structure strategy and finance instructure, strategy,...

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Structure Strategy and Finance inStructure Strategy and Finance inStructure, Strategy, and Finance in Structure, Strategy, and Finance in Changing Markets: the Case of ProChanging Markets: the Case of Pro--

FacFac CooperativeCooperativeAnnual Meeting of NCERAAnnual Meeting of NCERA--210 Committee:210 Committee:

Research on Structure, Strategy, and FinanceResearch on Structure, Strategy, and FinanceNovember 19November 19--20, 2008 in St. Paul, MN20, 2008 in St. Paul, MN

Cornell Cooperative Enterprise Program 1Cornell Cooperative Enterprise ProgramCornell Cooperative Enterprise Program

Brian M. Brian M. HenehanHenehan and Todd M. and Todd M. [email protected]@cornell.edu

Dept of Applied Economics and ManagementDept of Applied Economics and ManagementCornell UniversityCornell University

AcknowledgementsAcknowledgementsCoCo--author, Dr. Todd author, Dr. Todd SchmitSchmit, Asst. Professor, , Asst. Professor, AEM, Cornell UniversityAEM, Cornell UniversityGail Malone, graduate student in AEM, Cornell Gail Malone, graduate student in AEM, Cornell UniversityUniversityJenna Jenna VanLieshoutVanLieshout, undergraduate student in , undergraduate student in AEM, Cornell UniversityAEM, Cornell UniversityKevin Kevin McAveyMcAvey, graduate student, AEM, Cornell , graduate student, AEM, Cornell UniversityUniversity


Steve Wright, General Mgr. ProSteve Wright, General Mgr. Pro--FacFacCooperativeCooperativeKevin Murphy, Member Relations, ProKevin Murphy, Member Relations, Pro--FacFacCooperativeCooperative

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Why Study ProWhy Study Pro--Fac Cooperative?Fac Cooperative?Original Formation Based on Highly Original Formation Based on Highly Innovative Business StructureInnovative Business StructureInnovative Business StructureInnovative Business StructureProPro--FacFac Has Effectively “ReHas Effectively “Re--Designed” Designed” Itself Throughout It’s HistoryItself Throughout It’s HistoryUseful Case for Understanding How A Useful Case for Understanding How A Cooperative Strategically ReCooperative Strategically Re--positioned positioned


p g yp g y ppDuring Times of Significant ChangeDuring Times of Significant ChangeCase Includes Review of Structure, Case Includes Review of Structure, Strategy and Finance DimensionsStrategy and Finance Dimensions

Why Study PF in New YorkWhy Study PF in New York

Economic Impact on NYS Economic Impact on NYS –– 60,000 acres 60,000 acres of high value crops and processing plantsof high value crops and processing plantsOngoing Relationship Ongoing Relationship –– hosted BOD on hosted BOD on campus, previous member survey, campus, previous member survey, advised on organizational structure advised on organizational structure optionsoptions


optionsoptionsAttended all annual meetings since 1985 Attended all annual meetings since 1985

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ProPro--Fac CooperativeFac Cooperative

ProPro--Fac Cooperative is an agricultural Fac Cooperative is an agricultural marketing cooperative of 488 members whomarketing cooperative of 488 members whomarketing cooperative of 488 members who marketing cooperative of 488 members who provide fruits, vegetables and popcorn for provide fruits, vegetables and popcorn for processing facilities across the country. These processing facilities across the country. These commodities are marketed as branded, private commodities are marketed as branded, private label and food service products, primarily label and food service products, primarily through its main customers, Birds Eye Foods through its main customers, Birds Eye Foods and Allens Inc The total value of cropsand Allens Inc The total value of crops


and Allens, Inc. The total value of crops and Allens, Inc. The total value of crops delivered in 2007 was $61.1 million.delivered in 2007 was $61.1 million.

Map of ProMap of Pro--Fac Member Crops Fac Member Crops


Source: PF web site – www.profaccoop.com

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ProPro--Fac Member Crops by StateFac Member Crops by StateCalifornia: California: PeachesPeachesDelaware: Delaware: Limas, PeasLimas, PeasFlorida: Florida: PotatoesPotatoesIllinois: Illinois: PopcornPopcornMichigan: Michigan: Apples, Asparagus, Blueberries, Carrots, Dry Beans, Apples, Asparagus, Blueberries, Carrots, Dry Beans, Peaches, Potatoes, Tart CherriesPeaches, Potatoes, Tart CherriesNebraska: Nebraska: PopcornPopcornNew York: New York: Apples, Beets, Butternut Squash, Carrots, Corn, Kraut Apples, Beets, Butternut Squash, Carrots, Corn, Kraut Cabbage, Peaches, Peas, Red Cabbage, Snap Beans, Tart Cabbage, Peaches, Peas, Red Cabbage, Snap Beans, Tart CherriesCherries


Oregon: Oregon: Cucumbers, PotatoesCucumbers, PotatoesPennsylvania: Pennsylvania: PotatoesPotatoesWashington: Washington: Cucumbers, Dry Beans, PotatoesCucumbers, Dry Beans, Potatoes

AgendaAgenda

Review Relevant LiteratureReview Relevant LiteratureDiscuss Why the Transformations Took Discuss Why the Transformations Took PlacePlacePresent Strategies and Structures Present Strategies and Structures Utilized for Redesign During Each PhaseUtilized for Redesign During Each PhaseReview Financing ApproachesReview Financing Approaches


Review Financing ApproachesReview Financing ApproachesAreas for Further ResearchAreas for Further Research

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Relevant LiteratureRelevant LiteratureChaddadChaddad and Cook (2004) and Cook (2004) –– Understanding Understanding new cooperative models “cooperative with new cooperative models “cooperative with

””capital seeking entities”capital seeking entities”Anderson (1986) Anderson (1986) –– evolution of cooperative evolution of cooperative management strategies during phases of the management strategies during phases of the cooperative life cyclecooperative life cycleAmanorAmanor--BoaduBoadu, Boland, Barton et al (2003) , Boland, Barton et al (2003) ––


Birds Eye Foods, Inc Birds Eye Foods, Inc -- A Case StudyA Case StudySeeking input from this group Seeking input from this group –– economic economic value of information, equity and risk value of information, equity and risk management strategies management strategies

Three Phases of Redesign:Three Phases of Redesign:Will Concentrate on Third PhaseWill Concentrate on Third Phase

1.1. First Phase starts with the Formation of the First Phase starts with the Formation of the C ti i 1961 d t 1994C ti i 1961 d t 1994Cooperative in 1961 and runs to 1994Cooperative in 1961 and runs to 1994

2.2. Second Phase Starts with Acquisition of Second Phase Starts with Acquisition of CurticeCurtice--Burns Operations in 1994 and ends Burns Operations in 1994 and ends in 2002in 2002

3.3. Third Phase Begins with Inclusion of Vestar Third Phase Begins with Inclusion of Vestar C it l E it P t Wh BC it l E it P t Wh B


Capital, an Equity Partner Who Becomes Capital, an Equity Partner Who Becomes Majority Owner of Processing and Marketing Majority Owner of Processing and Marketing Assets in 2002 to todayAssets in 2002 to today

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Phase 1.Phase 1.

PF Formed to Help Salvage Fruit and PF Formed to Help Salvage Fruit and Vegetable Processing in New YorkVegetable Processing in New YorkVegetable Processing in New YorkVegetable Processing in New YorkThis Period Saw Dramatic Restructuring This Period Saw Dramatic Restructuring in the Industry in U.S. and NYin the Industry in U.S. and NYPost WWII Saw Dramatic Decline in Post WWII Saw Dramatic Decline in Number of Firms and PlantsNumber of Firms and Plants


Number of Firms and PlantsNumber of Firms and PlantsTwo Such Firms Located in Two Such Firms Located in W.NewW.New York York –– CurticeCurtice Brothers and the BurnsBrothers and the Burns--Alton Alton Corp. Came up for SaleCorp. Came up for Sale

[email protected]

Member

Food Service

Member Farm

Ag.Services

Crop Delivery

Farm

SpecialtyProducts

RetailCrop Coordination& Harvest

Food Manufacturing

BrandedProducts

Sales &Marketing

Distribution

‐‐‐‐‐ F a r m P r o d u c t V a l u e C h a i n ‐‐‐‐‐‐‐‐‐‐Member

Farm

Production Planning


Member Farm

PF Functions

CB Functions

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Summary of Curtice Burns and Pro-Fac Cooperative Integrated Agreement, 1961-1994

Curtice Burns Area Pro-Fac Cooperative

-Net proceeds derived from total sales; shared with PF 50/50 Finance

-Financed ownership of plants, leased facilities to CB-Equity loaned to CB; seasonal & term loans from Bank for Coop’sPF 50/50

-Common stock listed on AMEX, 1973Finance for Coop s

-Sold delivery rights based on common stock to members

-Conducted all marketing activities-Owned brands, made acquisitions-Developed new products

Marketing-Recruited members from new acquisition farming areas-Reserved first right to purchase brands upon dissolution-Farm products provide basis for new products

-Supervised and managed business and properties of PF-Maintained relations with lenders, kept books for Management &

G

-PF and Agway had access to books and financial information


, pjoint venture-One PF director on CB board

Governance -1 CB and 1 Agway director on PF board

-Payment for crops based on CMV-As CB operations expanded, PF given first right to supply new plants-Developed sales plan that determined volume produced for each commodity

Supply Agreement

-Committee for each commodity-Committees determine CMV in concert with PF management and approve crop agreements-Payments made from a single, multi-commodity pool

GLF/Agway Farmer-MembersElect Directors

Pro-Fac Grower-MembersElect Directors

GLF/ Agway Inc.B d f Di t

Pro-Fac Cooperative (PF)B d f Di t

Pro-Fac Cooperative, GLF/Agway, and Curtice Burns Organization and Integrated Agreement, 1961 – 1994.

Board of DirectorsControlling interest in CB

Appoints CB Board

Board of DirectorsAgway Rep. on Board

CB Rep. on Board

Curtice Burns (CB)Board of Directors

PF Rep. on Board

Curtice Burns (CB)Management & Staff

Pro-Fac Cooperative (PF)Management & Staff


Integrated Agreement:1. Finance2. Management3. Marketing4. Supply

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Phase 2. Begins in 1994Phase 2. Begins in 1994

Agway is Forced to Sell It’s CB Majority Interest Agway is Forced to Sell It’s CB Majority Interest to Raise Cashto Raise Cashto Raise Cash to Raise Cash The Long Standing Integrated Agreement The Long Standing Integrated Agreement Venture with CB Came to an End in 1994 as PF Venture with CB Came to an End in 1994 as PF Purchases Agway’s InterestPurchases Agway’s InterestCB buyout creates Initial Leverage on PF’s CB buyout creates Initial Leverage on PF’s Balance Sheet (Debt financing at 50% in ’96)Balance Sheet (Debt financing at 50% in ’96)


BE acquisition results in highly leveraged BE acquisition results in highly leveraged position in 2000 (Debt financing at 80% in 2001)position in 2000 (Debt financing at 80% in 2001)

Member

Food Service

Member Farm

Ag.Services

Crop Delivery

Farm

SpecialtyProducts


Food Manufacturing

BrandedProducts

Sales &Marketing

Distribution


Farm

Production Planning


Member Farm

Pro-Fac/AgrilinkFunctions

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Phase 2. DevelopmentsPhase 2. Developments

PF Becomes the First Farmer PF Becomes the First Farmer C ti t A i P bli l T d dC ti t A i P bli l T d dCooperative to Acquire a Publicly Traded Cooperative to Acquire a Publicly Traded CompanyCompanyLater Becomes the First Farmer Later Becomes the First Farmer Cooperative with a Security (cumulative Cooperative with a Security (cumulative preferred stock) Listed on a Major preferred stock) Listed on a Major E hE h NASDAQ ( b l PFACP)NASDAQ ( b l PFACP)


Exchange Exchange –– NASDAQ (symbol PFACP)NASDAQ (symbol PFACP)To Signify It’s Role in Linking the To Signify It’s Role in Linking the Agricultural and Marketing Segments, CB Agricultural and Marketing Segments, CB Changed It’s Name to Agrilink Changed It’s Name to Agrilink

Grower-MembersElect Directors

Pro-Fac Cooperative (PF)Board of Directors

Curtice Burns / Agrilink /Bi d E (CB/AL/BE)

Pro-Fac Cooperative, Curtice Burns/Agrilink/Birdseye Foods Organization, 1994-2002.

Board of Directors12 - Elected by Membership

3 - Independent, appointed by elected directors

Birds Eye (CB/AL/BE)Board of Directors

15 – Appointed by PF Board

Notables:• CB/AF/BE wholly-owned subsidiary of PF (1994)

Pro-Fac CooperativeManagement & Staff

Curtice Burns / Agrilink /Birds Eye

Management & Staff


• CB/AF/BE wholly-owned subsidiary of PF (1994)• Pro-Fac Board & CB/AL/BE Board meet jointly as a single board, separate votes as necessary• CB changes name to Agrilink Foods (1997) & to Birds Eye Foods (2003)• Agrilink controlled brands, including acquisition of Birdseye & other brands from Dean Foods

Vegetable Co. (1998)• Dean’s acquisition effectively doubles size of Birds Eye Foods • Birds Eye Foods finds itself in a highly leveraged position

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Number of ProNumber of Pro--FacFac Members, 1974 Members, 1974 --20082008

800

900Phase 1 Phase 2 Phase 3

500

600

700

Num

ber


300

400

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Year

ProPro--FacFac shareholder and member shareholder and member capitalization and investment, 1974capitalization and investment, 1974--20082008..

250

300

250

300

0)

g _ p

Phase 1 Phase 2 Phase 3

50

100

150

200

50

100

150

200

Valu

e per

Mem

ber (

Nom

inal

, $00

0

Tota

l (No

min

al, $

Mill.

)


00

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

V

YearPF Shareholder/Member Equity/Capitalization PF Equity/Capitalization per MemberPF Class A Common Stock per Member

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Commercial market value (CMV) of raw product Commercial market value (CMV) of raw product deliveries, total and per member, 1962deliveries, total and per member, 1962--20082008

140

160

70

80

90

mbe

r


20

40

60

80

100

120

20

30

40

50

60

70

hous

and

2006

Dol

lars

Per

Mem

Mill

ion

2006

Dol

lars


0

20

0

10

1962

19

64

1966

19

68

1970

19

72

1974

19

76

1978

19

80

1982

19

84

1986

19

88

1990

19

92

1994

19

96

1998

20

00

2002

20

04

2006

20

08

Th

YearTotal CMV Average CMV per Member

Sources: Pro-Fac, Curtice Burns, & Agrilink Annual Reports, Pro-Fac SEC 10-K Filings

ProPro--FacFac debt levels and debt ratio, debt levels and debt ratio, 1974 1974 -- 2008 2008

100%

120%

1,000

1,200

mill

.


20%

40%

60%

80%

200

400

600

800

Deb

t Rat

io (

%)

Tot

al L

iabi

litie

s, n

omin

al $

m

\


0%0

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

YearTotal Liabilities Debt Ratio (%)

Sources: Pro-Fac, Curtice Burns, & Agrilink Annual Reports, Pro-Fac SEC 10-K Filings

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Phase 3. Begins in 2002Phase 3. Begins in 2002

AgrilinkAgrilink is in a Highly Leveraged Positionis in a Highly Leveraged PositionThin Margins Limit EarningsThin Margins Limit EarningsCapacity of Members to Provide Needed Capacity of Members to Provide Needed Equity is Being Tested Equity is Being Tested Board Explores Other Sources and Board Explores Other Sources and R i M O tiR i M O ti


Reviews Many OptionsReviews Many OptionsAccepts Proposal from Accepts Proposal from VestarVestar Capital Capital Partners and Approved by Member VotePartners and Approved by Member Vote

Member

Food Service

Member Farm

Private LabelPrivateLabel

Sales &

Ag.Services

Crop Delivery

Farm

SpecialtyProducts


Allen’sFood Manufacturing

Bird’s EyeBrandProducts

Sales &Marketing

Distribution


Farm

Supply agreements

ProductsLabelProducts

Marketing


Member Farm

PF & Farm FreshFirst, LLCFunctions

Minority Share of BEF

Birds Eye FoodsFunctions

Vestar MajorityOwner of BEF

Allens FoodsFunctions

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Grower-MembersElect Directors

Pro-Fac Cooperative, Vestar, & Birds Eye Foods Organization, 2008

Vestar Capital PartnersPrivate Equity Firm

Vestar LLCCapital Investment - 56% Management - 3%

Pro-Fac Cooperative (PF) – 41%Board of Directors

12 - Elected by Membership3 - Independent, appointed by

elected directors

Birds Eye Holdings LLCBoard of Directors

9 – Vestar2 – Appointed by PF board

Notables:

Pro-Fac CooperativeManagement & Staff

Birds Eye Foods, Inc.Management & Staff


• Vestar holds controlling interest in Birds Eye Holdings LLC• Birds Eye Holdings owns facilities (assets) and Birds Eye brands• Allens Inc. purchased NY plant facilities and private label brands in 2006

• PF received $120 million distribution from Birds Eye Holdings in 2007, used primarily for equity redemption and dividend payments

Need for Capital InfusionNeed for Capital Infusion

NonNon--cash goodwill impairment charge of cash goodwill impairment charge of $179 million results in negative income $179 million results in negative income for FY 2002 and reduces equityfor FY 2002 and reduces equityIncreased debt to finance acquisition of Increased debt to finance acquisition of large, national branded businesslarge, national branded businessExhaust members capacity to supplyExhaust members capacity to supply


Exhaust members capacity to supply Exhaust members capacity to supply more equitymore equityIncreased interest expenses Increased interest expenses

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Options the PF Board Considered in Options the PF Board Considered in 20022002

Increase public stock offeringIncrease public stock offeringSeek strategic investorSeek strategic investorFind synergistic partner, LLCFind synergistic partner, LLCSeek private equity firmSeek private equity firm“tough it out”“tough it out”


Sell the companySell the company

Pete Call, PF Chairman and BEF Pete Call, PF Chairman and BEF Board Member Board Member

“PF’s expertise lies in producing raw “PF’s expertise lies in producing raw products not in operating processing products not in operating processing facilities, so a partnership with an facilities, so a partnership with an operating entity is an option that will be operating entity is an option that will be actively pursued”actively pursued”


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Selecting a Private Equity PartnerSelecting a Private Equity PartnerGood fit with portfolioGood fit with portfolioWorked with current managementWorked with current managementWorked with current managementWorked with current managementAcceptable Terms:Acceptable Terms:•• Option for individual members and Option for individual members and

management to investmanagement to invest•• Termination paymentsTermination payments


p yp y•• Line of creditLine of credit•• 10 year supply agreement10 year supply agreement•• Representation on BEF boardRepresentation on BEF board

Public Stock Offering vs. Private Equity Public Stock Offering vs. Private Equity Placement Placement

Publically Traded OfferingPublically Traded Offering Private Equity InvestmentPrivate Equity InvestmentST HorizonST Horizon1/4ly earnings driven1/4ly earnings drivenMarket VolatilityMarket VolatilityBroad Stockholder Broad Stockholder InterestsInterestsHigh Cost of ListingHigh Cost of Listing

Longer Horizon (7yrs)Longer Horizon (7yrs)Driven to improve firm Driven to improve firm performanceperformanceLess volatilityLess volatilityNarrow Investor GroupNarrow Investor GroupPossess managementPossess management


High Cost of Listing High Cost of Listing &SEC Compliance&SEC ComplianceSOX requirementsSOX requirements

Possess management Possess management talenttalentUltimately sell acquired Ultimately sell acquired businesses for gain businesses for gain

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Phase 3. DevelopmentsPhase 3. DevelopmentsIn August 2002, In August 2002, VestarVestar Becomes Majority Becomes Majority Owner of Owner of AgrilinkAgrilink (approx. 56%)(approx. 56%)gg ( pp )( pp )AgrilinkAgrilink Name Changed to Birds Eye Foods, Name Changed to Birds Eye Foods, BEFBEFPF:PF:•• Maintains significant minority ownership of BEF Maintains significant minority ownership of BEF

(approx. 40%) with management accounting for (approx. 40%) with management accounting for (approx 4%)(approx 4%)


(approx.4%)(approx.4%)•• Has 10 year supply agreementHas 10 year supply agreement•• Receives $10 million annually for 5 yearsReceives $10 million annually for 5 years•• Can secure $1 million line of credit for each of 5 Can secure $1 million line of credit for each of 5

yearsyears

Phase 3. DevelopmentsPhase 3. Developments

Bird Eye Foods Rolls Out Successful New Bird Eye Foods Rolls Out Successful New ProductsProductsVestarVestar Sells Processing Plants and Private Sells Processing Plants and Private Label Business to Label Business to AllensAllens, Inc. in 2006, Inc. in 2006VestarVestar SubsidiarySubsidiary-- BEF Holdings Distributes BEF Holdings Distributes 120 Million to PF in 2007 120 Million to PF in 2007


PF Uses Distribution to Redeem Equity and PF Uses Distribution to Redeem Equity and Pay Dividends on Selected SecuritiesPay Dividends on Selected Securities

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Financing Through Each PhaseFinancing Through Each Phase

Phase 1.Phase 1.•• Innovative diversification of sources Innovative diversification of sources ––

members, loans from BC, and publicly members, loans from BC, and publicly traded securitiestraded securities

•• Relatively strong, consistent earnings Relatively strong, consistent earnings supported use of retained earningssupported use of retained earnings


•• Upfront member purchase of stock tied to Upfront member purchase of stock tied to deliveries raised additional member equity deliveries raised additional member equity

Financing: Phase 2Financing: Phase 2

Maintained diversification of sources Maintained diversification of sources ––members loans from BC and publicly tradedmembers loans from BC and publicly tradedmembers, loans from BC, and publicly traded members, loans from BC, and publicly traded securitiessecuritiesHigh costs of acquisitions eroded equityHigh costs of acquisitions eroded equityWeaker earnings reduced use of retained Weaker earnings reduced use of retained earningsearningsLimited new member purchases of stock tied to Limited new member purchases of stock tied to


ppdeliveries raised additional member equitydeliveries raised additional member equityIncreased Debt Level to Support Buyouts Increased Debt Level to Support Buyouts Results in Highly Leveraged Position and Results in Highly Leveraged Position and Increased Interest Expense Increased Interest Expense

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Financing: Phase 3.Financing: Phase 3.

PF Accepts Proposal from Private Equity PF Accepts Proposal from Private Equity FirmFirmFirm Firm VestarVestar Investment Significantly Reduces Investment Significantly Reduces BE Debt (approx. $175M)BE Debt (approx. $175M)Agreement with BE Holdings Generates Agreement with BE Holdings Generates Annual Payments for 5 yearsAnnual Payments for 5 years


Annual Payments Used to Support PF Annual Payments Used to Support PF Operations and Pay Dividends on Operations and Pay Dividends on Preferred StockPreferred Stock

Research QuestionsResearch QuestionsDoes a Private Equity Firm Do a Better Does a Private Equity Firm Do a Better Job Managing Member Equity than aJob Managing Member Equity than aJob Managing Member Equity than a Job Managing Member Equity than a Cooperative?Cooperative?Are Specialty Crop Producers Gaining Are Specialty Crop Producers Gaining Market Power that Minimizes Market Risk Market Power that Minimizes Market Risk (and need to own plants & brands)?(and need to own plants & brands)?


How Do We Measure the Value of How Do We Measure the Value of Market Intelligence and Information that Market Intelligence and Information that Cooperatives Generate for Members?Cooperatives Generate for Members?

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SummarySummary

The PF story present a unique case in The PF story present a unique case in the world of cooperativesthe world of cooperativesA Number of “A Number of “FirstsFirsts” for a farmer ” for a farmer cooperative: cooperative: •• leveraged buyout of publicly traded leveraged buyout of publicly traded

companycompany


company,company,•• having a security listed on a major exchangehaving a security listed on a major exchange

Continue to Change and Adapt to New Continue to Change and Adapt to New Players and MarketsPlayers and Markets

Summary, cont’dSummary, cont’d

Utilized a number of innovative strategies to Utilized a number of innovative strategies to t ti l t i t t d bt ti l t i t t d bovercome potential constraints encountered by overcome potential constraints encountered by

traditional agricultural cooperatives:traditional agricultural cooperatives:•• Transferable delivery rightsTransferable delivery rights•• MultiMulti--commodity poolcommodity pool•• Diverse set of crops and productsDiverse set of crops and products•• Board geographic membership baseBoard geographic membership base


•• Board geographic membership baseBoard geographic membership base•• Conversion of equity to publicly traded securities to Conversion of equity to publicly traded securities to

create liquidity for member investment create liquidity for member investment •• Partnering with successful firms and capital groupsPartnering with successful firms and capital groups

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Current Situation for Most MembersCurrent Situation for Most MembersSignificant Increase in Prices for Most Significant Increase in Prices for Most Crops (Input costs also increasing)Crops (Input costs also increasing)p ( p g)p ( p g)Growing Demand Results in Increased Growing Demand Results in Increased Acreage for Most CropsAcreage for Most Crops$120M Distribution in 2007 Generated $120M Distribution in 2007 Generated Higher ROEHigher ROESituation Varies Across Crops andSituation Varies Across Crops and


Situation Varies Across Crops and Situation Varies Across Crops and RegionsRegionsIt Remains to Be Seen, How Long It will It Remains to Be Seen, How Long It will LastLast

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