1. CAPITAL DEPLOYMENT AND DIVERSIFICATION Kent Bang – AgStar Financial Services 2015 PORK MANAGEMENT CONFERENCE

2. Overview Capital Decisions in the Swine Industry –Capital Needs –Trends in the Industry –Diversifying (does it make sense) Ron St. John – Alliance Dairy –Experiences from the Dairy Industry John Maddux – Maddux Cattle Company –Experiences from the Beef Industry

3. Capital Considerations Current Business needs Working Capital Needs Equity Position Swine outlook Risk assessment Position relative to peers Growth plans

4. Capital Considerations Current Business needs Working Capital Needs Equity Position Swine outlook Risk assessment Position relative to peers –12/31/14 »>$1200 working capital w/o sows »>63% Book Equity (at year-end) Growth plans

6. Capital Considerations Prior down-cycles (I.S.U. Summary) –Nov. 1997 to Jan. 2000 $20.44 per head average loss $1104 working capital per sow –Nov. 2001 to Apr. 2003 $15.90 per head average loss $572 working capital per sow –Oct. 2007 to Feb. 2010 $22.05 per head average loss $1279 working capital per sow

7. Industry Trends Capital Investment supporting the business –Owning more of the asset base Farrowing sites Growing facilities Feed milling / grain storage

8. Industry Trends Capital Investment supporting the business –Integration Packing / processing investment Retail meat sales

9. Industry Trends Capital Investment supporting the business –Reverse Integration Land acquisition Breeding Stock multiplication

10. Diversifying Financial due diligence –Understanding the business’ financial performance, cycles and needs. –Investment Liquidity –Closely held partnerships or LLC’s Buy – sell agreements Are you prepared to take the partners out? –Adding potential investment –Replacement of owner / manager.

11. Diversifying Does it make sense? –Identify unique competitive strengths before trying to apply them in another business line. Defining the business –Product (i.e. pig business) –Customer function (i.e. food business) –Core competencies (i.e. low cost, feature) Think not about what you do, but what you do better than your competitors.

12. Diversifying Does it make sense? –What strategic assets to we need in order to succeed in the new business? To diversify, a company must have all of the necessary strategic assets, not just some of them.

13. Diversifying Does it make sense? –If you are missing one or more critical factors for success in the new business, can you purchase them, develop them, or make them unnecessary by changing the competitive rules of the industry? Can you do that at a reasonable cost? –Can you catch up to or leapfrog competitors at their own game?

14. Diversifying Does it make sense? –Will diversification break up strategic assets that need to be kept together? –You need to determine whether your strategic assets are transportable to the new business. Many companies introduce their time-tested strategic assets in a new market and still fail. They have separated strategic assets that rely on one another for their effectiveness and are not able to function alone.

15. Diversifying Does it make sense? –Many new entrants are quickly outmaneuvered by their new competitors. In many cases they have failed to consider whether their strategic assets can easily be imitated, purchased on the open market or replaced. –Will you be simply a player in the new market or will you emerge a winner?

16. Diversifying What can our company do better than any of its competitors in its current market? What strategic assets do we need in order to succeed in the new market? Can we catch up to or leapfrog competitors at their own game? Will diversification break up strategic assets that need to be kept together? What we be simply a player in the new market or will we emerge a winner? What can our company learn by diversifying, and are we sufficiently organized to learn it?

17. Diversifying Like good chess players, forward- thinking investors will think two or three moves ahead.

18. Diversifying Warren Buffet rule: “NEVER INVEST IN A BUSINESS YOU CAN’T UNDERSTAND.” –Ability to sense trouble –Conviction enables you to seize opportunity