Appendix

1. txho/HO0282/00824cs App.ppt • 1/1/2020 10:03:27 AM Appendix Appendix

2. txho/HO0282/00824cs App.ppt CONTENTS • Page • Meats • Pork • Beef • Poultry • Softs • Coffee • Cocoa • Sugar • FCOJ • Cotton • Tea • Other agricultural products • Dairy • Fruits/vegetables • Other 2 4 6 8 10 13 15 17 19 21 25 28

3. txho/HO0282/00824cs App.ppt • Attractiveness • H/M/L • Criteria • Rationale • Origination • Risk exposure • Price transparency • Government forces • Concentration along value chain • Product attributes • Transportation • Trends/discontinuities • Proprietary trading • Market liquidity • Information concentration • Producer concentration • Single event sensitivity • Impact of systematic reporting • E-commerce • Current e-commerce activity • Platform acceptance • H-producer, processor • L-M • M-H • H • L • M • L • H • M • L • L • M-H • M • M • Primary processors face margin uncertainty (input & output prices uncorrelated and cannot always pass through input price increases); output hedging not available on exchange; in addition, high capital requirement puts premium on normalized cash flow • Producer – low correlation between input(feed) and output (finished hog) prices; but ST hedging available • Pork producers know local prices but not fully transparent; loosely based on CBOT (processing capacity is driver) • Liquid financial market for bellies (processed meat) and lean hogs, illiquid elsewhere • Some loan programs and subsidized feed prices • Top 4 processors ~58% (Smithfield, IBP, ConAgra, Cargill) • Increasing vertical integration among producers and processors • Very fragmented elsewhere • Hogs have limited time frame to go to market (245 lb ideal size) ; Storage expensive for processed pork (refrigeration) • Established product standards; fungible • Nearly all by truck (99%); total transportation cost ~ 1.7% of retail price; geographically constrained for live pigs • Increasing consolidation/vertical integration • Liquid futures market for lean hogs (processor input, traded on CME) – also liquid market for frozen pork bellies (traded on CME) • Processors likely to have insight on live hog market based on their known needs • Produced globally • Produced over large geographic area, not very weather sensitive • Live hog market somewhat sensitive to impact of export demand on domestic producers • USDA does issue reports estimating domestic and global supply of live hogs; reports do have impact on market activity • Commerce Ventures launching consortium site with large incumbents (Smithfield, IBP, Cargill and Tyson to sell protein products on-line) • Key questions: • Would manufacturers use site to get specific grades without merchants? • Would processors post prices? PRODUCT ASSESSMENT: PORK

4. PRELIMINARY txho/HO0282/00824cs App.ppt • Secondary processors • Sow production • Processor • Wholesale/ distributors • Retail VALUE CHAIN ANALYSIS – PORK • Buy environment • Sell environment • Concentration • Risk management/hedging activity • Raise own sows • Most feed (e.g., corn) self produced • Often on spot basis • Contract production rising (ST/LT) • Market price based on processor capacity • Fragmented • Top 4 ~18% of production • Ability to hedge feed input costs and output (lean hogs) prices but seldom utilized • Buy on spot from producers in region • Contact buying and backward integration increasing • Sell regularly on spot basis; price unrelated to cost of input • Moderately concentrated • Top 4 ~58% • Trend in increasing concentration • Can hedge input cost through forward contracting or futures use, but unable to hedge output prices • Buy on frequent basis from processors • Forward buying only when back-to-back selling • Sell to customers with frequent price changes to pass through fluctuations • Very fragmented • n/a • Buy frequently, spot basis • Costs are passed through to customers • Very fragmented • n/a Opportunities • Unhedgeable output prices for processors • Limited hedging by sow producers who bear price risk despite available product Obstacles • Increasing concentration may make exploiting opportunity difficult • Vertical integration is helping to stabilize cash flow Source: USDA, NASS; Analyst reports; Interviews; Team analysis

5. txho/HO0282/00824cs App.ppt • Attractiveness • H/M/L • Criteria • Rationale PRODUCT ASSESSMENT: BEEF • Origination • Risk exposure • Price transparency • Government forces • Concentration along value chain • Product attributes • Transportation • Trends/discontinuities • Proprietary trading • Market liquidity • Information concentration • Producer concentration • Single event sensitivity • Impact of systematic reporting • E-commerce • Current e-commerce activity • Platform acceptance • H-highest with owner, primary processor • M • H • L-processors • H-others • M-L • M • L-M • H • M • M • L • H • M • M • Processors experience margin volatility with no output hedge available. Hedging available for feedlots (e.g., feed, stocker cattle futures/forwards in ST, live cattle output futures/forwards available) • High capital requirement puts premium on normalized cash flow • Only loosely based on CME, general awareness of market price in area • Liquid financial market for live cattle, less liquid elsewhere • Limited government programs (loans, weather relief); no price floors • Top 4 U.S. ~ 70% (IBP, ConAgra, Cargill, Farmland); not much vertical integration • Others very fragmented • Cannot store for long periods – live cattle must be sold at certain weights, limited after slaughter storage (fresh has highest value, expensive to freeze) • Cost not too high ($1 to $1.50/mile for a load) for live cattle – death loss not too significant • After slaughter transported in refrigerated trucks • Total transport costs make up ~ 1.3% of retail cost • Trend to consolidation • Liquid futures market for live cattle (1,200 lb. slaughter ready cattle) • Concentrated producers in US most likely have insight into live cattle market; possibly large feedlots may be price leaders in market • U.S. concentrated primarily in Southern and Central Plains • Produced over large geographic area, moves through numerous trade routes • USDA does issue reports estimating domestic and global supply and demand; reports do have significant impact on market activity • Commerce Ventures site is planned (Smithfield, IBP, Cargill and Tyson to sell protein products on-line) with large incumbents • Key questions • Would manufacturers use site to get specific grades without merchants? • Would processor post prices?

6. PRELIMINARY txho/HO0282/00824cs App.ppt • Secondary processor VALUE CHAIN ANALYSIS – BEEF • Beef cow production • Auction house • Stockers • Feedlots • Processor • Wholesale/ • distributor • Retail • Buy environment • Sell environment • Concentration • Risk management/hedging activity • Produce own cattle • Feed on pasture except in extraordinary circumstances • Typically sell on spot basis through auctioning; some “contract growing” • Very fragmented ~900,000 operations • Illiquid stocker futures market (CBOT) • Limited forward contracting • None – transaction facilitator • See above • Very fragmented ~10,000+ • n/a • Buy mostly at auction (~300 lb. cow) • Any direct buying is relationship based • Feed primarily on pasture • Sell to feedlots or retain ownership and contract with feedlots • Very fragmented ~10,000+ • Illiquid stocker futures market (input) • Liquid, but seldom used feeder cattle futures market (output) • Buy from stockers(~660 lb. cow) or “lease” feed space (cost plus basis) • Purchase feed on spot and forward basis • Relationship-driven; price based on • CBOT (live cattle) • Some forward sales under 1-2 month contracts • Fragmented • Top 4 ~10% • Input feed costs, feeder cattle, andlive cattle output hedges available on CBOT, but used seldomly • Contracts sometimes used for speculation • Primarily spot market purchases • Trend to sign fixed volume, floating price contracts • Sell to wholesalers on daily basis • Price not related to input costs (ST, MT) • Concentrated • Top 4 ~70% • Futures available to hedge input costs • No output hedge available • Buy from processors frequently, generally on spot basis • Pass through costs by regular pricing changes • Fragmented ~10,000+ • n/a • Buy from processors or wholesalers very frequently, generally on spot basis • Pass through costs by regular pricing changes • Fragmented ~10,000+ • n/a Opportunities • Processor unable to hedge output prices • Limited hedging by cattle owners who bear price risk despite available products Obstacles • Identifying short side counterparties • High concentration at processing level may inhibit market penetration Source: USDA, NASS; Analyst reports; Interviews; Team analysis

7. txho/HO0282/00824cs App.ppt PRODUCT ASSESSMENT: POULTRY • Attractiveness • H/M/L • Criteria • Rationale • Origination • Risk exposure • Price transparency • Government forces • Concentration along value chain • Product attributes • Transportation • Trends/discontinuities • Proprietary trading • Market liquidity • Information concentration • Producer concentration • Single event sensitivity • Impact of systematic reporting • E-commerce • Current e-commerce activity • Platform acceptance • M-H • M-H • M • M • M-L • L • L • L • M • L • L • L • M • – • Heavy integration along value chain results in risk held at processing level • Processor very dependent on consumer demand which set output prices; no current hedging products (ST/LT) with illiquid spot market for processed goods • High capital requirement puts premium on normalized cash flow • Not much need for transparency through processing level due to integration • Illiquid spot market for processed goods with limited transparency; primarily negotiated contracts (some brokers) • Govt. mandates LT growing contracts (5 yrs), which makes supply management for processors difficult • Integrated players (from growing to processing) Top 4 ~ 54%; (Tyson, Gold Kist, ConAgra, Perdue); even smaller players are integrated • Only 2 primary market transactions created along value chain (processed chicken) • Very fungible (although some branding) • High storage costs ($.015/lb/mo), perishable both before and after slaughter (can freeze 18 months, fresh can last 2 weeks through value chain) • Nearly all by truck (99%) (high mortality rate if moved long distance) – Total transportation costs ~ 2.4% of retail price. Processed chicken must be refrigerated • Consolidation; also large integrated players attempting to manage supply to meet demand • Very illiquid spot market; most transactions contracted directly with wholesaler • Large producers probably have understanding of supply availability • Produced globally • Produced over large geographic area, moves through numerous trade routes • Chicken stock reports have no meaningful market impact • Commerce Ventures is planned (Smithfield, IBP, Cargill and Tyson to sell protein products on-line)

8. PRELIMINARY txho/HO0282/00824cs App.ppt VALUE CHAIN ANALYSIS – BROILERS • Food service • Chicken production • Primary processing • Secondary processing • Wholesale/ distributor • Retail • Key facts • Processors have unhedgeable output price risk on processed poultry • Most processing players (even smaller ones) are integrated from chicken production to secondary processing stage • No liquid spot or futures market exists • Most transactions between processors and food service companies and wholesalers/distributors are contracted on a short-term basis Source: Interviews; Analyst reports; USDA; Team analysis

9. txho/HO0282/00824cs App.ppt • Attractiveness • H/M/L • Criteria • Rationale • Origination • Risk exposure • Price transparency • Government forces • Concentration along value chain • Product attributes • Transportation • Trends/discontinuities • Proprietary trading • Market liquidity • Information concentration • Producer concentration • Single event sensitivity • Impact of systematic reporting • E-commerce • Current e-commerce activity • Platform acceptance • M • L-M • L-M • M • M-H • L • L • H • L • M • M • TBD • TBD • TBD • Futures market extremely volatile – “can move 20% in one day; does not have limits” • Supply driven market where weather and port strikes can significantly impact the market • Low correlation on input (green bean) and output (packaged coffee) prices for roaster/food company; but probably price pass through to customers • Producer holds long-term risks (relatively long life of coffee tree) • Potential price risk for trader (no physical match between supply and demand) • Many product grades with premiums paid for quality coffees • 2 exchange traded contracts (NYBOT and LIFFE); volume of contracts moderate (~11,000 per day) • ACPC (Association of Coffee Producing Countries) attempting to influence pricing (13 countries controlling 63% of global production) • Generally low regulations and restrictions • Moderate concentration at the roaster (top 4 own 49% of market) • Moderate concentration at trader/importer (top 5 own 44% of imports) • Concentration at production varies by country • Brazil highly concentrated (large co-ops) • Columbia highly fragmented (many small farms) • Many product types/grades available – Europe market and retail/direct to consumer market is very specific about coffee origin • Premiums paid for quality/particular origins • Once roasted, must be consumed within a month • No special transport required – mostly bulk shipments (compete with other ocean freight) • Vertical integration – direct to consumer channel buying direct from growers (e.g., Starbucks), roasting & distributing; trading firms getting into farming • High level of liquidity (average daily volume ~11,000 contracts; velocity 22x physical) • Though there are a handful of key drivers, many other factors can affect the market (e.g., demand driven factors) • Top 4 countries own 50% of production (Brazil: 26%, Columbia: 11%, Vietnam: 7%, Indonesia: 7%) • Market quite volatile with port strikes and weather being key drivers • n/a • n/a • n/a PRODUCT ASSESSMENT: COFFEE

10. PRELIMINARY txho/HO0282/00824cs App.ppt • Origin country • Receiving country VALUE CHAIN ANALYSIS – COFFEE • Farmer • Local processor • Trader • Roaster • Wholesaler/ retailer • Participants • Asset profile • Profitability sources/factors • Buy environment • Sell environment • Risk management/ hedging activity • Many small and large owners in 52 countries, 2 primary varieties • Limited or nonstorage capacity • Small and medium land owners in Colombia • Large owners in Central America • A pulper or dryer are the only equipment owned • Owns small car or contracts transport • No subsidies • Price takers in input/output • Linked to international price • Inputs purchased at local spot price • Little storage capacity • Crops sold to local coop/buyer • Not much geographically sales option • Limited futures contract use (Mexico, Guatemala) • Spot price changes weekly in Colombia • Many cooperatives and private buyers/exporters • Hundreds of local warehouses • Own storage capacity in some countries • Presence in origin (vertical integration) • Medium- and large-size hullers • Contract transport • Aggregation and processing • Market power at the local level • Parchment coffee purchased at spot price from many local farmers • Green coffee sold at NY/ London basis • Long-term relationship • Execution over the whole year • Guarantee basis through back-to-back transactions • Top 5 trade 44% imports • Rent storage capacity in port • Presence in origin (vertical integration) • Contract transport and shipping • Storage and transportation arbitrage • Crop purchased from exporters at NY/London basis • Small base of roasters at NY/London basis • Guarantee basis through back-to-back transactions • Top 4 roast 49% imports • Large players with scale plants in consuming countries • Contract transport • Processing spreads • Branding • Packaging • Capital intensive • Blends are highly sensitive to variety and quality • Increasing use of just on time, less stocks • Output price sensitive in the long run to comm price • Thousands • Large players • Store product • Marketing skills • Inventory and other logistics • Marketing skills • Inventory and other logistics management

11. txho/HO0282/00824cs App.ppt • Attractiveness • H/M/L • Criteria • Rationale • Origination • Risk exposure • Price transparency • Government forces • Concentration along value chain • Product attributes • Transportation • Trends/discontinuities • Proprietary trading • Market liquidity • Information concentration • Producer concentration • Single event sensitivity • Impact of systematic reporting • E-commerce • Current e-commerce activity • Platform acceptance • M • M • L-M • M-H • L-M • M • TBD • M-H • M • H • M-H • – • – • – • Producer (small 3rd world farmers) holds long-term risks (plant lasts many years), but most selling done in spot market • Potential price risk for trader/processors (no physical match between supply and demand) and delivery risk • 2 exchanges (NYBOT and LIFFE); moderate volume of contracts traded (average of 8000 per day, $64 million/day) • Poor transparency in physical markets • Limited government intervention as most countries too poor to finance programs • However, instability in major cocoa growing nations introducing increased volatility and uncertainty in cocoa market (e.g., Ivory Coast) • Many foreign credits extended to cocoa producing countries with stipulations to privatize • Production – country production concentrated, but individual farmer level fragmentation varies by country (Ivory Coast – fragmented; Indonesia/Malaysia – concentrated); IC owns 40% of global production • Processor – fragmented, done mostly at origin and though ADM/Cargill has been purchasing local plants, locals still own ~60% of processing capacity (1997 capacity breakdown: ADM 18%, Cargill 8%, Callebaut-Berry 14%, Other 60%) • Wholesaler – fragmented, no company owns more than 10% market share • Plant very finicky and prone to disease • Processed cocoa must be shipped in order to prevent quality degradation • Many grades / origins with premiums paid for quality • No need for specialized transport • ADM/Cargill buying processing plants in producing countries • Liquid exchange market (average daily volume: 8,000 contracts and velocity of 13) • Market highly sensitive to current situation in Ivory Coast (e.g., privatization of cocoa industry – or reversal to government supported; farmer acceptance of new cocoa market) • Production concentrated in West Africa; countries experiencing a significant amount of political instability, especially with privatization of the cocoa industry • Changes in market highly dependent upon political, weather and growing conditions/changes • n/a • n/a • n/a PRODUCT ASSESSMENT: COCOA

12. PRELIMINARY txho/HO0282/00824cs App.ppt VALUE CHAIN ANALYSIS – COCOA • Origin • Farmers • Local buyer/broker • Export • Processor • Processor/ wholesaler • Distributor/ retailer • Participants • Asset profile • Mode of transportation (outbound) • Profitability sources/factors • Buy environment • Sell environment • Risk management/ hedging activity • Government intervention • Many; size of farm varies by country • Minimal – no storage • Trucks • Animals • Price takers for input/outputs • n/a • Majority sold on fixed price spot at harvest • Little to none • Limited forward sales • Minimal use of futures • Limited – most countries too poor to finance programs • “Middleman”; usually individual/private entity (excludes Ghana where government is local buyer) • Minimal – no storage • Truck • Rail • Bid/ask spread • Cash/fixed price spot • Fixed price • Sold to export or processor • Minimal • Limited forward sales • Minimal use of futures • Limited though some governments play this role • EDF & Man, Cargill, and country-specific private entities • Storage facility • Ships (bulk) • Bid/ask spread • Position taking • Buy mainly from local buyer • Sold to wholesaler, processor, or country (destination or origin) • Some hedging • Take positions • Minimal • Fragmented with local entities having strong presence • Trend of ADM/Cargill buying local processors • High capital intensity requires full utilization • Ships (bulk) • Processing spreads • Buy from local buyer or export player • Sold to wholesaler • Some • Minimal • Fragmented – no company has more than 10% market share; example co. – Nestle, Mars, Hershey, Lindt, Cadbury • Many have processing facilities • Truck • Rail • Brand • Value add in processing • Buy 6 month-long contracts (crop cycle) • Some hedging via futures • Minimal

13. txho/HO0282/00824cs App.ppt COCOA MANUFACTURERS • Company • Nestle • Mars • Philip Morris/KJS • Cadbury Schweppes • Ferrero • Hershey • Huhtamaki • Lotte Shoji • Storck • Haribo • Other • Total • Sales – US • $ Billions • $7.7 • 5.9 • 4.8 • 3.8 • 3.5 • 3.0 • 1.0 • 1.0 • 0.8 • 0.7 • 51.5 • $83.7 • Market share • Percent • 9.2% • 7.0 • 5.7 • 4.5 • 4.2 • 3.6 • 1.2 • 1.2 • 1.0 • 0.8 • 61.6 • 100.0% • Top 3 = 22% • Top 5 = 31% Source: ICCO

14. txho/HO0282/00824cs App.ppt • Attractiveness • H/M/L • Criteria • Rationale • Origination • Risk exposure • Price transparency • Government forces • Concentration along value chain • Product attributes • Transportation • Trends/ discontinuities • M-H • M-H • L • M • H • M-H • L • Risk held by producer, processor and trader/exporter; large credit risk held by processor on both buy (mills) and sell side (developing countries) • Low risk exposure for many domestic refining and food companies due to price floors for raw sugar (low volatility) • Capital needs of mill result in financing by trading companies in VPP-like agreements • Bartering can occur (e.g., trade oil for sugar) • Visible exchange traded prices (contract prices generally based from exchange-traded prices) • Large price floors (2-3X market price) in U.S. (combined with Freedom to Farm Act) and EU • Import/export restrictions in most countries, especially U.S. and EU • Brazil has ethanol regulations • Fragmented market for mills (processors) and food companies • Small number of trading houses/ exporters with presence (e.g., Cargill, Louis Dreyfus, Tate&Lyles) • Producers fragmented across numerous countries; Brazil dominates export market • Can make both alcohol(ethanol) and raw sugar from cane • Many product substitutes for sugar (HFCS, sweeteners) • Store at low cost of 1-2 years • High product fungibility (few grades) • Local by truck • Ocean freight is non-specialized (competes with other products for access) • Through long periods of relationship building, Cargill has been able to build a presence in the market in producing regions • New harvesting machines (due to environmental regulation reducing traditional burn & clear method results in new capital requirements PRODUCT ASSESSMENT: SUGAR

15. txho/HO0282/00824cs App.ppt • Attractiveness • H/M/L • Criteria • Rationale • Proprietary trading • Market liquidity • Information concentration • Producer concentration • Single event sensitivity • Impact of systematic reporting • E-commerce • Current e-commerce activity • Platform acceptance • H • L-M • L-M • L-M • M • Market exchange (NYBOT, LIFFE) liquidity in raw sugar • Approximately 25% of sugar trades in free market (exported) • Only “residual” or surplus country production (in most cases) is subject to market conditions and viewed as a marginal surplus market • Information primarily controlled by global physical traders (e.g., Cargill) • Production dispersed globally; top 5 have 53% of market (India-14%, EU-14%, Brazil-12%, U.S.-7%, China-6%); India’s production is highly sensitive to weather and government regulation (stock-level requirements) • Brazil dominates export market and is low-cost producer (~7c/lb vs. 17c/lb EU) • Consumption dispersed globally; top 5 have 46% of market (India-14%, EU-11%, U.S.-7%, China-7%, Brazil-7%) • Multiple factors affecting market prices (e.g., weather and yields in each producing region, government regulation, developing country default on purchases, economic crisis); however, Brazilian events have most impact on global trade and prices • Long response time to market events due to protected nature of domestic markets and long-term harvest of cane (3-5 years) • Most traders are integrated players with physical focus and global presence • TBD • TBD PRODUCT ASSESSMENT: SUGAR (CONTINUED)

16. Criteria • Origination • Risk exposure • Price transparency • Government forces • Concentration along value chain • Product attributes • Transportation • Trends/discontinuities • Proprietary trading • Market liquidity • Information concentration • Producer concentration • Single event sensitivity • Impact of systematic reporting • E-commerce • Current e-commerce activity • Platform acceptance txho/HO0282/00824cs App.ppt • Attractiveness • H/M/L • Rationale • M • L • L-M • L • L • L • L-M • L • L-M • M • L-M • M • TBD • TBD • Long term price exposure for producers • Short term (<1 year) hedging instruments available within year through forward contracts and exchange • Processors are able to lock in margin to cover processing costs; also can mix grades to increase margins • Food manufacturers generally pass through price fluctuations • Processing operations are capital intensive • Many Florida processing facilities are experiencing financial difficulties • Exchange volume quite thin (~2000-2500 contracts per day) but spikes during sensitive events (e.g., storm) • Active forward market between parties • Import tariffs for Brazilian oranges to equalize prices • Export subsidies in US (up to amount of import) • Production – Mostly med to large farms in US • Processing • Fragmented in US – top 3 firms own 20% of processing capacity (Cargill, Cutrale, Dreyfus) (total of 20 processing plants owned by ~15 companies) • Concentrated in Brazil – top 4 firms own 70% of processing capacity • Manufacturer / wholesaler – highly concentrated: top 3 firms own 70% of market (Tropicana – 41%, Minute Maid – 21%, Florida’s Natural – 8%) • Product has short shelf life • Storage of FCOJ pricey due to cost of keeping product refrigerated/cool; but can be stored for a season • Product can be blended (across harvest season in order to meet flavor spec) • Harvest season last 6 months • Tankers (trucks/ships) – only requirement is that tankers must meed food grade quality • Some big players own ship tankers (Cargill and Citrosuco) • Estimate fewer imports into US as domestic production rises • Increase in some big players owning ship tankers (Cargill and Citrosuco); investment in Florida processing industry (Brazil, Japan, France, Canada) to retain US customer base and ensure future supply of OJ • Illiquid futures market (average daily volume: ~2500 contracts) • Key producers in Brazil likely have advance knowledge of supply-side shocks • Production concentrated in Brazil (30%) and US (20%) • Market can react strongly to weather events • Market impacted by USDA production report • n/a • n/a PRODUCT ASSESSMENT: ORANGE JUICE

17. PRELIMINARY txho/HO0282/00824cs App.ppt • Growers • Processor • Traders • Packager/ • Manufacturer/ • wholesaler • Distributor/ retailer VALUE CHAIN ANALYSIS – ORANGE JUICE • Participants/ activity • Asset profile • Buy environment • Sell environment • Risk management/ hedging activity • Concentration varies by country • Top producing countries • Brazil 30% • U.S. 17% • Mexico/China/Spain 5% each • Land • Trees (20-30 year life) • n/a • Spot to 6-month forward • Some farmers use futures to hedge • Fragmented in U.S. – top 3 own ~20% of processing capacity • Processing plant and equipment • Spot or up to 6 months forward • Flat price or basis off NY (or Brazil) exchange • Utilize futures to hedge transactions • Utilize various orange and FCOJ varieties to blend and mitigate price risk • 4 main players dominate; Cargill (U.S.), IDC (France), Citrosuco (Brazil), and Centrale (Brazil) • Warehouses to store FCOJ vats/bricks • Price basis off NY (or Brazil) exchange • Price basis off NY (or Brazil) exchange • Utilize futures to hedge transactions • Highly concentrated; top 3 own 70% of market (Tropicana, Minute Maid, Citrus Hill) • Processing and packaging equipment; storage capacity • Basis or flat price against exchange • n/a • Utilize futures to hedge purchase • Can pass through price fluctuations

18. Attractiveness • H/M/L • Criteria • Rationale • Origination • Risk exposure • Price transparency • Government forces • Concentration along value chain • Product attributes • Transportation • Technology/trends • Proprietary trading • Market liquidity • Information concentration • Producer concentration • Single event sensitivity • Impact of systematic reporting • E-commerce • Current e-commerce activity • Platform acceptance • M-H • L • L • M • M • H • L-M • H • L-M • L • L • H • M • Textile manufacturers cannot pass cost changes of material inputs (cotton, synthetic fibers - which make up 20% of total costs) through to customers; farmers bear some commodity price risk (though less in US market due to government programs); however, liquid futures market does allow some hedging • Cotton is priced based on exchange price with basis differentials and differentials for quality • Nearly $1B paid in direct government subsidies; impacts both export merchants and farmers • 60% of cotton goes through lint merchants (Louis Dreyfus, Donovan) who match millers bids for specific types with farm supply; fragmented elsewhere in chain • Storage is easy, inexpensive and can be stored for long periods, but numerous grades used by millers and manufacturers • Inexpensive to ship. Tends to be shipped by barge and ocean vessel • GMO seed use is expanding rapidly; primarily for damage resistant traits but starting to develop for specific end use characteristics • Liquid futures market (NYBOT) • Fragmented producers; numerous merchants and buyers • Produced globally • Produced over large geographic area, moves through numerous trade routes • USDA does issue reports estimating domestic and global supply and demand; reports do have significant impact on market activity • Would millers and growers use given the number of product specifications? txho/HO0282/00824cs App.ppt PRODUCT ASSESSMENT: COTTON

19. PRELIMINARY txho/HO0282/00824cs App.ppt • Crushing VALUE CHAIN ANALYSIS – COTTON • Producers • Brokers (Dreyfus, Donovan) • Milling • Manufacturing • Retail • Key facts • Key brokers play a significant role in market (Louis Dreyfus, Donovan), which may make intermediation difficult • Heavy government subsidies given to U.S. producers and exporters results in U.S. price well above world price • Manufactures can and do hedge by purchasing cotton futures, but activity does not fully correlate with input needs (e.g., synthetic fibers, power and other variable inputs not hedged) Source: Interviews; USDA

20. Criteria • Origination • Risk exposure • Price transparency • Government forces • Concentration along value chain • Product attributes • Transportation • Trends/discontinuities • Proprietary trading • Market liquidity • Information concentration • Producer concentration • Single event sensitivity • Impact of systematic reporting • E-commerce • Current e-commerce activity • Platform acceptance txho/HO0282/00824cs App.ppt • Attractiveness • H/M/L • Rationale • L-M • M-H • M • M • M • M • L • M-H • L-M • M-H • TBD • TBD • TBD • TBD • Dealers and growers subject to price risk; tea factories and packers can pass along price increases • Low degree of volatility • No exchange for tea; each contract either negotiated between buyer and seller (or via contract growing) or sold in local auctions • Many tea varieties with premiums and discounts to apply accordingly • Low perceived intervention from government forces • Fragmented along value chain: many producers, tea factories (processors), dealers, and packers • Contract growing limits intermediation points (Over 50% of tea is sold from tea factory direct to packer - e.g., Nestea, Lipton) • Many different varieties where taste and quality varies significantly from year to year, but some standards exist • Product sold immediately after harvested; harvest season lasts 6-12 months • Tea shipped in crates, boxes or bags – no specialized equipment required • Trend towards more tea factory selling direct to packers and away from use of auctions • No existing tea exchange; each party negotiates price • Though production concentrated geographically, there are many players along the value chain with fragmentation within each category of players (e.g., growers, dealers, tea factories) • Concentrated geographically – top 4 countries produce 70% (India – 28%, China – 23%, Sri Lanka – 9%, Kenya – 8%) • Consumption moderately concentrated – top 4 countries consume 53% of global supply (India 32%, Soviet Union 9%, UK 7%, Pakistan 5%, US 5%) • n/a • n/a • n/a • n/a PRODUCT ASSESSMENT: TEA

21. PRELIMINARY txho/HO0282/00824cs App.ppt VALUE CHAIN ANALYSIS – TEA • Grower • Tea factory processor • Dealer • Auction house • Packer/ • manufacturer/ • wholesaler • Distributor/ retailer • Key facts • Fragmented along value chain • Tea factory direct to packer/manufacturer/wholesaler transactions prevalent (50%+ of market) • Dealers assume significant amounts of risk with no exchange/financial markets available to hedge positions • Trend towards decreasing use of auction as means of transacting • Country production concentrated geographically: top 4 own 70% of production • Consumption moderately concentrated geographically: top 4 consumer 53% of supply Source: Interviews; Analyst reports; USDA; Team analysis

22. Criteria • Origination • Risk exposure • Price transparency • Government forces • Concentration along value chain • Product attributes • Transportation • Trends/discontinuities • Proprietary trading • Market liquidity • Information concentration • Producer concentration • Single event sensitivity • Impact of systematic reporting • E-commerce • Current e-commerce activity • Platform acceptance txho/HO0282/00824cs App.ppt • Attractiveness • H/M/L • Rationale • L-M • L • L • M-H • L-M • H • L-M • L • L-M • L • L • M • TBD • TBD • Farmers have price risk (cost of feed generally not related to milk costs), which can be mitigated by forward contracting with cooperatives (who then bear the risk) and through subsidies • Most food service and consumer outlets pass risk through. Note that milk products have relatively stable demand so most price shocks are upward • Exchange price for butter is known, and most transactions are based off the exchange price • Substantial government subsidies; including direct payments and price supports. “The dairy industry is the most highly subsidized and protected of all agricultural commodities in many countries.” • Although cooperative dominated, generally fragmented because largest cooperative still small compared to total market (Top 4 dairy farms < 2%; Top 4 cooperatives ~ 40%; Top 4 processors ~ 37% of Top 30); Top 6 butter coops handled 39% of all butter marketed in US; 36 total coops • Butter requires refrigeration and can be stored for only limited periods (typical turnover 20 days), but there are limited number of product variants • Inexpensive to transport relative to its value. Truck dominated • Dairy industry, like all agriculture industries, is consolidating. Labor productivity and yield productivity are increasing as technology increases • Futures market exists, but limited liquidity • Fragmented producers; numerous merchants and buyers. Some large coops may be key to price discovery • Produced globally • Produced over large geographic area, moves through numerous trade routes • USDA does issue reports estimating domestic and global supply and demand; reports do have impact on market activity • n/a • n/a PRODUCT ASSESSMENT: BUTTER

23. Criteria • Origination • Risk exposure • Price transparency • Government forces • Concentration along value chain • Product attributes • Transportation • Trends/discontinuities • Proprietary trading • Market liquidity • Information concentration • Producer concentration • Single event sensitivity • Impact of systematic reporting • E-commerce • Current e-commerce activity • Platform acceptance txho/HO0282/00824cs App.ppt • Attractiveness • H/M/L • Rationale • L-M • L • L • M-H • M • H • L-M • L • L-M • L • L • M • TBD • TBD • Farmers have price risk (cost of feed generally not related to milk costs), which can be mitigated by forward contracting with cooperatives (who then bear the risk, but mitigate it with similar contracting with retailers) or milk futures use • Most food service and consumer outlets pass risk through. Note that milk products have relatively stable demand so most price shocks are upward • Exchange price for cheese is known, and most transactions are based off the exchange price, including noncommodity varieties • Substantial government subsidies; including direct payments and price supports. “The dairy industry is the most highly subsidized and protected of all agricultural commodities in many countries.” • Although cooperative dominated, generally fragmented because largest cooperative still small compared to total market (Top 4 dairy farms < 2%; Top 4 cooperatives ~ 40%; Top 4 processors ~ 37% of Top 30); Top 7 cheese coops marketed 31% of total cheese produced (note than concentration is higher in cheddar); 45 total cheese coops • Cheese requires refrigeration, generally must be sold to consumer within 60 days • Inexpensive to ship relative to its value. Truck dominated • Dairy industry, like all agriculture industries, is consolidating. Labor productivity and yield productivity are increasing as technology increases • Futures market exists, but limited liquidity • Fragmented producers; numerous merchants and buyers. Some large coops may be key to price discovery. • Produced globally • Produced over large geographic area, moves through numerous trade routes • USDA does issue reports estimating domestic and global supply and demand; reports do have impact on market activity • n/a • Key question: • Would manufacturers use to buy to get specific grades without merchants? PRODUCT ASSESSMENT: CHEESE

24. Criteria • Origination • Risk exposure • Price transparency • Government forces • Concentration along value chain • Product attributes • Transportation • Trends/discontinuities • Proprietary trading • Market liquidity • Information concentration • Producer concentration • Single event sensitivity • Impact of systematic reporting • E-commerce • Current e-commerce activity • Platform acceptance txho/HO0282/00824cs App.ppt • Attractiveness • H/M/L • Rationale • L/M • L • L • M-H • H • H • L-M • L • L-M • L • L • M • TBD • TBD • Farmers have price risk (cost of feed generally not related to milk costs), which can be mitigated by forward contracting with cooperatives (who then bear the risk) and through subsidies • Most food service and consumer outlets pass risk through. Note that milk products have relatively stable demand so most price shocks are upward • CME exchange price for NFDM but low volumes, most transactions are based off the exchange price • Substantial government subsidies; including direct payments and price supports. “The dairy industry is the most highly subsidized and protected of all agricultural commodities in many countries.” Nearly 50% of all NDM in the US is purchased by the government • Although cooperative dominated, generally fragmented because largest cooperative still small compared to total market (Top 4 dairy farms < 2%; Top 4 cooperatives ~ 40%; Top 4 processors ~ 37% of Top 30); Top 9 NDM coops marketed 62% of total US produced dry milk products (NDM, WDM, DBM) • Storable for long periods, limited product variations • Inexpensive to transport relative to its value. Truck dominated • Dairy industry, like all agriculture industries, is consolidating. Labor productivity and yield productivity are increasing as technology increases • Futures market exists, but limited liquidity. • Fragmented producers; numerous merchants and buyers. Some large coops may be key to price discovery • Produced globally • Produced over large geographic area, moves through numerous trade routes • USDA does issue reports estimating domestic and global supply and demand • n/a • n/a PRODUCT ASSESSMENT: NFDM (NONFAT DRY MILK)

25. PRELIMINARY txho/HO0282/00824cs App.ppt • Primary processor • Food service company • Restaurant/provider • Milk production • Cooperative • Wholesaler/distributor • Retail VALUE CHAIN ANALYSIS – DAIRY • Buy environment • Sell environment • Concentration • Risk management/ hedging activity • Feed (corn, pasture) purchased on spot basis • Sell to nearby processing company on spot basis • Milk retrieved daily • Very fragmented ~>100,000 • Minimal government support prices minimize incentives • On spot basis from nearby farmers • Fluid milk is either sold to retailers or processed within days of being produced • Products sold on either spot or fixed quantity basis; price based on index • Fragmented top 4 dairy processors only accounted for less than 1/3 of market • Limited use of milk futures • Manage risk by limiting inventory, thus product moves before price • Often fixed quantity, floating price (based on index) contracting • Contacts are structured to mirror buying contracts • Pricing based on fixed margin over purchase price • Very fragmented • Prices are generally passed through • Often spot purchases based on need, some fixed quantity purchases • Retailers vary price with input prices; restaurants and others generally absorb ST risk • Very fragmented • Retailer pass through; others use milk futures on limited basis • Limited need for risk management because most players pass through price • Government intervention, combined with stable demand, provides floor price; thus most price shocks are upward • Some desire by parties who do bear risk to hedge Source: USDA; Analyst Reports; FAS; Interviews; marketing and milk pricing; Team analysis

26. Criteria • Origination • Risk exposure • Price transparency • Government forces • Concentration along value chain • Product attributes • Transportation • Trends/discontinuities • Proprietary trading • Market liquidity • Information concentration • Producer concentration • Single event sensitivity • Impact of systematic reporting • E-commerce • Current e-commerce activity • Platform acceptance txho/HO0282/00824cs App.ppt • Attractiveness • H/M/L • Rationale • L • M • L • M • L • L • L • M-H • L • M-H • L • TBD • TBD • TBD • Increased trend towards fixed volume contracts between producers and packinghouse • Producer bears a significant amount of price risk, both short and long term (trees last 20-30 years and takes 3-5 to bear commercial fruit) • Packers, processors and wholesale buyers can pass through price increases • For juice concentrate (approximately 20% of total apple market), some trading firms (Hartog & Pittra) offering LT fixed volume contracts to developing country processors with VPP-like agreements • No futures contracts available • Prices negotiated between parties; ultimate price determinant is end-consumer • Increased government programs (e.g., loans, price supports) demanded by farmers • Increased government apple juice import tariffs to combat Chinese dumping into US markets • Fragmented along the value chain • Many varieties in fresh with limited fungibility • Some blending opportunities available in juice • Specialized transport equipment not necessary • Increased government regulation • Increased in product varieties • No futures exchange traded contracts exist today • Though production concentrated in a few countries, especially in China, production fragmented within each country • Production concentrated – top 3 countries own 54% of global production (China 37%, US 11%, France 5%) • Macroeconomic supply and demand factors affects markets • n/a • n/a • n/a PRODUCT ASSESSMENT: APPLES

27. PRELIMINARY txho/HO0282/00824cs App.ppt VALUE CHAIN ANALYSIS – APPLES • Grower • Field broker/coop • Packing house • Distributory retailer • Fresh apples • Juice plants • Trader/ • exporter • Apple juice concentrate • Export • Key facts • Market breakdown ~80% fresh and ~20% juice concentrate • Increased government tariffs (Chinese juice imports) and farm programs (loans, subsidies) • Packing house, juice plants, distributors able to pass through price increases • Producer and trader subject to price risk without exchange/financial market to hedge transactions

28. Criteria • Origination • Risk exposure • Price transparency • Government forces • Concentration along value chain • Product attributes • Transportation • Technology/trend • Proprietary trading • Market liquidity • Information concentration • Producer concentration • Single event sensitivity • Impact of systematic reporting • E-commerce • Current e-commerce activity • Platform acceptance txho/HO0282/00824cs App.ppt • Attractiveness • H/M/L • Rationale • L • L • H • L • L-M • M • M • L • L • M • L • M • M-H • TBD • Price risk borne by producer; other parties generally pass through price increases • Contracts primarily negotiated on a fixed price annual basis • Small spot market (10-15% of total production) consists of negotiated deals; USDA publishes daily self-reported spot prices (fresh potatoes dominate spot market); also Urner Bary publishes regional price data • Little government intervention in U.S., no price floors • 6,000 growers in U.S. (largest grower, Ron Offutt, owns 2-3% of production) • Market divided into frozen (36%), chip (11%), fresh (26%), export (11%) and other (16%) • High concentration in frozen processing; top3 (McCain, Lamb-Weston, J.R. Simplot) control 88% of capacity • Chipping market highly concentrated – Frito-Lay controls 50% • Concentrated wholesale buyers for all products – frozen (McDonald’s, Burger King, Wendy’s), Fresh (grocery stores, Sysco) • Little product fungibility (high defect rates for size and shape discrepancies); product quality important for large buyers • Can store up to 1 year • Transported by truck; cost of transportation can amount to 30-40% of total product cost • Consolidation across value chain continues • Illiquid spot market (primarily long-term negotiated contracts) • Yield and price information concentrated with large processors and integrated buyers • Dispersed producing regions • Overall U.S. yields experience low volatility although single farm yields are affected by events • Small impact of systematic reports due primarily to small spot market • Few competitors in space; could be opportunity to utilize e-commerce platform to create a liquid spot market PRODUCT ASSESSMENT: POTATOES

29. Criteria • Origination • Risk exposure • Price transparency • Government forces • Concentration along value chain • Product attributes • Transportation • Trends/discontinuities • Proprietary trading • Market liquidity • Information concentration • Producer concentration • Single event sensitivity • Impact of systematic reporting • E-commerce • Current e-commerce activity • Platform acceptance txho/HO0282/00824cs App.ppt • Attractiveness • H/M/L • Rationale • L • H • L • M • L • L • TBD • M • L • L-M • M-H • M-H • TBD • TBD • U.S. producers protected by government loans and price supports (likely supports in other countries) • Mills use futures to hedge purchases, but may be exposed on output prices depending on contract term • Wholesalers pass through price changes • Difficult to gain price information due to myriad of pricing outlets and government programs • Strongly regulated and subsidized • A government entity is involved in at least 50% of all international transactions • Fragmented along value chain • Many types of rice, but limited blending opportunities due to distinct product categories • No need for specialized equipment • International trade is approximately 5% of total market – mostly consumed in producing region • n/a • Average daily futures volume: 20,000-25,000 contracts, though futures does not necessarily move in concert with physical commodity prices • Prices could be affected by many factors (weather, government policies, country specific events, reports, government tendors) • Prices and markets regional in nature due to primary consumption in growing region and government regulation • Top 2 countries produce 57% of world total (China: 35%, India: 22%, Thailand: 4%, US: 2%), though US is top 4 exporter due to limited domestic consumption; only 5% of volume is exported/traded across borders • Volatility can be highly driven by weather, government policies, official reports on prices/production, government tender, political instability in selling and/or buying countries • Volatility can be driven by official reports on prices/production • n/a • n/a PRODUCT ASSESSMENT: RICE

30. Criteria • Origination • Risk exposure • Price transparency • Government forces • Concentration along value chain • Product attributes • Transportation • Trends/discontinuities • Proprietary trading • Market liquidity • Information concentration • Producer concentration • Single event sensitivity • Impact of systematic reporting • E-commerce • Current e-commerce activity • Platform acceptance txho/HO0282/00824cs App.ppt • Attractiveness • H/M/L • Rationale • L • L • M • M-H • M • L • M • L • L • L • L • L • M • Producer holds long-term risks, typically sells to wholesale buyer via LT (1 year) fixed volume contract with floating price (based on regional index and transportation and operating costs) • Price risk primarily passed through by intermediaries and wholesale buyers • ECI (Egg Clearinghouse International) represents a small, but liquid spot market (ECI) with approximately 2.5% of non-hatchery eggs traded primarily representing offload volumes; USDA issues frequent pricing reports by region enhance price transparency; ECI represents de facto standard and spec setter • Non identified for price floors and subsidies; regulation exists for sanitization • Producers fragmented: 318 egg producers in U.S., top 5 represent 22% of market • Regional market due to transportation constraints • Presence of cooperatives growing • Wholesale buyers – fragmented across U.S. but concentrated in regional areas • Product grades defined primarily by size • Broken eggs represent a more fungible product • Trucked; transportation cost expensive relative to product price • Continuing consolidation (via co-oping) for producers • No future market; physically-delivered spot market exists • Information concentration at regional levels primarily owned by wholesale buyers • Fragmented throughout U.S. • Regional market factors impact market • Low impact • Few sites PRODUCT ASSESSMENT: EGGS