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Paul F. Engler Chairman of the Board & CEO The State of the Industry: Cactus Feeders’ Perspective on the Beef Industry The Early Years: The Building of an Industry Leader 1960: Hereford Feedyard Built first large commercial yard in Texas 1972: IBP VP of Carcass Division, Board of Directors 1975: Established Cactus Feeders With partner Tom Dittmer Cactus Feedyard Capacity 75,000 Acquired in 1975 Feedyard Frontier Feedyard Acquired 1977 Capacity 40,000 Stratford Feedyard Acquired in 1979 Capacity 80,000 Wrangler Feedyard Acquired in 1982 Capacity 55,000 Southwest Feedyard Acquired in 1993 Capacity 42,000 Wolf Creek Feedyard Built in 1997 Capacity 65,000 Hale Center Feedyard Acquired in 1999 Capacity 55,000 Syracuse Feedyard Acquired in 1999 Capacity 40,000 Ulysses Feedyard Acquired in 1999 Capacity 28,000 Villa Mercedes, Province of San Luis Cactus Argentina Established 2000 Capacity 25,000 Joint Venture with Cresud Benjamin / Amistad / Roswell 20,000 head stocker cattle 2,000 head cow herd 140,000 total acres / 8,000 irrigated Spike Box Ranches “If you take care of the land, the land will take care of you” World’s Largest Cattle Feeders ~ 480,000 head one-time capacity 9 Feedyards in Texas and Kansas 25,000 head Argentina expansion 550 + Employees “Producing America's Beef” Industry Leadership NCBA Cattle Business of the Century TCFA Environmental Stewardship Award Paul F. Engler - Cattleman of the Year - TCFA Former Chairman Environmental Stewardship NCBA Cattle Business Of the Century “It’s a business where a handshake still gets the deal done and your word is your bond.” The Cactus Way Think like an Owner Take care of the cattle first Get paid for what you produce Give your partner just a little better deal “It just takes concrete & steel to build a feedyard, but it will only work when you have the right people running it.” Company Ownership 32% Owned by Employees 68% Owned by Engler Family Share Price up over 300% since 1990 Average ESOP account $72,000 20,000 finished animals per week 10 Million lbs. red meat per week 1.89 Million tons of feed each year Milling 40.5 Million bushels of grain Beef & Feed Sales 1 out of every 30 fed animals in the U.S. is Cactus Beef Estimated economic multiplier 5:1 Total Sales ~ $750 M Estimated Total Impact = $3.75 B Economic Impact All products, goods and services are bought & sold within 200 miles of yard Cactus Feeders’ regional impact : Amar il l o, TeXas Popul at ion: 173,075 Customers vary in size from 80 to 25,000 cattle on feed at one time From Hawaii to Florida, Mexico to Montana Majority take advantage of financing Use carcass feedback to improve genetics Customer Base We serve as the Customer’s banker, grain elevator, care-taker, & marketer 60 / 40 Program: - Producers partner 50 / 50 with Cactus - Receive 60% of profits or 50% of loses Mexico Ranch Program Individual Carcass Information Cresud / Argentina Producer Alliances 1988: Founded “Formula Pricing” 2000: 900,000 head marketed to IBP / Excel ~ 7,000,000 total head marketed Packer & Retail Alliances The Current State of the Beef Industry The Cattle Cycle TIME HI LO Cattle Prices 1990-1991 2001 1974-1976 1985-1986 1996-1998 1979 Cattle Prices 30 40 50 60 70 80 90 00 YEARS 60 80 100 120 140 M I L H E A D Source: USDA 2003-2006 projected Total Cattle Inventory 80 82 84 86 88 90 92 94 96 98 00 02 04 06 YEARS 38 40 42 44 46 48 50 52 M I L H E A D Cattle-Fax projection 2003-2006 Source: USDA & Cattle-Fax Total Cow Inventory 80 82 84 86 88 90 92 94 96 98 00 02 04 06 36 37 38 39 40 41 42 43 44 45 46 Annual Calf Crop M I L H E A D Source: USDA, 2002-06 projected YEARS 80 82 84 86 88 90 92 94 96 98 00 02 0 200 400 600 800 1000 1200 1400 1600 MEXICO TOTAL 0 0 0 H E A D Feeder Cattle and Calf Imports Source: Census Bureau & STATS Canada 2002 estimate 80 82 84 86 88 90 92 94 96 98 00 02 22 24 26 28 30 32 34 36 38 40 42 M I L H E A D Feeder Cattle and Calf Supply - Jan 1st Outside of feedyards, 2003 projected Source: USDA & Cattle-Fax 75 77 79 81 83 85 87 89 91 93 95 97 99 01 550 575 600 625 650 675 700 725 750 775 Average Carcass Weights Average increase 5.9 lbs Source: USDA, 2002 Projected P O U N D S J F M A M J J A S O N D 740 750 760 770 780 790 800 810 820 830 840 Steer Carcass Weights P O U N D S Source: USDA WEEKS 5-Yr Avg 2001 2002 98 99 00 01 02 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 M I L L B S Additional Beef Tonnage due to Increase Carcass Weights Source: USDA, compared to 1997 carcass weights 2002 estimate 80 82 84 86 88 90 92 94 96 98 00 02 04 06 21 22 23 24 25 26 27 28 B I L L B S Beef Production projected 2002-2006 Source: USDA & Cattle-Fax YEARS 80 82 84 86 88 90 92 94 96 98 00 02 YEARS 10 12 14 16 18 20 B I L L B S Pork Production Source: USDA 2002 projected 80 82 84 86 88 90 92 94 96 98 00 02 YEARS 10 15 20 25 30 35 40 B I L L B S Poultry Production Source: USDA 2002 projected 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 0 10 20 30 40 50 60 70 80 90 B I L L B S BEEF PORK POULTRY Meat Production Source USDA 2002 Projected 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 YEARS 36 38 40 42 44 46 48 50 52 54 56 58 60 62 B I L $ U.S. Consumer Expenditures on Beef Source: USDA & Cattle-Fax Domestic disapperance valued at all-fresh retail price, 2002 projected Per Capita Beef Spending and Consumption 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 155 160 165 170 175 180 185 190 195 200 205 210 215 60 65 70 75 80 85 90 95 162160 157 171 178 181 177175176 173 170 167169 176 187 199 210 200 166 Per Capita Spending (dollars) Per Capita Consumption Source: USDA 2003 projected Spending Consumption Market Share of Meat Spending 1980 1985 1990 1998 53.9 50.3 45.4 39.8 26.9 26.2 27.0 29.5 16.1 19.5 23.1 26.3 3.1 4.0 4.5 4.4 2001 42.3 28.8 25.1 3.9 2002* 43.1 28.3 24.9 3.7 *projected 90 91 92 93 94 95 96 97 98 99 00 01 02 2.25 2.35 2.45 2.55 2.65 2.75 2.85 2.95 3.05 3.15 D O L L A R S All Fresh Beef Price Source: USDA 2002 projected Years Round Chuck 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 1999 2000 2001 Source: USDA Change in Choice Beef Values vs. 1998 % C H A N G E EXPORTS IMPORTS 0 1 2 3 4 5 6 7 B I L D O L L A R S BEEF VARIETY MEATS TALLOW HIDES LIVE CATTLE 5.50 4.29 2001 Live Cattle, Beef, and Beef Product Exports vs. Imports Total Value Source: Dept of Commerce Bureau of Census 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Exports Imports Billion Pounds Source: USDA/ERS, 2002 projected Beef Imports and Exports What if Exports to Japan Decline? Result: Off 10 percent Off 20 percent Off 30 percent Off 50 percent An additional 2.1 mil lbs per week on U.S. market An additional 4.2 mil lbs per week on U.S. market An additional 6.3 mil lbs per week on U.S. market An additional 10.5 mil lbs per week on U.S. market 79 81 83 85 87 89 91 93 95 97 99 01 92 94 96 98 100 102 104 106 108 110 112 114 116 118 120 122 124 126 750 lb Steer as Percent of Fed Steer P E R C E N T Source: Cattle-Fax 2002 projected YEARS 75 77 79 81 83 85 87 89 91 93 95 97 99 01 50 60 70 80 90 100 110 120 130 140 150 160 P E R C E N T 450 lb Steer Calf as Percent of Fed Steer Source: Cattle-Fax 90 91 92 93 94 95 96 97 98 99 00 01 YEARS 11.0 11.5 12.0 12.5 13.0 13.5 14.0 14.5 M I L H E A D U.S. Bunk Capacity Estimate Source: Cattle-Fax From 1990 to 2000 U.S. bunk capacity grew 16% 1995 1996 1997 1998 1999 2000 2001 YEARS 0 5 10 15 20 25 30 35 40 45 50 Percentage of Fed Cattle Movement from: Formula, Contract , Alliance & Packer Fed Cattle P E R C E N T Slaughter Capacity versus Marketings 0 5000000 10000000 15000000 20000000 25000000 CO KS NE TX/OK Total # of head Slaughter Capacity 2001 Marketings www.cactusfeeders.com 36