Record third quarter, year-to-date net income
USPB Announces

Third Quarter Results

U.S. Premium Beef, LLC (USPB) recorded its highest third quarter net income during the thirteen weeks ending May 29, 2010. For the quarter, USPB had net income of $52.0 million, which was $7.07 per Class A unit and $61.95 per Class B unit, compared to net income of $27.7 million, or $12.43 per Class A unit and $25.23 per Class B unit, in the prior fiscal year.

“The improvement from the prior year is reflective of higher gross margins for beef products we sold,” CEO Steve Hunt explained in announcing the results.

The record third quarter results also enabled USPB to realize record net income during the year-to-date period. “During the first three quarters of fiscal year 2010, our company had net income of $108.7 million compared to a net income of $55.9 million for the year-to-date period in the prior fiscal year,” Hunt noted.

Net sales and cost of sales were higher primarily due to an increase in the average volume of cattle processed per week and an increase in sales prices and live cattle prices per head processed. Interest expense also decreased significantly as a result of the reduction in debt levels.

“The beef herd continues to liquidate, which will keep longer term cattle supplies in a downward trend,” Hunt pointed out. “However, the lack of expansion in the pork industry and very modest growth in the poultry sector will keep per capita protein supplies in check and provide underlying support to cattle and beef prices.

“General economic conditions remain tenuous and will continue to dominate market potential over the coming months,” he added. “Global trade prospects remain positive on similar global supply issues as well as the potential for stronger economic performance.” w

National Beef Leathers
Announces Tannery Upgrade

National Beef Leathers, LLC, has started an expansion and upgrade to our wet blue leather tanning facility in St. Joseph, MO. The two year, $24 million expansion is expected to create 25-30 additional jobs, bringing the total employment at the facility to approximately 140. The wet blue leather produced at the plant is sold throughout the world to tanners who make finished leather for high quality products such as automotive, luxury goods, shoes, handbags, apparel and furniture.

“This expansion will make our tanning facility the state of the art in the industry,” CEO Steve Hunt explains. “It will allow us to add more value to the hides processed at that facility and it fits with our long-term company-wide goal of being recognized

...continued on page 2

Participation in comment period essential
Proposed GIPSA Rules:

A Threat to Value-Based Programs

By Steve Hunt, CEO

As provided for in the 2008 Farm Bill, on June 22, 2010, the Department of Agriculture (USDA), Grain Inspection, Packers and Stockyards Administration (GIPSA) announced proposed new rules and regulations addressing livestock and poultry marketing practices.

USPB is assessing the available information surrounding the proposed rules to determine the potential impact to the company and its members. A few areas of the rules require further definition and clarification before we can make a full assessment, however, we have identified several areas that are of great concern.

Clearly, the proposed rules would increase the level of government intrusion in the marketplace. If finalized, the proposed rules will have a devastating impact on USPB and the many value-based integrated marketing strategies that serve to benefit producers and consumers. Perhaps most damaging would be the requirement to provide written cost and benefit justification to the USDA on each and every lot of cattle purchased. The USDA intends to police prices paid for value-based cattle programs and determine whether they are fair and justified, similar to Utility rate boards.

At a minimum, this “one price fits all” sanction will narrow the range of prices paid to producers as processors work to defend variations in the prices they pay for cattle. Ultimately, this opens the door to the return of a single commodity bid, not only from one processor, but all processors within an industry. Decades of work by USPB and the industry to develop highly successful, specialized value-based programs designed to respond to unique individual consumer preferences will be lost.

Does this rule best serve the innovative producer looking at value

...continued on page 2

Downey Ranch Wins BIF Award

The Beef Improvement Federation (BIF) recognized USPB founding member Downey Ranch, Inc., (DRI) located near Wamego, KS, as its Commercial Producer of the Year during the annual BIF convention in Columbia, MO.

DRI is owned by members of the Joseph L. Downey family. Barb Downey and her husband, Joe Carpenter, manage the family ranching business. DRI owns a 550 head commercial and registered Black Angus cow herd. Registered bulls along with commercial heifers are sold at a production sale every fall.

Since its beginning, DRI has focused on producing quality beef from efficient Angus cows. In 1993, DRI won the Certified Angus Beef® (CAB) Value Discovery Project and in 1995, had the highest marbling pen of Angus steers in the 20,000 head Angus Alliance project. In 1997, it became a founding member of U.S. Premium Beef and has marketed its finished cattle through our company ever since. Their results are impressive, averaging 83% Prime and Choice carcasses, 30% CAB qualifiers and only 4% Yield Grade 4 carcasses.w