A View From Wall Street

A View From Wall Street USMEF Strategic Planning Conference Tucson, Arizona November 4, 2008 Presented by: Christine McCracken, Cleveland Research

Agenda • Cleveland Research Overview • Top Down Market Analysis • Channel Insights • Commodity & Food Industry Highlights • Industry Implications • Q&A

Who is Cleveland Research? • Cleveland Research Company Founded in 2006 with as an independent research firm. 65 employees, 40 in research. Headquartered in Cleveland, with Food & Agribusiness team in Los Angeles. • Stock Market Research We provide in-depth financial research on publicly-traded companies across a number of sectors. We service the 125 largest institutional investors such as Fidelity, AllianceBernstein, T. Rowe Price, as well as hedge funds. • What Sets us Apart? We go to greater lengths than most of our peers to find out what’s new and what’s changing with the companies we cover. This means we spend a large amount of our time in the field or talking with customers, suppliers, distributors, or competitors. Our clients find this to be highly value-added and differentiated versus other sell-side firms.

My Background • Raised on Farms in Minnesota and Florida • B.S. in Agricultural Economics, UGA • M.S. in Agricultural Economics, UC Davis • Early Career in Consulting, Agricultural Biotechnology/Investment Banking • 14 Years in Equity Research – Food & Agribusiness Focus

Financial Crisis 2008

What Happened? Subprime Housing Bubble Bursts - Fannie/Freddie/AIG Wall Street Shaken - Bear Stearns/Lehman/Merrill Regional Banks Fail -WaMu, National City Global Fallout – Emerging Markets Consumer Credit/State and Municipal Governments?

S&P Down 38% From Peak

That’ll Leave A Mark!

What’s Next? • Elections Likely to Drive Market in Near-term • Tough Holiday Season Likely • Recession • Dollar – Foreign Exchange Headwinds • Consumer Credit • Unemployment Rising • Inflation So When Do Investors Come Back In?

CRC Coverage Universe

What Matters to Investors? • What is the “Bottom Line” • When business trends get better, earnings go up • When earnings go up, stocks go up • Fundamental Business Drivers Best Indicators for the Stock • Sales • Gross Margins (Cost of Goods) • Operating Expenses (Shipping/Handling, Labor) • Other (Interest Expense, Share Repurchase) • Valuation • Expectations

Channel Themes and Inflections • Planning for a weaker consumer environment • Trading down – proteins, private label, WMT • Value brands gain; adjusting portfolios • Grocery channel clearly slowing and likely below expectations • Channel shift much more visible to Supercenter and Clubs • Foodservice hanging on by a thread • Casual dining consolidation • QSR adjusting mix; White table cloth weak • Packaged Food relatively stable • Focus on costs; Commodity Uncertainty • Commodity-Related Equities Struggle With Debt

How Healthy is the Consumer? • Perceived Wealth – Emotions • Home Value • Credit…Credit…Credit • Drop in Fuel Costs a Plus • Consumers Still Nearing Price Threshold

Grocery and Restaurants Diverge

Food Retail Trends • WMT asking for incremental allowances • Starting to hear more pushback on price increases this summer (specifically WMT) • SKU rationalization is a hot topic • More centralization coming (SVU, KR) • Tighter inventory management and supply chain efficiencies • Private label development and targets

Foodservice Still Weak • Demand is bad and not getting much better • Too many restaurants, little differentiation • Grocery taking share in foodservice • Costs are still rising (labor, food) • Costs to build and run restaurants > sales, • Demographic shifts less favorable (particularly more at-home moms) • Pricing is uncomfortably high • Quality is arguably worse in both food & service at the chains

Supply/Demand Not Balanced Top 15 Casual Dining chains slowed from 3-6% from 2000-05 before flattening in 2006 and dipping negative in 2007/2008 Capacity growth has moderated from 8-11% to 3-5%, but this needs to slow a lot more (and demand needs to accelerate)

Demographics Less Favorable Biggest change is drop in dual-income families, or fewer working women; more stay-at-home moms favors food retail Flattening of the foodservice dollar = slower growth

Menu Pricing is Getting Too High National pricing is over 4% for the first time in a decade Quality of food and service has been impaired at many chains

Average Check Now Near $70

Foodservice Outlook • Expect more bad news before good news • Industry needs structural reconfiguration • Weak players will get weeded out • Capacity growth must and will slow • Differentiation is key • Cost control is more important • Financial re-engineering or re-franchising is not the right long-term answer

Outlook for Food Companies • Consumer Trade Down – Private Label? • Commodity Deflation • Channel Shift Favors Some, Not Others • Not All Companies Created Equal • Sustainability? Organic? • Food a Defensive Investment?

Grain & Oilseed Outlook • Economics Favor Corn (Marginally), But Soybeans Lower Risk • Input Costs Remain High, But Falling • Feed Demand Likely to Fall • Ethanol Turning the Corner • Several Bankruptcies (VSE), But Plants Still Coming Online • Political Support Appears Strong • South American Crop Delays • China – India Will Drive Next Wave

Livestock, Dairy & Poultry Outlook • Broiler Industry Has Made Cuts…More Coming • Pilgrim’s Pride –Significant Implications for Industry • Russia • Pork Production Needs to Drop 10% • Liquidation Stalled by Drop in Feed Costs • Trade Outlook Will Drive Decisions • Cattle Feeding Industry at the Edge • Will Take Years • Dairy Industry Maintains Production • Turkeys & Eggs

What Happens on Wall Street? • Continued Consolidation • Hedge Fund Redemptions • Tax Loss Selling/Capital Gains • Holiday Season 2008? • Fundamentals Still Matter, But Cash is King • Reduced Exposure to Emerging Markets

What Happens in Agriculture? • Acreage Battle Continues • New Direction for Ag Policy/Trade? • Value of the Dollar • Will the Speculators Come Back? • Liquidity is Key…Size Matters • Protein Industry Liquidation

Thank You Christine L. McCracken Cleveland Research Company 222 North Sepulveda, Ste 1775 El Segundo, California 90245 Phone: (310) 563-1900 Cell: (310) 683-8348 Email: cmccracken@cleveland-research.com

Disclosures Important disclosures for the companies mentioned in this report can be found at www.cleveland-research.com/clients/disclosures Buy: The stock’s return is expected to exceed the market due to superior fundamentals and positive catalysts. Underperform: The stock’s total return is expected to underperform the market due to weak fundamentals and a lack of catalysts. Neutral: The stock is expected to be in line with the market due to full valuation and/or a lack of catalysts. Valuation and Risk: Price targets are established under various valuation methods including P/E, P/S, EV/EBITDA on financial estimates based on forward earnings. Price targets are not established for every stock. The price target’s effectiveness may be affected by various outside factors. Risk assessments can be found in the most recent research on these stocks. Other Disclosures: I, Christine McCracken, certify that the views expressed in the research report(s) accurately reflect my personal views about the subject security(s). Further I certify that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in the research report(s). The analysts responsible for the preparation of this report have no ownership stake in this company. Cleveland Research Company provides no investment banking services of any type on this or any company. The information transmitted is intended only for the person or entity to which it is addressed. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this in error, please contact the sender and delete the material from any computer. Member FINRA/SIPC

A View From Wall Street