy sows in the slaughter mix. Key question is how long slaughter levels can continue to post solid double digit growth relative to last year. The Dec/Feb pig crop that is currently being slaughtered was only up 10% yet kills have averaged about 3% higher than that. Accelerated marketings could account for the entire extra hog run OR the USDA pig crop estimates may be grossly understated. 2,400 2,300 2,200 2,100 2,000 1,900 1,800 1,700 1,600 Actual FI Total Hog Slaughter Broiler-Type Hatching Egg Layers, 1st of Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Poultry News and Trends: Following two years of decline, chick hatchings per layer posted a 0.6% increase during Q4 of 2014 and followed that up with a 0.4% increase during Q1 of this year; however, a 0.2% decline was recorded during Q2. On the surface it might seem as if productivity has stalled again evoking memories from when it suffered as integrators struggled to source replacement pullets in a timely manner and stretched older hens and a primary breeder discovered a genetic defect in a strain of roosters but a closer look reveals that isn t necessarily true. Egg production per layer was up a fairly robust 1.6% from year-ago levels during the April-June time period. While it s difficult to confirm this, Informa believes shortages in the table egg sector from avian influenza have sent processors scrambling into the broiler segment in search of fertilized eggs to use as breaking stock. This is likely to continue for a little while longer, putting a small dent in the forward growth curve. Expansion will still be fairly robust, however, with layer inventories likely to rebound counterseasonally to more than 55.0 million by fall.

2 MPO15-29 Update and Forecasts for Livestock, Meat and Poultry Professionals Jul 24, 2015 Cattle and Beef: The post-holiday slide in beef prices continued this week, but at a more moderate pace, with the blended cutout slipping near $230 at week s end, down about $2 from last week s close, while nearly $25 under the late June peak. Despite limited fed beef production volumes, down nearly 5% from a year earlier in recent weeks, the steeper than seasonal price slide has been exacerbated by the deep discounts on competing meats, which has diverted promotional interest. After underpinning most of the June rebound, the end cuts also have led the recent decline, although the weakness in beef prices has pervaded the entire carcass with active participation also coming from declining middle meats and fat trim. Amid still historically tight fed cattle supplies, the blended cutout during the past year has generally found support in the $235-$240 range. Although further weakness cannot be ruled out, the rib and round primals have stabilized in recent days and further significant weakness in the chucks and fat trim are doubtful, while the loin cuts may remain on the defensive. Recent price declines may rekindle interest from beef buyers, although still-wide discounts on competing pork and chicken items will pose a merchandising challenge for beef. The sharp plunge in beef prices and tight operating margins likely will continue to temper production plans in the weeks ahead. With the blended cutout expected to find support near current levels, additional downside risk in the fed cattle market may be limited, as well, ahead of a rebound into the fall. Ribs: Spot market volumes on ribs were very good last week, but slowed considerably this week. Some further downward pressure on ribs is expected, heading into early/mid-aug. Buyers have started to look at their fall needs on ribs and tenderloins, and will be approaching packers for forward offers. Packers will be trying to push customers mostly toward volume commitments, on a formula basis. Last fall, the proportion of ribs sold on formula increased through Oct and Nov to historically high levels, leading to very tight spot supplies and sharply higher spot prices. Chuck: Packers appeared to be willing to extend recent pricing in the $300 area on neck-off chuck rolls through Aug, in order to increase their forward bookings. Prices tend to increase seasonally on neck-off chuck rolls through Aug and Sep, into fall peaks in Oct. There was some modest strengthening in the spot market this week, along with larger spot market volumes. Prices on Choice 116A neck-off chuck rolls are expected to get up to the $ area by mid-aug, heading above $320 in Sep. Fall peaks are expected in the $340s. Round: There were large volumes of forward sales last week across all round cuts, especially the inside rounds showing the largest forward volume in 16 months. Packers had to offer product back of the spot market to get the large forward orders on the inside rounds. From the current mid $270s, commodity inside rounds are expected to get up to the mid $280s during Aug, before dropping back into the $270s in Sep. Prices should then move back up into the $280s and $290s for Oct and Nov. A late year rally could take prices above $300 heading into the new year. Choice 171B outside flats are expected to get up into the $280s during Aug, with further advances through Sep, toward $300 by the end of the month. Cattle and Beef Summary Statistics and Market Comments Cattle/Beef ago Week TX/OK Panhandle Cattle Choice Heavy Cutout Select Heavy Cutout Cattle/Beef ago Week Slaughter (1000 head/wk) Carcass Weights (lbs.) Beef Production (mil lbs./wk) Placements (% CHYA) % 7% 4% Rib ago Week Ch 109e Ribeye, Bone-in Ch 112a Ribeye, Bnls, heavy Ch 112a Ribeye, Bnls, light Se 109e Ribeye, Bone-in Se 112a Ribeye, Bnls, heavy Cap-Wedge Meat Chuck ago Week Ch XT Chuck Roll, neck off Ch XT Clod Ch 115 Chuck, 2 Piece Bnls Ch 120 Brisket Se XT Chuck Roll, neck off Se 114 Shoulder Clod Round ago Week Ch 167a Knuckle, peeled Ch 168 Inside Round Ch XT Inside Round Ch 171B Outside Round Ch 171C Eye of Round Se XT Inside Round Se 171C Eye of Round

3 MPO15-29 Update and Forecasts for Livestock, Meat and Poultry Professionals Jul 24, 2015 Loin: While the tenderloins have held up quite well compared to previous years, there may still be some temporary weakening over the next few weeks. Like the ribs, buyers will be working on lining up fall needs on the tenderloins. Prices are expected to move seasonally higher from summer lows, into fall highs in late Nov or early Dec. Short loins and strip loins have come down a long way from their record highs prior to Memorial Day. There may be some temporary rebound on these cuts in Aug, as retailers look to late summer featuring of loin steaks for the Labor Day weekend. But renewed downside would be expected in Oct and Nov to fall lows. Trimmings: School lunch program, the back-toschool period and feature activity leading into the Labor Day weekend are expected to help boost grinds going into late summer. Beef 50s are projected to show modest gains through Aug and Sep, with fall highs in Nov still remaining well below year-ago levels. Despite continued light cow slaughter levels, domestic 90s weakened into the mid $280s this week. At the same time, imported 90s jumped up into the mid $240s. But this is still keeping the spread between domestic and imported lean boneless beef at wider than normal spreads. Forward asking prices on off-shore lean boneless beef have continued to increase. There could be some modest rebound on the domestic 90s going into late Aug and early Sep, but US cow slaughter will be increasing seasonally as we head from late summer into the fall. Prices should again weaken in Oct and Nov. Loin ago Week Ch XT Strip Loin, 0x1, bnls Ch XT Shortloin, 0x Ch XT Top butt, bnls Ch 189a Tndrln, Trmd, 5-Up Se XT Strip Loin, 0x1, bnls Se XT Shortloin, 0x Se XT Top butt, bnls Se 189a Tndrln, Trmd, 5-Up Ch 185a Sirloin Flap Ch 185b Sirln Ball Tip, heavy Ch 185c Sirloin, Tri-Tip Trimmings ago Week Imported Cow Meat 90% Ln Imported Bull Meat 95% Ln % Fresh Trimmings % Frozen Trimmings % Fresh Trimmings % Fresh Trimmings % Frozen Trimmings % Fresh CGB % Fresh CGB Ground Chuck Ground Round Cow Cuts: For the week the cow cutout traded between $224 and $227 and is forecast to move sideways into the middle of next month in the high $220s, 2% lower than year-ago. The US FI cow harvest totaled 93,400 head the week ending July 11th, down 3% from year-ago. The US cow harvest over the last 4 weeks has averaged 89,780, 1.4% smaller than year prior. Over the next four weeks the US weekly cow harvest is forecast to average 91,000 head, 5.8% smaller than the same 4 week period last year. High Low Close Change Live Cattle Aug Oct Dec Feb Apr Jun Feeder Cattle Aug Sep Oct Lean Hogs Aug Oct Dec Feb Apr May Jun Jul Cow Cuts ago Week B/B 112 Ribeye Roll, B/B 180 Strip Loin, 9-Up B/B-C/C 190 Tndrln, B/B 184 Top Sirloin Butt B/B 168 Top Inside Rd, 10-up B/B 171B Outside Round B/B-C/C 167A Rd Knkle,Pld % Lean Inside Round % Ln, Flats & Eyes-Combo Cattle Futures Comments: The exodus of large specs continued in mid-july, slashing their long commitment to around 30,000 contracts (futures and options) down from nearly 100,000 in early June. Higher open interest in recent days, coupled with the slide in prices, suggests new shorts have joined the fray as key support areas were breached and new lows were established, reaffirming the market s down trend with nearby futures slipping to the lowest levels in more than a year. After breaching Apr lows, actively traded Oct may have set sights on the Feb lows under $142, although that appears overly pessimistic in an oversold market. The still-strong basis may continue to spur selling interest while the modest premiums on the fall months offer scant encouragement for a strong rebound. Hogs Futures Comments: A big leap in the lean hog futures on Wednesday helped the market to finish in positive territory for the week. With cash hog markets generally flat this week, most of the excitement came from moderate gains in the cutout. The window is closing fast for any reduction in kills and soon market-ready hog supplies will be working higher. That has some market participants on edge and is likely an important reason why the discounts on the Oct and Dec contracts are so large compared to today s cash market. However, as schools reopen and we move past these dog days of summer, domestic demand should strengthen to the point where it effectively offsets the negative impact of seasonally larger supplies. International trade is the wild card. If exports hold up well this summer and fall, then the futures are way too cheap.

4 MPO15-29 Update and Forecasts for Livestock, Meat and Poultry Professionals Jul 24, 2015 Pork Summary Statistics and Market Comments COPYRIGHT INFORMATION: Copyright 2015 by Informa Economics, Inc. Printed in USA all rights reserved. Under the copyright laws this publication may not be copied, photocopied, reproduced, translated or reduced to any electronic medium or machine readable form, in whole or in part, without the prior written consent from Informa Economics, Inc. Hogs ago Week Informa Economics, Inc. produces the Meat Price Outlook based on information which we believe reliable, however National we do not guarantee Lean Hog the accuracy Priceor completeness 131 of the material 79presented. Any 82 opinions 84 or recommendations 83 expressed 81 are based 79 upon information available to us and upon our general experience and judgment of the meat Composite Value, Cutout and commodities markets. Those using the information for trading purposes are responsible for their own actions. Hog Slaughter (Wkly Avg) THE REGULAR SUBSCRIPTION RATE FOR THE MEAT PRICE OUTLOOK IS $549/YEAR FI Avg Dressed Car Wgts SPECIAL RATE AVAILABLE FOR ADDITIONAL SUBSCRIBERS WITHIN THE SAME COMPANY For further information please call Hams, Fresh ago Week # Trmd Sel Ham # Trmd Sel Ham # Trmd Sel Ham Hogs/Pork: Pork demand is going to be extremely important to price direction and magnitude across the pork product set for the rest of the year. During the first half, pork demand was above "normal" by our estimates with price weakness back in the Feb/Mar/Apr period due to unexpectedly huge supplies and issues on the export side of the market. Pork is still attractively priced relative to beef and even some chicken items so one should expect at least "average" demand during the summer and fall. Trade could be the determining factor on the demand side as exports during last half 2014 were very weak while imports were strong. A completely opposite situation may occur this year as exports are likely to be solidly above 2014 levels while the strong price magnet for imports has gone away. Could very well be that the change in trade this fall will totally offset the expanded production volumes resulting in a 1% reduction in domestic per capita supplies. If this happens, it will be bullish to the market as futures are trading huge discounts to current values and year ago levels at the moment. Bellies, Fresh ago Week # Belly Belly Primal Derind Belly 9-13# Derind Belly 13-17# Loins/Butts, Fresh ago Week /4 Trimmed Loin VAC Bnls CC Strap-on /4 Trim Butt VAC Ribs, Fresh ago Week Trmd Sparerib - LGT Backribs 2.0#/up Trimmings ago Week % Trim Combo, Frsh % Trim Combo, Frsh Pic Mt Cbo Cshn Out, Frsh Sltr Sows, lbs COPYRIGHT INFORMATION: Copyright 2015 by Informa Economics, Inc. Printed in USA all rights reserved. Under the copyright laws this publication may not be copied, photocopied, reproduced, translated or reduced to any electronic medium or machine readable form, in whole or in part, without the prior written consent from Informa Economics, Inc. Informa Economics, Inc. produces the Meat Price Outlook based on information which we believe reliable, however we do not guarantee the accuracy or completeness of the material presented. Any opinions or recommendations expressed are based upon information available to us and upon our general experience and judgment of the meat and commodities markets. Those using the information for trading purposes are responsible for their own actions. THE REGULAR SUBSCRIPTION RATE FOR THE MEAT PRICE OUTLOOK IS $549/YEAR SPECIAL RATE AVAILABLE FOR ADDITIONAL SUBSCRIBERS WITHIN THE SAME COMPANY For further information please call Hams: Ham prices worked higher this week, despite large hog supplies and the lack of smokehouse space. The 20-23# hams experienced the largest increase moving from the $53 level late last week into the very $60s this week. The 23-27# hams ranged between $56 and $59 this week, averaging approximately $4 higher than last week. The 20-23# hams are projected to trade sideways to modestly higher through August moving up into the very low $70s by early September. The 23-27# hams are forecast to move from their current level in the high $50s into mid $60s by the same time. Bellies: Belly prices continue skyrocket, escalating to levels not reached since July of last year. Tight frozen stocks, 39.7 million pounds less than year-ago at the end of June, along with strong retail and foodservice interest has pushed the primal above the $150 mark this week, prices not expected to be realized until early August. With the substantial increase in prices since late last month, buyers may step away from the market for a short period of time and belly prices may post a very modest decline over the next week or so before moving higher into August peaks. Loins: The bone-in ¼ trimmed loins moved $3-$4 higher through the week reaching the $115 area at noon Friday. Boneless strap-on loins trade up into the mid $140s during the week, averaging approximately $7 higher than last week. Bone-in loins are forecast to trade back down into the $110 area before moving back up into the $115 by the middle of August supported retail interest ahead of Labor Day. The boneless strapon loins are forecast to move up into the mid $140s by early August followed by modest increases prior to the holiday. Trimmings: Pork trimmings weakened a tad this week, as retailer pipelines began to be replenished. However, this week s decline is expected to be short lived and prices look to head back higher as orders are finalized for Labor Day and packages are put together for Octoberfest promotions. The 42s averaged $36 this week, $2 lower than last week. The 72s were lower as well averaging $2.55 lower than last week at $68. Prices for pork 42s are forecast to move up into the mid-$40s and the 72s are expected to move sideways in the low $70s through the middle of August.

5 MPO15-29 Update and Forecasts for Livestock, Meat and Poultry Professionals Jul 24, 2015 Poultry Summary Statistics and Market Comments Broiler Market Comments: Whole Broilers: Soaring output, ample freezer stocks, and lackluster retail feature activity are all putting pressure on the whole bird segment. Informa sees the beat-down continuing near-term but expects buyers to start moving in and support the national composite whole broiler market in the low-to-mid 70 cent area with a firmer tone returning this fall as many retailers look to feature whole broilers as a holiday item. White Meat: Egg sets have backed off slightly, which is slowing down the industry s expansionary push just a little, but there s still an abundance boneless white meat coming to market at a time when retailers are struggling to also move significant quantities of chicken dark meat and pork. This means tenders are likely to keep unwinding with b/s chicken breasts flat to a little lower near-term. Dark Meat: Leg quarters averaged just 26 cents/lb in the Northeast this past week according to the USDA, and there is widespread talk of product changing hands in the low-20 cent area that isn t getting reported. Even the prevailing average of 26 cents/lb this past week represents the lowest level for this market since May It s hard to imagine a quick recovery either with relentless production increases in play and an export market that s currently in shambles. Broilers, USDA Monday ago Week GA Dock National Chicago Los Angeles New York NE Plant Grade Parts, USDA Average Price ago Week Bnls Sknls Breast Breast, Line Run Legs Leg Quarters Drumsticks Thighs Wings Year- Current Aug Aug Aug Aug Sep Supply Projections ago Week Projected Slaughter % Change to Year Prior -0.1% 2.8% 3.7% 3.6% 3.8% 3.4% 1.9% Live Weight % Change to Year Prior 3.0% 2.7% 2.3% 2.2% 1.9% 1.8% 2.7% Total Production % Change to Year Prior 3.3% 5.4% 6.1% 5.9% 5.7% 5.3% 4.6% Turkey Market Comments Whole Birds: The USDA reported frozen whole turkey stocks at 262 million pounds at the end of June. That compares to 269 million pounds a year earlier and a 5- year (10-14) average of 284 million pounds. The last time whole bird stocks were this small at the end of June was Informa expects freezer stocks to dip to around million pounds by later this year. That would be far below recorded levels from the past three years but still above the lows observed back in Spot prices for lighter hens and toms will very likely hit $1.40/lb by Thanksgiving. Heavier toms, what few, if any, change hands, will likely be going for above $1.70/lb at that time. Breast Meat: Turkey breast prices keep climbing at an unrestrained pace, and given the supply outlook for the remainder of summer, it s difficult to imagine a slowdown for at least a few more weeks. Dark Meat: According to USDA s latest Cold Storage report, frozen turkey leg meat stocks totaled 14.4 million pounds at the end of June, well above year-ago at just 8.3 million pounds and also above the 5-year (10-14) average of 13.5 million pounds. It seems a lackluster export market may be to blame here, and elevated stocks of frozen thighs and drums are keeping these markets in check. Whole Birds ago Week UB Hens, East Frz 8 LBS UB Hens, East Frz 12 LBS UB Toms, East, Frz Lbs Breast / Breast Meat ago Week UB Tky Meat - Brst, Tom, Fsh UB Tky Meat - Brst, Tom, Frz UB Tky Brst, Rtl, 15% Bstd UB Frsh Tenderloins, DeStrp Thighs / MDT ago Week UB Turkey Meat - Thigh, Frsh UB Turkey Meat - Thigh, Frz UB Tom Drums, Frz UB Tky MDT Frsh<20%Fat,SS