1. October 2008 Paul Braks Food & Agribusiness Research and Advisory Grain markets in motion Impact of volatile commodity prices on the agri-food value chain

2. Who is Rabobank?  Rabobank is the largest Allfinanz financial service corporation in the Netherlands  Rabobank is an AAA rated financial institution  Rabobank has a international food & agri focus  Rabobank delivers financial solutions through a network of branches in 41 countries 2 Source: Rabobank, 2008

3. 3 What is driving commodity prices? A whole range of factors… Commodity price Agricultural land Yield (output/ha) Farm management Farm input prices Weather Diseases Supply factors Feed Food Biofuels Industrial Demand factors Fund activity Exchange rates Freight rates Crude oil prices Technical specifications Market sentiment and speculation New non-agri market entrants Other price determining factors Trade Policy Agricultural Policy Biofuel/Energy policy Food safety regulations (e.g. GMO) Sustainability criteria Policies Source: Rabobank, 2008

4. Stocks are falling because consumption of grains is structurally higher than production 4 Source: USDA, 2008  Ongoing demand for meat, especially in emerging markets  Demand from a continuous expanding biofuels industry  Supply negatively affected (bad harvests) by adverse weather  Policy reforms resulted in lower stocks and less price stability

5. Scarcity in world market has moved up prices although the current trend is downward due to the financial crisis Financial crisis drives down prices:  Less liquidity in the financial markets and market uncertainty  Banks have a very conservative credit risk appetite  Investors have been selling commodities to reduce risk and raise cash 5 Source: Bloomberg, 2008

6. Long term inflation adjusted commodities price has been downward Low real prices tell that:  Farmers were able to expand production to meet ongoing demand growth  Production could grow by means of efficiency improvements  Food has never been so cheap 6 Source: IMF, 2008 Real wheat price trend (2006 USD/MT)

7. Farm input prices (crude oil & fertiliser) are also very volatile 7 Source: Bloomberg, 2008 USD/MT

8. US wheat production costs have increased by 25% due to higher fertiliser (+75%) & fuel costs (+60%) between 06/07-08/09 8 Source: Rabobank analysis based on USDA, 2008

9. US wheat profit margins have so far increased because grain price increase outpaces cost increase  Farmers planting decisions in 2009/10 should be followed with great care  The current fall in the grain price is much more severe than the fall in input costs  Grain markets are still tight and therefore more future grain production is needed 9 Source: Rabobank analysis based on USDA, 2008

10. The European food industry is facing a higher and more uncertain costs base Food processors have the following options:  Accepting pressure on margins / push volumes  Internal costs savings measures  Passing through input cost inflation  Strategic actions to address the cost base (M&A) Source: Rabobank analysis, 2008 10

11. Higher cost base cannot be passed on and therefore margins are under pressure Source: Rabobank, 2008 11 Average EBITA margin for top 35 European food companies

12. Outlook  The current grains crop (2008/09) is considerably higher than last year. The good crop is especially driven by higher yields due to favourable weather and to some extent larger planted acreages  Prices of grains show a downward trend due to current situation in the financial markets. The grain markets are fundamentally still tight and therefore a future production expansion is needed  All players in the agri-food value chain continue to face volatile input and output costs, which will have an impact on profit margins  Commodity price risk management is getting more important for all players (from farmer to user) in the agri-food value chain 12 Source: Rabobank, 2008

13. 13 “The financial link in the global food chain”™