Discussion Topics

1. Discussion Topics • Where have we been? Where are we going? • Production Ag Financing Update • Capital Markets update for cooperatives • Credit Union and Bank conditions • Questions & answers

2. Economic Summary and Outlook Brian Legried President, Cofina Financial

3. Agriculture Demand increase – World wealth increasing Weather impacts – low stocks Energy, Bio-fuels – increasing demand High commodity prices – demand and $$ Grain based balance sheets stressed Financial markets and economic meltdown Inventory valuation impacts What’s next?

4. U.S. Economy World demand increase – China, India, U.S. Housing slowdown / sub-prime mortgage mess Financial meltdown Monetary policy recovery steps Governmental action / stimulus Recovery? If so, what kind – U, V, L or W?

5. Housing Starts

6. 3-Month Treasury Bill Yield

7. Interest Rates

8. Corporate Bonds – Moody’s Seasoned

9. Dow Jones Industrial Average

10. Considerations US / World economic conditions Financial markets Agriculture • Production and consumption • Globalization • Innovation

11. Innovation Weather Planting Decisions US Commodity Prices Trade Policy Government Spending Strength of $ Inflation US Deficit Interest Rates World Food Demand US Growth Consumer Spending World Economic Growth Energy Consumption Investor Confidence China Growth Unemployment Rate

12. Summary Volatility is constant Financial position • Liquidity – working capital needs • Reserves – balance sheet management • Margins – compressed Demand driven markets are good, but… What if?

13. Agricultural Outlook Ross B. Anderson Sr. Vice President and Chief Credit Officer 12

14. Farm Income Statement

16. Avg. U.S. Cropland Value in $/Acre, Jan. 1, 1999 - 2009

18. Credit Conditions – Credit Quality by Commodity Volume as % of YE 2009 Commodity of 6/30/09 Portfolio % Adverse Projection Hogs $3,428 5.8% 11.7% 15.7% Dairy $4,581 7.8% 8.1% 10.7% Poultry $2,128 3.6% 6.5% 7.5% Cow / Calf $4,015 6.8% 1.8% 3.3% Feedlots $1,448 2.5% 3.2% 4.0% Corn & Soybeans $11,535 19.7% 0.7% 0.9% Other Crops $16,801 28.6% 1.3% 2.3% Ethanol $1,632 2.9% 27.5% 34.2% Other Commodities $13,113 22.3% 3.9% 5.0% Total $58,682 100.0% 4.1% 5.0% $ in millions 17

19. Dairy Futures strip:; Dec. ‘09 - $14.82; March ‘10 - $15.19; June ‘10 - $15.58; Dec. ‘10 - $15.72 Cost of production $15/cwt. Weak domestic and foreign demand, Strong dollar, High feed cost $19 to $12 price Kielkopf – “Need to slaughter 225K cows to reduce excess NFDM” Two industries – traditional and “factory” dairies • Factory dairies are losing equity at a rapid rate – high volatility in feed markets • Traditional - less debt, some profits from crop production, less affected by market volatility for feed costs • Expect to finance negative cash flows through mid 2010 • Many factory dairies do not have the liquidity and solvency to reach breakeven next summer

20. Per Capita Consumption of Meat in Pounds

21. Livestock Overview

22. Pork Oversupply due to increased productivity of herd due to effective circo virus vaccine and genetic improvement Exports have been strong, 20% of production Vulnerable to global slow down/swine flu scare Banes- spring 2008 --- need 10% reduction in sow number; actual only 3% Futures strip –Dec. ‘09 - $56.20; Live $41.58 Feb. ‘10 - $61.90; $45.80 June ‘10 - $72.35 $56.42 Estimated cost of live production $50-51/cwt. Expect to finance negative cash flows through Mid 2010 • Many operations have burned liquidity and solvency and do not have the ability to get to mid-year 2010

23. Beef Feedlots were losing $100-200 per head Lower placements put pressure to move from hotel to “owner” role. Financial capacity to accept risk is often not present. Beef is a high price source of protein What will financially pressured consumers buy? Beef to chicken issue. South Korean agreement - how fast will it ramp up? Limited movement of feedlots to western corn belt (NE) due to DDGs What will feedlots be worth? 65 for sale Lower calf prices for cow/calf producer after 5-8 years of good income will lead to lower profitability

24. Broilers Production - USDA • ‘07 35,739MM# +1.0% • ‘08 36,511 +2.1 • ‘09 35,095 -3.9 • ’10 35,541 +1.2 Value subtraction issue (whole birds vs. further processed) World trade/Russian exports Cash positive in 2nd quarter, positive net income in 3rd quarter Industry will build equity if they do not crank up production

25. Ethanol Mandate = 10.5 BGY in 2009 Current production capacity = 12.5 BGY Current production = 9.8 BGY 78% of capacity Forecast is to operate at 10-15 cents per gallon EBITDA (assumes labor is fixed expense) New industry driven by government policy Problems caused by market volatility/high feedstock cost (corn) Expect several plants to turn more than once

26. Crops Crop producers • USDA forecasts $20 billion less revenue in 2009 vs. 2008 • Overseas production response to high prices in 2008 • Domestic and foreign demand reduced due to economic recession and reduced livestock use • Flattening of demand pressure from ethanol • Less income, not losses Credit concerns in this segment are unlikely to show until 2011 or 2012 • A drought in the world can change credit outlook in 90 days Crops - two different risk profiles • Cash renter/operator • Land owner with low debt load

27. World Grain Stocks

28. World Oilseed Stocks

29. US Coarse Grain & Oilseed Stocks

30. Capital Markets Update and Keys for Cooperative Financing Bob Doane Vice President, CoBank

31. Total Bank Debt and High-Yield Bond Volume in the Leveraged Finance Market Source: S&P/LCD and Merrill Lynch Global High Yield Strategy

32. Percent of Outstanding Leveraged Loans in Payment Default or Bankruptcy

33. High Yield Bond and Lev. Loan Maturities ($billions)

34. Loan Spreads Over LIBOR for BB/BB- Average New-Issue Pro Rata & Weighted Average First-Lien Institutional Spread of BB/BB- Loans

35. Loan Spreads Over LIBOR for B+/B Average New-Issue Pro Rata & Weighted Average First-Lien Institutional Spread of B+/B Loans

36. Middle Market Spreads (Cash Flow < $50MM) Institutional Pro Rata

37. Secondary Market Trading Spreads By Rating B Loans All BB/B Loans BB Loans

38. Deal Structure Trends • Lower leverage, higher equity levels required • Tighter covenants and security packages • More asset-based financing • Borrowing bases • Shorter maturity loans • Very few dividend recapitalization deals • Original-issue discounts, higher up-front fees • Libor floors often set at 2 to 2.5% • More rigorous excess cash flow sweeps

39. Commercial Lenders Recapitalization process has begun although some commercial banks are likely to remain under pressure into 2010. Banks remain unpredictable (deal by deal for some) Capital issues Credit concerns evident in 3Q results (depth/breath of recession remains an issue) Reformed business strategies Different personnel, layoffs, restructurings Market down to a handful of dependable Ag lenders Focus on: Credit quality and risk Conservative structures (shorter tenors, tighter covenants, Libor floors, borrowing bases, and collateral packages — back to old school backing) Higher loan spreads and fees Relationships Count Relationship banks continue to support their core accounts Ancillary business remains very important

40. Farm Credit System Greater capital conservation Focus on pricing (minimum spread thresholds) and structure (term, collateral and covenants) Interested in funded assets that achieve market yields Selective with lower hold levels Reserving capital for core relationship borrowers Ethanol, Dairy, Forest Products and Livestock segments experiencing credit deterioration Farm Credit entered downturn with strong balance sheets and solid credit quality ratios Continued interest in quality credits (all the FCS investors are back, some not yet at full strength)

41. Credit Market Outlook • Global Unwinding of Leverage • Banks, hedge funds, private equity, and consumers, all in process of unwinding leverage • Rapid unwinding of leverage associated with the structured finance (securitization) industry • Government sector taking on new debt, risk of crowding-out of private sector • Derivative exposure concentrations still unknown • Commercial/investment banks likely to remain under extreme pressure through 2009 and likely into 2010 • Higher minimum capital requirements for all financial institutions likely • Need to raise more capital, who will provide it? • Rethinking risk management models • Substantial internal restructuring and deleveraging • How will regulatory environment change?

42. Credit Market Outlook • Fundamentals of real estate and consumer credit problems likely to have a long tail and tied to unemployment dynamics and deleveraging • Lender perspective that the economy is poised for recovery. But will it be a jobless recovery? • Expectation of higher credit losses in many segments • Credit spreads likely to tighten from current levels as economy continues to recover but refinancing calendar likely to put floor on spreads • Multiple levels of uncertainty: global economy, role of government (ownership), credit availability, dollar value, financial strength of institutions/counterparties, derivative exposure concentrations, risk management (model) risks, regulatory changes, etc.

43. Key items that lenders typically consider • Management • Board governance • Balance sheet strength • Appropriate risk management competencies and tools • Capacity • People • Capacity • Time

44. Ratios • Working Capital (Liquidity) • Current assets - Current liabilitiesFactors to Consider: • Accounts receivable management • Inventory management • Types of business lines • Grain merchandising practices • Prepayment activity • Peak seasonal borrowing needs • Working Capital to Sales Percentage is one component of Risk Rating

45. Ratios • Local Leverage Long Term Debt minus Current Portion Due Net Worth minus investments in Cooperatives and Other Entities • Reasonable Local Leverage 50% • Minimum Acceptable Level < 80%

46. Ratios • Debt Service Coverage Ratio Net Cash Available for Debt Service Current Portion of Long Term Debt • Minimum Acceptable Level > 1.5 : 1 • Optimum Level > 2.75 : 1

47. Procedures/Policy • Counter-party risk • Assessment, due diligence, mitigating factors, contracts, limits • Contracts • Procedures on contract execution and fulfillment (enforcement) • Forward contracting limitations • Pre-pay versus booking contracts

48. Wrap-up: Rapidly Changing Conditions • Prepare to manage greater risk associated with increasing volatility in all markets. • input risk – availability, price, prepaids, etc. • production risk – weather, technology, etc. • marketing risk –hedging, pricing, consumer • investment risk – realistic assumptions • Regulatory risk – farm programs, regulation • Develop strategies to secure working capital and remember it will be resource challenged in the future!

49. Credit Union and Bank Financial Update Bill Raker President, Federal Employees Credit Union

50. Credit Unions • Financial cooperatives • One vote per member • Volunteer boards • State or federal charter & supervision • Full-service financial providers • Defined field of membership • Single employer • Multiple employer groups • Organizational • Community (geographic) • Trade, Industry, Profession (TIP)