Find out what's new in agribusiness for 2012 and beyond, and how it could affect your agriculture business.

1. 2012 Agribusiness Update
December 5, 2012

2. Agenda
10:45 a.m. – 11:00 a.m. Welcome Time & Registration
11:00 a.m. – 11:05 a.m. Sikich LLP
• Introduction
11:05 a.m. – 11:45 a.m. Brent Gloy, Director, Center for Commercial Agriculture, Purdue
University and Kip Tom, CEO and President, Tom Farms LLC
• Boom or Bust? What Lies Ahead for Production Agriculture?
11:45 a.m. – 12:00 p.m. Break – Box Lunches
12:00 p.m. – 12:40 p.m. Beth Bechdol, Director of Agribusiness Strategies, Ice Miller LLP
and President, Agribusiness Council of Indiana
• Post-Election Impacts on Agriculture – Agricultural Policy and
The Farm Bill
12:40 p.m. – 1:20 p.m. Jim Schultz, Founder and Managing Partner, Open Prairie Ventures
• Early Stage Investment Opportunities in Food and Agriculture
1:20 p.m. – 1:30 p.m. Q&A

4. Industry Challenge
 Agriculture is being asked to
do more today than ever in
the history of mankind……and
do it with less.
1970 to 2010 world population doubles. From 2010 to 2050 the world's
population grows from 6.8 billion people to 9.31 billion people.

5. Tom Farms Today
 Our goal is to leverage each and every asset to
maximize our returns.
 We educate and empower employees and partners.
 Management delegation and operational guidelines.
 We look at out business as a manufacture and embrace
principals such as S.O.P.’s., lean manufacturing, and
programs similar to Six Sigma and others.
 We place a high value in long term relationships with
business partners.
 We invest in planning to assure a smooth multi-
generational transition in leadership, succession, and
asset transfer.

6. Factoid: 1970 to 2007 Farmers grew 40% more corn
and 30% more Soybeans on the same amount of land.

7. Fundamental Forces Shaping
Tom Farms Plans
 Global Production
 Growing and Diversified Global Demand
 Consumer Expectations
 New Science and Technology
 Changes in Ag Business Model
 Government Policy

8. New Science and Technology
 Simplify/automate processes
 Seed traits
 Robotic or GPS guided machinery.
 Electronic measuring monitoring and
controls utilizing the internet.
 Implications
 Labor productivity
 Production skills
 Managerial skills/span of control
 Biological manufacturing

9. New Science and Technology Results
CORN SOYBEANS
Tom Farms Resources per Unit of Output
Indexed to Year 2000 Actual Values

10. Major Threats
 Consequences of Government Policy decisions
effecting agriculture production causing an
adverse impact to the challenge we face to
feed a growing world.
 Risk Management in volatile markets.
 A divided Agriculture industry not working
collaboratively to tell our story or serve as an
advocate.
 Agriculture Industry image threats from special
interest groups using emotion, not science and
facts.
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11. Thanks!
 Kip Tom
 Tom Farms LLC
 8542 North Harper Road
 Leesburg, IN 46538
 574.453.3300
 www.tomfarms.com
 www.cereservinc.com
 kiptom@tomfarms.com

12. “Hang On! There's Too Much
At Stake!”
Post-Election Impacts on
Agriculture and the Farm Bill
2012 Agribusiness Update
December 5, 2012
Beth Bechdol
Director of Agribusiness Strategies
Ice Miller LLP

13. Overview
• The World Around Us
• Post-Election Results – A Recap
• The Lame Duck Session
• The Farm Bill
• Think Bigger…Complex Policy Issues
Remain

14. The World Around Us…
• Global economic uncertainty – the growing
"middle class"
• Currencies and the US dollar
• Market liberalization/trade agreements
• Biofuels production and policies
• Energy and agricultural input prices
• Regulatory climate
• Biotechnology developments
• Weather – climate change
• Politics and policy

15. Post-Election Results – A Recap…
President Obama Re-elected Urban O (70%) – R
 62.1 mil. (51.4%) popular votes (28%)
 332 (61.7%) of electoral votes Suburbs R (50%) – O
(48%)
Democrats Retain Senate Majority Rural R (60%) – O
 Democrats gain 2 seats (38%)
 13th Congress: 55 Expected in Democratic Caucus = 53
Democrats + 2 Independents. 45 Republicans.
Republicans Retain House Majority
 113th Congress: 234-R/201-D
 112th Congress (2010 Election): 242-R/193-D
 Over 1/3 of House members will be serving their first and/or
second term in the 113th Congress

16. So…Not Much Change
But, Hopefully, Not A “Status Quo” Legislative
and Budget Outcome in the Lame Duck.
The 112th Congress: “The Least Productive Body In a Generation”
“The 112th Congress is set to enter the Congressional record books
as the least productive body in a generation, passing a mere 173
public laws as of last month. That was well below the 906 enacted
from January 1947 through December 1948 by the body President
Harry S. Truman referred to as the “do-nothing” Congress, and far
fewer than even a single session of many prior Congresses.”
- Jennifer Steinhauer - New York Times. September 18, 2012 -

17. Will They Ever Rise Above "It"?
"There is nothing which I
dread so much as a division
of the republic into two
great parties, each
arranged under its
leader, and concerting
measures in opposition to
each other.
This, in my humble
apprehension, is to be
dreaded as the greatest
political evil under our
Constitution."
JOHN ADAMS - 1789

18. Lame Duck Session - Budget and Farm Bill?
An exhausting "to do" list
• Sequestration
• Tax cuts
• AMT patch
• Unemployment measures
• Tax extenders
• Debt ceiling
• Farm Bill

19. Let's Look at the Unfinished Business…
Sequestration cuts – begin Jan. 2, 2013
• $110 bil cut in non-exempt programs for FY 2013 - half from
Defense.
Bush Tax Cuts - expire Dec. 31, 2012
• Income Tax Rates - increase from 10% - 35% to 15% - 39.6%
• Capital Gains Rate - increase from 15% to 20%
• Estate Tax - exemption decreases from $5 million to $1 million.
Top rate increases from 35% to 55%. (Pre-2001 levels.)
• Dividends - increase from 15% for most to top income tax rate
• Other expiring provisions: Child tax credit (halved and no
longer refundable), Marriage penalty relief, various tax
benefits for education, retirement savings, and low-income
individuals.

20. Let's Look at the Unfinished Business…
Alternative Minimum Tax (AMT) annual patch – expired Dec.
31, 2011
• Exemptions fall – without retroactive 2012 patch, 30 mil. will
pay AMT--up from 4 mil.
Job / Unemployment Measures - expire Dec. 31, 2012
• Payroll taxes rise from 4.2% to 6.2% on first $110,000 in income
• Number of weeks of unemployment benefits reduced
Tax Extenders - expired Dec. 31, 2011
U.S. Debt Ceiling - will reach at end of 2012
Farm Bill - a number of provisions ALREADY expired Sep 30, 2012
• Full Farm Bill as Budget Offset for Fiscal Cliff Costs?
• If Extension only, how much deficit reduction will be required?

21. What About Spending?
• GOP Controls – net gain of 63 seats
• New approach in House
– Committee chairs have more power
– House will go first on most issues
– Unlike last time GOP controlled House…GOP
leaders in House and Senate work well
together
• House Agriculture Committee – chaired by
Frank Lucas (R-OK) – 23 new members

22. Where Do We Make the Cuts?
Federal Budget
Net Interest Outlays
12% Medicare -
Medicaid
• Still few specific plans
24% on reductions to
Defense defense, Medicare &
18%
Medicaid, social
Social Security security – nearly 2/3 of
21% the budget
Discretionary
and Other
Spending Agriculture is 4.5% of $3.6 trill
25%
budget ($162 bil)
78% goes to food/nutrition
Source: Congressional Budget Office – Aug. 2012
spending ($126 bil)

23. 2012 Farm Bill Status
• S. 3240 – Agriculture Reform, Food
and Jobs Act of 2012
– Passed Senate June 21, 2012 by 64-35 vote
• H.R. 6083 – Federal Agriculture Reform and Risk
Management (FARRM) Act
– Passed House Ag Committee July 11, 2012
by 35-11 vote

24. A Full Chronology of U.S. Farm Bills
• 2008 Food, Conservation • 1973 Agricultural and
and Energy Act Consumer Protection Act
• 2002 Farm Security and • 1970 Agricultural Act
Rural Investment Act • 1965 Food and Agricultural
• 1996 Federal Agriculture Act
Improvement and Reform • 1956 Agriculture Act
Act • 1954 Agriculture Act
• 1990 • 1949 Agriculture Act
Food, Agriculture, Conserva • 1948 Agriculture Act
tion and Trade Act • 1938 Agricultural Adjustment
• 1985 Food Security Act Act
• 1981 Agriculture and Food • 1933 Agricultural Adjustment
Act Act
• 1977 Food and Agriculture
Act

25. Senate Bill Sets the Tone
• Direct, counter-cyclical and ACRE payments eliminated –
Average Risk Coverage revenue program created –
regional concerns
• Tinkering with crop insurance
– Conservation compliance and income limits
• Consolidation of conservation and rural development
programs
• Gradual scaling back of CRP acreage – 25 mil acres by
2017
• Reduces SNAP benefits by $4.5 billion
TOTAL BUDGET SAVINGS - $24 billion

26. House Committee Offers Different Version
• Eliminates direct payments – increases target prices
• Cuts nutrition programs more ($16 bil over 10 yrs from
$800 bil baseline)
• CRP acreage cap reduced to 25 mil acres
• No mandatory funding for energy programs
• Eliminates unnecessary pesticide permit requirements –
opens up regulatory reform debate
• Biotech expedited USDA approvals
TOTAL BUDGET SAVINGS - $35 billion

27. Two Must-Do's in the Lame Duck Session
The 2008 Farm Bill has expired…
• Reauthorize the funding for programs that expired on
September 30
– If not – they lose baseline funding. Most are trade and
conservation programs.
• Continue suspensions of permanent law provisions
for the 1938 and 1949 acts for dairy and other
commodity programs.
– If not we are back to acreage allotments and marketing
quotes – totally untenable in today's global markets

28. No Consensus on Outcome…
• Option #1 – pass a five-year bill during the lame duck
– take the budget savings and wrap a Farm Bill into a
larger "fiscal cliff" package – only 5 weeks left!
– Two issues remain: cuts to nutrition spending (how big?)
and can target price supports be maintained in some form
• Option #2a - pass a short-term extension during the
lame duck
– 6 months
– 1 year
• Option #2b – will need to start over with the new
Congress on a multi-year bill – need to pass a new
Senate and House version and then conference

29. Other Things to Watch…
• The Players – small change of change – but there's
always speculation
– Lucas/Petersen stay in House and Stabenow in Senate
– Rumored challenge of Roberts by Cochran
– Villsack to stay? Kent Conrad (ND), Blanche Lincoln (AR) in
the wings
• Is this the last "Farm Bill"?
– Some political leaders view it as a "Food Bill"
– Agriculture would have a tough time "going it alone"
though

30. Future Policy/Regulatory Challenges to Agriculture –
More Diverse and Complex
• Regulatory issues – EPA, OSHA, DOL, DOT, FDA
• Climate Policy
• Energy Policy
• Trade – FTAs, China, Cuba
• Immigration Reform
• Food Safety Policy
• Infrastructure Policy
• Financial Services Regulation
• Anti-trust Review and Oversight
• Tax Policy

31. Should We Just Give Up Now?

32. No…Hang On! There's Too Much at Stake!

33. Focus on our long-term competitiveness critical
Remember the world around us…big challenges
require big solutions
• Feeding the world
• Human health and nutrition
• Natural resource constraints
• Public understanding and perceptions
The next generation of agricultural leadership is
inspiring and up to the task!

34. Early-Stage Investment
Opportunities in Food and
Agriculture
December 5, 2012
34 34
OpenPrairie.com

35. Opening Thoughts…
“By 2050, the global population will surpass 9 billion people
and agricultural systems will be increasingly challenged by
water scarcity, climate change and volatility, raising the risk of
production shortfalls”
The Economist Conference
February 2012
35

36. About Open Prairie Ventures
• Midwest-based venture capital firm
• Team of entrepreneurs, operators, and investors
• Brand with National Recognition
• Partnership that values our Midwest roots
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37. J.M. “Jim” Schultz
• 5th Generation Agricultural Entrepreneur
• International Farmland Developer
• Founder, Open Prairie Ventures
• Kellogg MBA, DePaul JD
37

38. Open Prairie Investment Philosophy
• Efficient Innovation Model
• Proprietary Deal Flow
• Global Potential
• Platform Technologies with Multi-Channel Distribution
• Syndicate Development for Optimal Growth
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39. Where We Live…
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40. Disruptive Agricultural Technologies
Mechanization Hybrid Plant GMO
Synthetic Seeds Protection Biologicals
Fertilizers Chemicals
40

41. Agriculture Drivers
• Population
• Technology
• Globalization
41

42. “100 - 30 - 70 - 32”
 Global food demand will increase 100% over the next 30 years;
 70% of this increase will be fulfilled with new agriculture related
technologies;
 Using 1/32nd of the world’s land mass (currently 1/20th).
Source: Steinfoeld et al 42

43. Value-Added Food Consumption
As the Developing World Becomes More Affluent Food
Demand Will Grow Dramatically
Germany 375.39 Euros Mongolia 41,985.85 togrogs
or $500.07/week or $40.02/week
Source: MacroGain Partners, Steinfoeld et al 43

44. Agriculture Today
• World Bank puts the food
and agriculture sector at 10%
of global GDP or $4.8
trillion
• World food prices are at all
time highs and experts
predict they may double
again by 2030
• The underlying cause of
soaring food prices is the
lack of investment in
agricultural and food
production
Source: FAO Food Price Index; www.forbes.com; UN Secretary General Ban Ki-Moon, June 4, 2008 44

45. Global Population Projections
 1999: 6B people
 2011: 7B people
6000
2011
 2030: 9B people
Population (millions)
5000
2030
4000
3000
2000
1000
0
Africa Asia Latin Oceania North Europe
America America
Source: UN Report – World Population to 2030 45

46. The Dilemma
Can we feed the world without destroying it?
46

47. Where Will Food Be Produced…
Chinese Farmland U.S. Farmland
Arable land per capita: .08 Arable land per capita: .53
Source: The World Bank (figures in hectares) 47

48. Global Prospects for Future Food Production
48

49. U.S. Farms – Timeline and Consolidation
49

50. Farm Bifurcation
50

51. U.S. Target Yield Projections
Source: Monsanto’s Yield Targets 3/10 51

52. Midwest Region is Breadbasket of Innovation
• Home to World-Class Universities in Agriculture
• Vibrant Research Environment
• Global Headquarters for Premier Ag Companies
52

53. Ag Productivity Convergence
Crop Nutrition Crop Protection
Cloud Computing
Micronutrition IPM
Integrated Precision
Precision Decisions
Mechanics
Agricultural
Productivity (DDM)
Seed
Microfarming Treatment
Equipment and Data Convergence Seeds &
Cultural Practices Biotechnology
53

54. Keys to Success in Early-Stage Investments
 People Strong Management Team
 Product Disruptive, Proprietary Technology
Scalable and Executable Go-to-Market
 Production
Strategy
 Pricing Value Proposition to End Users
 Promotion Multi-Channels of Distribution
54

55. Midwest Value Proposition
• Convergence of science, capital, infrastructure and talent
 Strong agricultural presence and output
 C-level talent and management teams
 Thriving deal flow pipeline
• Capital efficiency is the Midwest’s competitive advantage
to deliver superior venture returns
Top Venture
Midwest
Markets
VC Dollars Invested per Company (million) $15.7 $9.8
Average Acquisition Value (million) $134.9 $125.4
Multiple: Acquisition Value / VC Invested 8.6x 12.8x
Source: VentureXpert; 2007-2011; Seed, Early, Growth and Later Stage. Top Venture Markets: CA, MA, NY, TX. Midwest: IL, IN, MI, OH, WI 55

56. Case Study for Disruptive Ag Technologies
 Industry: Ag Biotechnology Vestaron is developing a new generation of insecticides
 Stage: Early (pre-revenue) derived from peptides produced by spiders. These
peptides are potent insecticides, yet are environmentally
 Market Size: $21 billion benign, making them ideally suited for the
environmentally conscious, twenty-first century
People Product Production Pricing Promotion
• Expert team • Disruptive • Demonstrated • Less use of • Four market
with strong technology scale-up from toxic channels
advisory board with broad IP bench to pilot insecticides exceeding
scale • Increased $20 billion
grower
flexibility
56

57. Case Study for Disruptive Ag Technologies
 Industry: Ag Biotechnology Patented product that uses PPPMs (Pink Pigmented
 Stage: Early (pre-revenue) Facultative Methylotrophs) to improve plant health and
crop yield.
 Market Size: $5 billion
People Product Production Pricing Promotion
• Highly • Patented • Scalable • Increased • Applicable to
qualified team bacterial seed manufacturing yields multiple crops
and leaf process • Ease of • Low regulatory
inoculant adoption requirements
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58. Open Prairie “In the Field” Strategy
• Agriculture Sector is Expanding Globally
• Midwest Region is Epicenter of Agriculture Innovation
• Increasing Deal Flow and Exit Opportunities as Global Ag
Companies Look to Enhance their Research and
Development Pipelines
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59. “Harvesting Efficient
Innovation in The Field”
J.M. “Jim” Schultz
Managing Partner
Jim@OpenPrairie.com
Direct: 217.347.1017
Mobile: 217.821.9000
Office: 217.347.1000
OpenPrairie.com
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60. Questions?