Value Enhancement Opportunity Assessment Briefing forHigher Oil and Protein/Amino Acids1

(reduced structural carbohydrates)

This Value Enhancement Opportunity (VEO) involves the development of soybean varieties that produce significantly higher concentrations of protein and oil at the expense of the structural carbohydrate (i.e. “fiber”) fraction in the soybean. Research suggests that it is possible to produce soybeans with 23% oil and over 35% protein concentrations without sacrificing yields. This will result in approximately 4% more oil production from a bushel of soybeans. The resulting soybean meal will have protein levels exceeding 51%, but there will be 4% less meal produced.

It is envisioned that these market transformation techniques could also be applied to pricing high oleic soybeans based on their oil and protein levels in conjunction with existing high oleic premiums.

As you review the following points, please consider the following questions:

• How would the implementation of this VEO impact your sector (risk, return, market power)?

• What do you see as the biggest impediments to the industry embracing this VEO?

1 It is assumed that amino acid concentrations will increase proportionate to the protein levels

Page 1, Connections Revised 9/23/2014

VALUE PROPOSITION SUMMARYBenefits include:

• The per bushel value of these soybeans will be increased from the sheer volume of oil produced (oil is generally 2 to 4 times the value of meal per lb.) combined with the higher concentration of protein in the meal which provides for a more dense feedstuff.

• The higher protein soybean meal can be sold as a very high protein meal or blended to bring commodity soybean meal up to higher standards and avoiding discounts or achieving price premiums.

• More concentrated levels of oil and meal will improve the sustainability aspects of the soybean.

The primary costs will be from:

• Developing varieties and bringing them to market• Measurement technologies needed to efficiently and accurately measure quality at

multiple points along the value chain• Maintaining some degree of “soft” segregation and sorting early in the grain

handling and processing stages to preserve the value differential and facilitate efficient processing.

MARKET TRANSFORMATION REQUIREDThe following is an overview how various sectors in the value chain will be impacted by bringing this opportunity to market.

Seed Sector

• Experimental seed varieties have been developed and testing continues• Trait will need to be inserted into elite varieties in targeted growing areas• Introduction into high oleic varieties will simplify the segregation required

(“killing two birds with one stone”).

Farmer

• No yield drag is expected with these varieties• No special agronomic practices are expected to be required (will grow just like

commodity)• Raising these varieties will require “soft” IP during production up to delivery into

grain markets• Premiums will be established relative to the current meal and oil markets

Page 2, Connections Revised 9/23/2014

Grain Handlers

• Measurement technologies will be needed at delivery and perhaps other stages along the way

• Some degree of segregation from farmer to processor will be required to maintain value

Processor

• Some adjustments to processing methods may be necessary to optimize efficiency as compared to commodity soybeans, but no capital expenditures are anticipated as being necessary.

• Some adjustment in relative storage capacity for oil and meal may be needed

Oil Refiners

• No impact, just more oil

Feed Manufacturers

• The incremental value will be maximized by feed manufacturers having accurate knowledge of the protein content of the meal. This may require additional onsite measurement capabilities

• Additional storage may be required depending on existing configuration:• Book values used by feed optimization models will need to be adjusted to allow

for the higher protein levels in the meal if crude protein is not blended down by increasing the level of hulls.

• If the soybean meal sold by the processor is higher in crude protein and the amino acid balance is not changed, this will improve the meal’s Nutritional Bundle and associated Value Proposition. In a competitive ingredient environment, this will support higher usage levels and/or prices for soybean meal in a given formulation scenario.

o In addition, since the level of Nutritional Energy associated with protein is higher than that for “fiber’ in non-ruminant diets, higher protein at the expense of fiber is associated with proportionally higher Nutritional Energy. This is a further contributor to the meal’s Nutritional Bundle and overall Value Proposition

Livestock and Poultry Feeders

• Additional storage may be required depending on existing configuration and types of livestock fed, but to the extent that feed mixed off site is fed, no change in feeding practices will be required.

• The end feed product will still be balanced according to ration specifications, so no change in animal performance is expected

Page 3, Connections Revised 9/23/2014

Oil End Users

• More soybean oil per bu. crushed should reduce the price of soybean oil relative to substitutes and make soybean oil more price competitive

Page 4, Connections Revised 9/23/2014