F A R M S T R O N G. Curt Hudnutt & Mark Greenwood. DTN Ag Summit 2016 UILD ENDURANCE FOR COMMODITY CYCLES

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1 UILD ENDURANCE FOR COMMODITY CYCLES CHECKING AG'S VITAL SIG Curt Hudnutt & Mark Greenwood DTN Ag Summit 2016

2 RABOBANK OVERVIEW An international financial services provider dedicated to being a leading customer-centric bank with a cooperative core & principles Headquartered in the Netherlands One of the highest rated privately-owned banks in the world 115+ years of agricultural, retail, and community banking experience $900+ billion in assets Globally active in 40 countries Over 8 million clients Over 51,000 full-time employees

3 AG STAR OVERVIEW Part of the Farm Credit System Servicing Clients for over 100 years We have seen cycles and worked with clients through cycles and this is another cycle Part of it as a producer is changing your thought process

4 S T A T E O F T H E AG E C O N O M Y

5 STATE OF THE ECONOMY This isn t the 1980 s all over again WHERE WE ARE TODAY Fewer owned acres No trade issues (currently) or inflation Low interest rate environment Fixed Rate Debt vs. Variable Rate What has occurred Commodity prices have declined significantly Stocks to use ratio unfavorable to high grain prices ARC has paid out = limited safety in Farm Bill CRP is exhausted Many producers have strong equity & working capital positions Some see this as a time to grow Some see this as a time to reassess the current state of their business

6 STATE OF THE ECONOMY PLANNING & UNCERTAINTY

7 STATE OF THE ECONOMY

8 STATE OF THE ECONOMY WHERE WE ARE HEADED What to Expect: Increased land sales, decreased land values Continued loss years in 2017 & 2018 Up to 50% experiencing a breakeven from a debt service perspective 2019 has a higher probability of making an investable profit, if there is: 3-6 million production acre reduction New Farm Bill providing more consistent safety net to corn and soybean producers Producers will quit farming by choice or involuntarily

9 WHAT TO EXPECT UNDER PRESIDENT TRUMP D M I N I S T R AT I O N

10 THE TRUMP ADMINISTRATION What it means for Interest Rates USD Regulations Trade Immigration 2018 Farm Bill

11 BUILT TO H O W T O T H R I V E & S U R V I V E LAST

12 BUILT TO LAST WEATHERING THE STORM The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday s logic. -Peter Drucker

13 BUILT TO LAST WEATHERING THE STORM It s how you were raised. It s what you know. It s in your bones. this much hasn t changed

14 BUILT TO LAST MANAGING VOLATILITY Can you manage volatility?

15 BUILT TO LAST OPERATING LINE USAGE 60.0% 50.0% 40.0% Grain Revolving Principal as % of Peak 52.2% 45.3% 46.1% 47.4% 48.8% 49.1% 47.5% 48.3% 45.1% 46.2% 44.6% 45.4% 41.1% 43.1% 30.0% 20.0% 10.0% 0.0%

16 BUILT TO LAST PROFIT & CASH FLOW DRIVERS Key profit model & cash flow drivers: 1) Commodity Prices 2) Yields 3) Land Rent Levels 4) Other Operating Costs 5) Living Draws 6) Income Taxes 7) Capital Spending 8) Finance Structure

17 BUILT TO LAST TAKING CONTROL Do you understand your current financial position today? Do you take an overall assessment of your current business (financial and operational)? Do you know your cost of production? Do you know how much liquidity or working capital you actually have to manage through some uncertainty?

18 BUILT TO LAST HOW TO THRIVE & SURVIVE Survivors will have proactively & aggressively communicated with their landlords & managed their liquidity & equity positions. They ll know their true break even, and be willing to: Walk away from acres Sell excess equipment Liquidate non-core assets Make lifestyle changes Divest of core assets that have poorer returns

19 BUILT TO LAST CHARACTERISTICS OF SUCCESS Characteristics of Successful Operations: Willingness to change current practices for overall improvement Do not stay status quo Be great at blocking and tackling without that you have no shot Data management the ability to use data to make decisions that add to your bottom line Be willing to benchmark against your peers understanding where you stack up You need to be relentless

20 BUILT TO LAST STRATEGY Move beyond a price & cost taker Group buying Basis management Critical mass Mini-merchandiser marketing Carry vs. Inverse Market Diversification Partnership with niche & emerging food companies Defined & disciplined marketing plans Employ professionals to assist

21 T A L K I N G W I T H Y O U R L E N D E R

22 TALKING WITH YOUR LENDER GETTING INSIGHT Get in to see your lender early & often Be open to your weaknesses Be judicious with your equity Bring a plan that goes beyond debt or wait & see Develop a marketing plan to limit losses & preserve liquidity Listen to your lender The Choice: borrow or turn it into cash If your lender doesn t have insights, find a new lender

23 LESSONS LEARNED lessons from my father

24 Thank You! Mark Greenwood Senior Vice President Relationship Management Blogs Webinars e-books Curt Hudnutt Executive Vice President Chief Commercial Officer