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UnderstandingtheUSButterMarketChristianEdmistonDirector,SourcingandRiskManagement

April2016

Disclaimer

LandO’Lakes isnotmakinganyspecificorgeneralrecommendations aboutmarkets, riskmanagementpolicies,ortransactions.

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LandO’LakesDairyFoodsRiskManager

60%ofthetime Iamrightevery time

Agenda

• About LandO’Lakes• International ButterFundamentals• USDemandFundamentals• USProduction• ClassIBFUsage• Implications

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Ourbusinesstoday

Agricultureservices,cropinputs,

precisionagriculture

Animalnutritionandfeed

Dairyfoods

LandO’Lakes,Inc.overview

10,000employees

3,574individualmembers

826membercooperatives

300,000+agriculturalproducers

Serving 290U.S.facilities

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LandO’Lakes,Inc.overview

largestmember-ownedcooperativeinU.S.

2nd

#199on Fortune500

50statesand60+countries

In

Source:ChicagoMercantileExchange,USAForeignAgriculturalService

US

NZEU

Millbs.QuarterlyAverages

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0

200

400

600

800

1000

1200

1400

1600

1800

2000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Millionlbs.

USAnnualButterProduction

Source:USDA DairyProductsReport

0

2

4

6

8

10

12

14

16

1909

1916

1923

1930

1937

1944

1951

1958

1965

1972

1979

1986

1993

2000

2007

2014

PerCapitaConsumptionofFat

ButterMargarine

Source:USDA EconomicResearchService,IRi

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18

13

11

10

9

8

6

6

5

0 5 10 15 20 25

France

Germany

Austria

Denmark

Australia

Finland

UnitedKingdom

Russia

UnitedStates

AnnualPerCapitaLbs

GlobalButterConsumptionTrends

Source:USDA, DairyAustralia,CanadianDairyInformationCentre

Source:OECD.org

12%15%15%

0%

5%

10%

15%

20%

25%

30%

35%

40%

AustriaGermanyFranceUnitedStates

ObesityRates35%

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Source:USDA DairyProductsReport

ReducedFat

Whole0

10,000

20,000

30,000

40,000

50,000

60,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

BottledMilkProduction

Skim

ReducedFat

Whole

13%

33%

55%

16%

36%

48%

Source:USDA ERS

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Source:USDA ERS

600

800

1000

1200

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

ButterfatinMilkDeliveredtoBottlers

Butterfat Utilized Butterfat Re-Supplied

Millbs.

Source:USDA DairyProductsReport

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Conclusions• Developed countries tendtoexportprotein• HistoricallyUStradebalancehasbeensensitivetoglobalprices

• ButUSpriceshavebeenmainlydriven bydomesticmarkets

• Muchhigherpercapitabutterconsumption ispossible (EUdiet,UShistory)• ClassIproduction hasonly recently increased itscompetition forbutterfatsupply

Looking ahead

• Demand:• Willmorelow-fatmilkconsumersswitchtowholemilk?• Bigunknowns around extent ofUSbutterdemandgrowth

• Supply• Growthtrends infatyield inmilk• Manufacturingcapacity