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Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
1
Q4 BIG PICTURE
OUTLOOK
FACING THE NORTH AMERICAN RED MEAT MARKETS
& IMPLICATIONS FOR PRICING IN Q4 OF 2018
FEATURING:
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or
duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
HOSTED BY:
Retail Ready Foods Inc. & J.S. Ferraro & Company
DATE: SEPTEMBER 19, 2018
Dr. Rob Murphy, BS, MS, PhD Agri Economics
Executive Vice President, Research & Analysis
J.S. Ferraro & Company
Kevin Grier
Market Analyst
Kevin Grier Market Analysis & Consulting
2 |
The JSF Group is a set of companies linked by a common
thread, integral within a protein based supply chain.
A provider of innovative risk
management solutions,
specializing in meat & livestock.
Retail Ready is your “Go-To” protein
merchandising & industry expert.
Protein expertise at your fingertips.
An integrated sustainable food brand
committed to creating the best-tasting
fresh protein experience.
JSF Group is the parent company of several businesses that have a strong foothold in the agri-commodity market in
North America and service a breadth of customers including value added processors, large national retail chains and
independents, food service operators and distributors.
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
3 |
Rob Murphy
Dr. Rob Murphy, BS, MS, PhD Agri Economics
Executive Vice President, Research and Analysis
J.S. Ferraro & Company
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.
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
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 managing director 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.
4 |
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
1. CURRENT RETAIL MEAT SITUATION
2. AFRICAN SWINE FEVER (ASF) AND TRADE DISPUTES
3. PORK PROSPECTS
4. BEEF PROSPECTS
5 |
DISCUSSION OUTLINE:
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
6 |
CANADIAN
RETAIL MEAT
SITUATION
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
-10%
-5%
0%
5%
10%
15%
20%
25%
15 A J O 16 A J O 17 A J O 18 A J
YearoverYearChange
Beef Chicken Pork
Stable to lower retail prices after
volatility in 2015-2017.
7 |
CANADIAN RETAIL MEAT SITUATION
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
140
Canadian Pork Cutout
260
240
220
200
180
160
J F M A M J J A S O N D
2016 2017 2018
8 |
CANADIAN PORK CUTOUT
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
450
Canadian Beef Cutout
750
700
650
600
550
500
J F M A M J J A S O N D
c$/CKG
2016 2017 2018
9 |
CANADIAN BEEF CUTOUT
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
$/ckg
Canadian Chicken Wholesale Composite Cutout Value
2016 2017 2018
10 |
CANADIAN CHICKEN CUTOUT
420
410
400
390
380
370
360
350
340
330
320 Ja Fe Mr Ap Ma Ju Jl Au Se Oc Nv De
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
11 |
BEEF AND PORK WHOLESALE PRICE SPREADS
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
-60%
%Differential
Canadian Beef Less Chicken and Beef Less Pork
Wholesale Price Differential vs 2012-2016 Average
Beef-Chicken Beef-Pork
Relative price levels are normal in recent months.
Not much to make one meat preferred compared to
another.
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
12 |
RETAIL MARGINS NOW VERSUS AVERAGE
-2%
0%
2%
4%
6%
8%
10%
BEEF PORK CHICKEN
Indexdifferencefromaverage
Current Retail Margins Versus 14-16 Average Margins in the meat case are probably favorable
for the three main meats compared to 2014-2016.
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
13 |
AFRICAN SWINE
FEVER (ASF) & TRADE
CLIMATE
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
CHINA IS HOME TO NEARLY HALF OF THE
GLOBAL SWINE POPULATION
Global Share of Pork Production | 2017
14 |
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
CHINAALSO HAS THE HIGHEST PIG DENSITY
IN THE WORLD
High pig density greatly increases
the chances for spread of ASF.
There is no vaccine and the disease is spread by
contact with infected animals or meat. Wild boars
are often carriers.
Biosecurity measures play a big role in limiting
the disease, but China has very little biosecurity
given that a large proportion of production occurs
in “backyard” operations.
The practice of feeding table scraps to hogs in
China can also spread ASF.
15 |
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
ASF has been present in Eastern Europe
and Western Russia since 2007.
Recently, cases have been found in Western Russia
and now in mainland China.
ASF is contained by depopulating all swine in
the area where an outbreak surfaces.
China has not always been forthcoming about
the extent of its disease problem.
Pig populations in S. Korea and Japan are at
risk due to proximity.
16 |
AFRICAN SWINE FEVER (ASF) OUTBREAKS
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
INTERNATIONAL TRADE DISRUPTIONS:
THE “TRUMP TARIFFS” – A TIMELINE
January, 2016 Three days after he took office, Trump withdrew the US from the Trans-Pacific Partnership Agreement (TPP).
March 1, 2018 The US imposes a 25% tariff on steel and a 10% tariff on aluminum imported from China.
April 1, 2018 China imposes retaliatory tariffs, including a 25% tariff on US pork.
June 1, 2018 The US imposes a 25% tariff on steel and a 10% tariff on aluminum imported from Mexico, Canada and the EU.
July 5, 2018 Mexico imposes a 20% tariff on pork imported from the US in retaliation for the steel/aluminum tariffs.
July 6, 2018 China imposes an additional 25% tariff on pork imported from the US.
July 1, 2018 Canada announces a raft of tariffs on a host of US products in retaliation for the steel/aluminum tariffs.
Processed beef is subject to a 10% tariff; pork not affected.
Current Trump continues to threaten China with additional tariffs and the Chinese have vowed to respond with more
tariffs of their own. A tentative trade deal has been reached between the US & Mexico, discussions are
ongoing with Canada. All tariffs remain in effect until the deal is ratified, which could take several months.
17 |
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
18 |
PORK
PROSPECTS
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
19 |
THE US HOG SECTOR HAS BEEN CHURNING OUT
MORE HOGS FOR 4 CONSECUTIVE YEARS
Three new hog slaughter facilities added in 2018.
Processing capacity increased by over 20k head/day.
Another big plant scheduled to come on line near
the end of the year. Will add another 10k/day once
fully operational.
This industry expansion has largely been driven
by ever-increasing exports.
US pork exports grew by 20% from 2014 to present
Production in Q4 should be up at least 4%
from last year.
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
20 |
RAPID EXPORT GROWTH IS DRIVING EXPANSION
IN THE US HOG & PORK SECTOR
Forecast
5220.0
4720.0
4220.0
3720.0
3220.0
2720.0
2220.0
1720.0
1220.0
5720.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
TotalPorkExports(millbs)
Total Pork Exports
History
In order of volume, Mexico, Japan, S. Korea and
Canada are the major destinations for US pork.
In 2017, the US exported 22% of its pork production.
J.S. Ferraro & Co. (JSF) forecasts 2019 exports
to decline 3-4% mostly as a result of increasing
trade friction.
Some slowdown in the global economy is also expected
to temper demand for pork exports next year.
However, if ASF spreads widely in China, US pork
exports could be up double digits in 2019.
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
US DOMESTIC DEMAND FOR PORK
IS CURRENTLY VERY WEAK
Domestic pork demand has struggled at times
in 2018. We are currently in a soft spot.
The US economy is seeing strong growth,
wage increases are beginning to accelerate.
Perhaps consumers are “trading up” from pork
and chicken to beef as their incomes rise.
If this soft demand continues in Q4, then
big production will limit price strength.
21 |
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
PORK PRICING PROJECTED TO REMAIN
WELL BELOW LAST YEAR INTO 2019
Current JSF forecast has the pork cutout trading
between $65 and $75 for the next six months.
If demand improves, the cutout could challenge the
top of that range.
Big supply will be an issue. Pork demand is inelastic
meaning that small changes in supply can bring big
changes in price.
Large domestic production is far more important to
price in the near term than export market risk.
22 |
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
23 |
THE 2019 FUTURES ALL LOOK TOO HIGH
RELATIVE TO THE FUNDAMENTAL FORECAST
With yet another new plant opening in early 2019, it’s
a good bet that production will be up again in 2019.
The current JSF forecast has commercial pork
production up another 3% in 2019.
The futures market for 2019 looks way over-priced
given the production forecast. 2019 futures are likely
pricing in the risk of a major escalation in ASF.
High futures prices translate into high asking prices
on forward pork deals. Proceed with caution when
booking pork for 2019 delivery.
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
Slow cautious growth in production
Packer capacity exceeds supply on the prairies
24 |
CANADIAN SOW HERD
0
200
400
600
800
1000
1200
1400
1600
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
000Head
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
Modest Decline in 2018 (production issues)
Increase in 2019 (Oly Quebec, HyLife, Conestoga…)
25 |
CANADIAN HOG SLAUGHTERMillionHead
22
21
20
19
18
17
16
15
14
13
12
08 09 10 11 12 13 14 15 16 17 18 19
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
26 |
BEEF
PROSPECTS
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
THE US CATTLE HERD IS
NEARING A CYCLICAL TOP
As the cattle herd expands, beef production increases.
Production will continue to increase for
about 2 years beyond the cycle top.
All else equal, beef should get cheaper over the
next 2-3 years until herd rebuilding takes hold.
However, strong domestic and international
demand could limit how low beef prices go moving
forward.
27 |
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
FEEDYARD INVENTORIES EXPECTED
TO REMAIN LARGE THROUGH Q4
Feedlots have aggressively placed
cattle on feed in 2018.
Current on-feed inventories are
consistent with a growing cattle herd.
US cattle feeders have suffered financially, with
margins mostly negative for over a year now.
Packer margins have been very strong over the
same period. Currently, J.S. Ferraro & Co.(JSF)
estimates packers are making just over $200/hd.
28 |
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
Beef demand looks much better than pork
demand currently.
Possibly due to consumers “trading up.”
Middle meats in particular have seen strong demand
in 2018 and that is expected to continue through the
end of the year.
Beef is not as vulnerable to trade disruptions as
pork. The US is a net importer of beef.
29 |
DOMESTIC BEEF DEMAND LOOKS HEALTHY
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
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The cutout has performed very well this summer,
especially since production was up about 2%
in Jun-Aug.
J.S. Ferraro & Co. expects strong middle meat pricing
heading into the year-end holidays. That should
support the cutout and help offset the price impact of
large production.
Cheap pork is a risk for beef in Q4.
Cattle weights point to relatively current feedyards,
which reduces the odds of a cattle backlog developing.
BEEF CUTOUTS SHOULD BE APPROACHING
A NEAR-TERM BOTTOM
30 |
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
The cattle futures curve is much more in line with the
J.S. Ferraro & Co. fundamental price forecast than hog
futures.
J.S. Ferraro & Co. sees the Oct18 live cattle
contract rallying significantly into expiration at
the end of Oct.
Buyers should move quickly to book Oct & Nov
needs before the market rallies.
The primary bearish argument for near-term price
weakness is if a backlog of develops in the feedyards.
So far, there’s not much evidence of that.
31 |
CATTLE FUTURES LOOK APPROPRIATELY PRICED,
OUTSIDE OF THE OCT18 AND JUN19 CONTRACTS
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CANADIAN BEEF COWS AND
HEIFER REPLACEMENTS
No real expansion occurred or occurring700
680
660
640
620
600
580
560
5402.00
2.50
3.00
3.50
4.00
4.50
5.00
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Beef Cows Beef Replacement Heifers
Replacements000Head
CowsMillionHead
32 |
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
The modest herd growth translates into modestly
higher slaughter in 2019 in Canada.
33 |
CANADIAN ANNUAL SLAUGHTER 2012-2019
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
MillionHead
2012 2013 2014 2015 2016 2017 2018 2019
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
34 |
A NOTE ON CHICKEN
Supplies back in balance after “fowl clampdown.”
115
110
105
100
95
90
85
80
75
J F M A
2012-2016 Average
M J
2017
J A
2018
S O N D
2018 Allocation
KGMillions
Canadian Chicken Production
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
35 |
HIGHLIGHTS
The ASF outbreak in China needs to be watched very carefully. If ASF begins to spread uncontrolled, China will be forced to
import large quantities of pork which would cause sharp increases in the pork market and likely benefit beef as well.
The current trade war environment is more detrimental to pork than beef in the US. It is particularly negative for US pork
exports into China longer term. If the trade issues don’t get resolved or worsen, then pork pricing is very vulnerable in
2019.
Domestic US pork demand is currently very weak. With a 4%+ production increase coming in Q4, that weak demand will
make it difficult for the pork market to reach last year’s price level. Add another 3%+ production increase in 2019 and
pricing next year could be even softer.
The demand situation in beef is much better than for pork. Beef middles in particular hold a lot of upside risk into Q4. Beef
production will be large, but strong demand has the potential to mitigate the price impact of that large production. Price
levels on middle meats could exceed last year while end cuts and grinds are more likely to be below last year.
Canadian meat case is seeing a period of stability in terms of costs and prices. Competing meats have moderated in cost.
Canadian merchandisers will have plenty of competing offers in the coming quarter from all three meats.
While the information contained in this report has been obtained from sources believed to be reliable, JSF Group Inc and its subsidiaries (i.e. Retail Ready Foods Inc., J.S. Ferraro
& Company) disclaims all warranties as to the accuracy, completeness or adequacy of such information. The information is not a recommendation to trade nor investment
research. User assumes sole responsibility for the use it makes of this information to achieve his/her intended results. No part of this material may be copied, photocopied or
duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
Q & A
36 |
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37 |
The JSF Group of companies are a set of companies linked by a
common thread integral within a protein based supply chain.
A provider of innovative risk
management solutions, specializing in
meat & livestock.
“
At J.S. Ferraro & Company we combine our experience in the
derivatives markets, expertise in econometrics and over 30 years
in the cattle and hog industry to help our clients lead the herd,
manage their risk, and maximize their margins.
Progressive thinking and precise quantitative modelling are the
cornerstones of our margin management solutions.
Retail Ready is your “Go-To” protein
merchandising & industry expert.
Protein expertise at your fingertips.
Retail Ready Foods Inc. is a major niche distributor of fresh
beef and pork protein, providing peace of mind to mid-to-
large retailers and processors across the Americas. We
provide clients with superior market insight to help them
make informed decisions about their meat purchases,
supported by our expertise and well stocked inventory that
we deliver just-on-time, every time.
“
Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
THANK YOU
Retail Ready Foods Inc.
130 Adelaide Street, Suite 810
Toronto, Ontario M5H 3P5
CANADA
(416) 306-8788
info@retailready.com | www.retailready.com
38 |
J.S. Ferraro & Company
130 Adelaide Street, Suite 3302
Toronto, Ontario M5H 3P5
CANADA
(416) 306-8787
hello@jsferraro.com | www.jsferraro.com
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No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.

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Q4: Big Picture Market Outlook Webinar

  • 1. Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. 1 Q4 BIG PICTURE OUTLOOK FACING THE NORTH AMERICAN RED MEAT MARKETS & IMPLICATIONS FOR PRICING IN Q4 OF 2018 FEATURING: Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company. HOSTED BY: Retail Ready Foods Inc. & J.S. Ferraro & Company DATE: SEPTEMBER 19, 2018 Dr. Rob Murphy, BS, MS, PhD Agri Economics Executive Vice President, Research & Analysis J.S. Ferraro & Company Kevin Grier Market Analyst Kevin Grier Market Analysis & Consulting
  • 2. 2 | The JSF Group is a set of companies linked by a common thread, integral within a protein based supply chain. A provider of innovative risk management solutions, specializing in meat & livestock. Retail Ready is your “Go-To” protein merchandising & industry expert. Protein expertise at your fingertips. An integrated sustainable food brand committed to creating the best-tasting fresh protein experience. JSF Group is the parent company of several businesses that have a strong foothold in the agri-commodity market in North America and service a breadth of customers including value added processors, large national retail chains and independents, food service operators and distributors. Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 3. 3 | Rob Murphy Dr. Rob Murphy, BS, MS, PhD Agri Economics Executive Vice President, Research and Analysis J.S. Ferraro & Company 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. Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 4. 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 managing director 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. 4 | Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 5. 1. CURRENT RETAIL MEAT SITUATION 2. AFRICAN SWINE FEVER (ASF) AND TRADE DISPUTES 3. PORK PROSPECTS 4. BEEF PROSPECTS 5 | DISCUSSION OUTLINE: Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 6. 6 | CANADIAN RETAIL MEAT SITUATION Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 7. -10% -5% 0% 5% 10% 15% 20% 25% 15 A J O 16 A J O 17 A J O 18 A J YearoverYearChange Beef Chicken Pork Stable to lower retail prices after volatility in 2015-2017. 7 | CANADIAN RETAIL MEAT SITUATION Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 8. 140 Canadian Pork Cutout 260 240 220 200 180 160 J F M A M J J A S O N D 2016 2017 2018 8 | CANADIAN PORK CUTOUT Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 9. 450 Canadian Beef Cutout 750 700 650 600 550 500 J F M A M J J A S O N D c$/CKG 2016 2017 2018 9 | CANADIAN BEEF CUTOUT Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 10. $/ckg Canadian Chicken Wholesale Composite Cutout Value 2016 2017 2018 10 | CANADIAN CHICKEN CUTOUT 420 410 400 390 380 370 360 350 340 330 320 Ja Fe Mr Ap Ma Ju Jl Au Se Oc Nv De Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 11. 11 | BEEF AND PORK WHOLESALE PRICE SPREADS 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% %Differential Canadian Beef Less Chicken and Beef Less Pork Wholesale Price Differential vs 2012-2016 Average Beef-Chicken Beef-Pork Relative price levels are normal in recent months. Not much to make one meat preferred compared to another. Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 12. 12 | RETAIL MARGINS NOW VERSUS AVERAGE -2% 0% 2% 4% 6% 8% 10% BEEF PORK CHICKEN Indexdifferencefromaverage Current Retail Margins Versus 14-16 Average Margins in the meat case are probably favorable for the three main meats compared to 2014-2016. Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 13. 13 | AFRICAN SWINE FEVER (ASF) & TRADE CLIMATE Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 14. CHINA IS HOME TO NEARLY HALF OF THE GLOBAL SWINE POPULATION Global Share of Pork Production | 2017 14 | Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 15. CHINAALSO HAS THE HIGHEST PIG DENSITY IN THE WORLD High pig density greatly increases the chances for spread of ASF. There is no vaccine and the disease is spread by contact with infected animals or meat. Wild boars are often carriers. Biosecurity measures play a big role in limiting the disease, but China has very little biosecurity given that a large proportion of production occurs in “backyard” operations. The practice of feeding table scraps to hogs in China can also spread ASF. 15 | Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 16. ASF has been present in Eastern Europe and Western Russia since 2007. Recently, cases have been found in Western Russia and now in mainland China. ASF is contained by depopulating all swine in the area where an outbreak surfaces. China has not always been forthcoming about the extent of its disease problem. Pig populations in S. Korea and Japan are at risk due to proximity. 16 | AFRICAN SWINE FEVER (ASF) OUTBREAKS Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 17. INTERNATIONAL TRADE DISRUPTIONS: THE “TRUMP TARIFFS” – A TIMELINE January, 2016 Three days after he took office, Trump withdrew the US from the Trans-Pacific Partnership Agreement (TPP). March 1, 2018 The US imposes a 25% tariff on steel and a 10% tariff on aluminum imported from China. April 1, 2018 China imposes retaliatory tariffs, including a 25% tariff on US pork. June 1, 2018 The US imposes a 25% tariff on steel and a 10% tariff on aluminum imported from Mexico, Canada and the EU. July 5, 2018 Mexico imposes a 20% tariff on pork imported from the US in retaliation for the steel/aluminum tariffs. July 6, 2018 China imposes an additional 25% tariff on pork imported from the US. July 1, 2018 Canada announces a raft of tariffs on a host of US products in retaliation for the steel/aluminum tariffs. Processed beef is subject to a 10% tariff; pork not affected. Current Trump continues to threaten China with additional tariffs and the Chinese have vowed to respond with more tariffs of their own. A tentative trade deal has been reached between the US & Mexico, discussions are ongoing with Canada. All tariffs remain in effect until the deal is ratified, which could take several months. 17 | Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 18. 18 | PORK PROSPECTS Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 19. 19 | THE US HOG SECTOR HAS BEEN CHURNING OUT MORE HOGS FOR 4 CONSECUTIVE YEARS Three new hog slaughter facilities added in 2018. Processing capacity increased by over 20k head/day. Another big plant scheduled to come on line near the end of the year. Will add another 10k/day once fully operational. This industry expansion has largely been driven by ever-increasing exports. US pork exports grew by 20% from 2014 to present Production in Q4 should be up at least 4% from last year. Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 20. 20 | RAPID EXPORT GROWTH IS DRIVING EXPANSION IN THE US HOG & PORK SECTOR Forecast 5220.0 4720.0 4220.0 3720.0 3220.0 2720.0 2220.0 1720.0 1220.0 5720.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 TotalPorkExports(millbs) Total Pork Exports History In order of volume, Mexico, Japan, S. Korea and Canada are the major destinations for US pork. In 2017, the US exported 22% of its pork production. J.S. Ferraro & Co. (JSF) forecasts 2019 exports to decline 3-4% mostly as a result of increasing trade friction. Some slowdown in the global economy is also expected to temper demand for pork exports next year. However, if ASF spreads widely in China, US pork exports could be up double digits in 2019. Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 21. US DOMESTIC DEMAND FOR PORK IS CURRENTLY VERY WEAK Domestic pork demand has struggled at times in 2018. We are currently in a soft spot. The US economy is seeing strong growth, wage increases are beginning to accelerate. Perhaps consumers are “trading up” from pork and chicken to beef as their incomes rise. If this soft demand continues in Q4, then big production will limit price strength. 21 | Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 22. PORK PRICING PROJECTED TO REMAIN WELL BELOW LAST YEAR INTO 2019 Current JSF forecast has the pork cutout trading between $65 and $75 for the next six months. If demand improves, the cutout could challenge the top of that range. Big supply will be an issue. Pork demand is inelastic meaning that small changes in supply can bring big changes in price. Large domestic production is far more important to price in the near term than export market risk. 22 | Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 23. 23 | THE 2019 FUTURES ALL LOOK TOO HIGH RELATIVE TO THE FUNDAMENTAL FORECAST With yet another new plant opening in early 2019, it’s a good bet that production will be up again in 2019. The current JSF forecast has commercial pork production up another 3% in 2019. The futures market for 2019 looks way over-priced given the production forecast. 2019 futures are likely pricing in the risk of a major escalation in ASF. High futures prices translate into high asking prices on forward pork deals. Proceed with caution when booking pork for 2019 delivery. Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 24. Slow cautious growth in production Packer capacity exceeds supply on the prairies 24 | CANADIAN SOW HERD 0 200 400 600 800 1000 1200 1400 1600 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 000Head Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 25. Modest Decline in 2018 (production issues) Increase in 2019 (Oly Quebec, HyLife, Conestoga…) 25 | CANADIAN HOG SLAUGHTERMillionHead 22 21 20 19 18 17 16 15 14 13 12 08 09 10 11 12 13 14 15 16 17 18 19 Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 26. 26 | BEEF PROSPECTS Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 27. THE US CATTLE HERD IS NEARING A CYCLICAL TOP As the cattle herd expands, beef production increases. Production will continue to increase for about 2 years beyond the cycle top. All else equal, beef should get cheaper over the next 2-3 years until herd rebuilding takes hold. However, strong domestic and international demand could limit how low beef prices go moving forward. 27 | Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 28. FEEDYARD INVENTORIES EXPECTED TO REMAIN LARGE THROUGH Q4 Feedlots have aggressively placed cattle on feed in 2018. Current on-feed inventories are consistent with a growing cattle herd. US cattle feeders have suffered financially, with margins mostly negative for over a year now. Packer margins have been very strong over the same period. Currently, J.S. Ferraro & Co.(JSF) estimates packers are making just over $200/hd. 28 | Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 29. Beef demand looks much better than pork demand currently. Possibly due to consumers “trading up.” Middle meats in particular have seen strong demand in 2018 and that is expected to continue through the end of the year. Beef is not as vulnerable to trade disruptions as pork. The US is a net importer of beef. 29 | DOMESTIC BEEF DEMAND LOOKS HEALTHY Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 30. The cutout has performed very well this summer, especially since production was up about 2% in Jun-Aug. J.S. Ferraro & Co. expects strong middle meat pricing heading into the year-end holidays. That should support the cutout and help offset the price impact of large production. Cheap pork is a risk for beef in Q4. Cattle weights point to relatively current feedyards, which reduces the odds of a cattle backlog developing. BEEF CUTOUTS SHOULD BE APPROACHING A NEAR-TERM BOTTOM 30 | Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 31. The cattle futures curve is much more in line with the J.S. Ferraro & Co. fundamental price forecast than hog futures. J.S. Ferraro & Co. sees the Oct18 live cattle contract rallying significantly into expiration at the end of Oct. Buyers should move quickly to book Oct & Nov needs before the market rallies. The primary bearish argument for near-term price weakness is if a backlog of develops in the feedyards. So far, there’s not much evidence of that. 31 | CATTLE FUTURES LOOK APPROPRIATELY PRICED, OUTSIDE OF THE OCT18 AND JUN19 CONTRACTS Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 32. CANADIAN BEEF COWS AND HEIFER REPLACEMENTS No real expansion occurred or occurring700 680 660 640 620 600 580 560 5402.00 2.50 3.00 3.50 4.00 4.50 5.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Beef Cows Beef Replacement Heifers Replacements000Head CowsMillionHead 32 | Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 33. The modest herd growth translates into modestly higher slaughter in 2019 in Canada. 33 | CANADIAN ANNUAL SLAUGHTER 2012-2019 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 MillionHead 2012 2013 2014 2015 2016 2017 2018 2019 Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 34. 34 | A NOTE ON CHICKEN Supplies back in balance after “fowl clampdown.” 115 110 105 100 95 90 85 80 75 J F M A 2012-2016 Average M J 2017 J A 2018 S O N D 2018 Allocation KGMillions Canadian Chicken Production Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 35. 35 | HIGHLIGHTS The ASF outbreak in China needs to be watched very carefully. If ASF begins to spread uncontrolled, China will be forced to import large quantities of pork which would cause sharp increases in the pork market and likely benefit beef as well. The current trade war environment is more detrimental to pork than beef in the US. It is particularly negative for US pork exports into China longer term. If the trade issues don’t get resolved or worsen, then pork pricing is very vulnerable in 2019. Domestic US pork demand is currently very weak. With a 4%+ production increase coming in Q4, that weak demand will make it difficult for the pork market to reach last year’s price level. Add another 3%+ production increase in 2019 and pricing next year could be even softer. The demand situation in beef is much better than for pork. Beef middles in particular hold a lot of upside risk into Q4. Beef production will be large, but strong demand has the potential to mitigate the price impact of that large production. Price levels on middle meats could exceed last year while end cuts and grinds are more likely to be below last year. Canadian meat case is seeing a period of stability in terms of costs and prices. Competing meats have moderated in cost. Canadian merchandisers will have plenty of competing offers in the coming quarter from all three meats. While the information contained in this report has been obtained from sources believed to be reliable, JSF Group Inc and its subsidiaries (i.e. Retail Ready Foods Inc., J.S. Ferraro & Company) disclaims all warranties as to the accuracy, completeness or adequacy of such information. The information is not a recommendation to trade nor investment research. User assumes sole responsibility for the use it makes of this information to achieve his/her intended results. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company. Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 36. Q & A 36 | Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 37. 37 | The JSF Group of companies are a set of companies linked by a common thread integral within a protein based supply chain. A provider of innovative risk management solutions, specializing in meat & livestock. “ At J.S. Ferraro & Company we combine our experience in the derivatives markets, expertise in econometrics and over 30 years in the cattle and hog industry to help our clients lead the herd, manage their risk, and maximize their margins. Progressive thinking and precise quantitative modelling are the cornerstones of our margin management solutions. Retail Ready is your “Go-To” protein merchandising & industry expert. Protein expertise at your fingertips. Retail Ready Foods Inc. is a major niche distributor of fresh beef and pork protein, providing peace of mind to mid-to- large retailers and processors across the Americas. We provide clients with superior market insight to help them make informed decisions about their meat purchases, supported by our expertise and well stocked inventory that we deliver just-on-time, every time. “ Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.
  • 38. THANK YOU Retail Ready Foods Inc. 130 Adelaide Street, Suite 810 Toronto, Ontario M5H 3P5 CANADA (416) 306-8788 info@retailready.com | www.retailready.com 38 | J.S. Ferraro & Company 130 Adelaide Street, Suite 3302 Toronto, Ontario M5H 3P5 CANADA (416) 306-8787 hello@jsferraro.com | www.jsferraro.com Confidential. © Copyright Retail Ready Foods Inc. All Rights Reserved, 2018. Not for distribution. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of JSF Group Inc or it’s subsidiary, J.S. Ferraro & Company.