Restructuring for Troubled Times 5th Annual Farmer Cooperatives Conference November 13-15, 2002  St. Louis, Missouri

1. Restructuring for Troubled Times5th Annual Farmer Cooperatives ConferenceNovember 13-15, 2002  St. Louis, Missouri Applying information and lessons learned from the 2001 Farmer Cooperatives Conference to Our Cooperative Thomas D. LarsonExecutive Vice PresidentMember and Public Affairs

2. Today’s Discussion • Review 2001 value creation concept • What and how CHS implementing • What and how implementing local co-op • Performance management module

3. Overview • Current co-op financial performance unacceptable • Ag supply has many untapped opportunities • Winning in future food landscape will be critical • Need to execute against a 5-part success model

4. Value creation is a key metric Return on invested capital* Value created Cost of capital Invested capital = – X ROIC Annual return of investment above that expected given risk level Rate of return required to compensate investors for risk * Impact of extraordinary items excluded

5. Value Creation • Industry • Regional co-ops • Local co-ops

6. ESTIMATE Most ag segments destroy value Contribution to GDP, $ billions, 1999 Feed Seed Financing Fuel and electric Equipment Ag chem Fertilizer Farm services 16.4% of U.S. GDP Secon-daryproces-sing Ag inputs Farm produc-tion Primary proces-sing Food distri-bution Input Distri-bution Cost of capitalPercent 11.1 10.9 10.4 10.9 10.8 10.6 Value createdPercent, share of invested capital -2.0 -7.0 -5.4 -1.1 -2.3 0.1

7. Financial performance ofdistribution particularly poor ESTIMATE Value created $ Millions Value created/ invested capital Percent Revenue $ Billions ROIC Percent Machinery 7.9 19 -2.5 -187 Feed 8.5 -53 16 -1.3 Fertilizer 9.1 -3.5 11 -122 12.6 Chemicals 0.1 11 2 -360 Total 57 -2.0 9.1 Input Distribution -2,519 -7.0 138 3.9

8. ESTIMATE Regionals struggled to create value in 1999… Value created $ Millions Value created/ invested capital Percent Revenue $ Billions ROIC Percent -0.6 Farmland 11 Dairy Farmers of America 8 5.2 Cenex Harvest States 6 4.1 6 Land O’Lakes 1.6 1 Agrilink 5.2

9. Value created/ invested capital Percent Cost of capital Percent Value created** $ Thousands ROIC Percent Revenue** $ Millions Quartile* 1 14.2 24 5.1 9.2 248 2 6.3 27 -3.0 9.3 -169 3 26 -7.8 1.8 9.5 -424 4 -9.3 9.4 14 -18.7 -559 Total -4.8 23 4.6 9.4 -227 Value Created Across Local Co-ops * Segmented by value created/invested capital ** Mean values for co-ops in quartile Source: Member co-op survey; team analysis

10. CHS Value Creation (EVA) • Mid 1990s • Executive management and board • Operating management • Financial measurement • Recognition program

11. EVA(economic value-added) Earnings minus (equity x minimum acceptable rate of return) • EVA recognizes there is no free capital • Equity represents an investment • Investor expects a return

12. CHS Co-op Performance Measurements • Profit • EVA • Cash Flow • ROI • Investment Grade

13. Local Co-op value creation • 4% above cost of borrowed capital • 9 - 12% ROE • Numerous meetings • Benchmarking

14. % Greater than Rate of # % of % of Local % of 50% Term Debt/ Return Accts. Sales Savings Accounts Local Equity 9%+ 216 52% 96% 39% 37% 5-9% 110 15% 15% 20% 16% 0-5% 108 17% 6% 20% 27% Below 11716%(17%) 21% 49% 0% Return on Local Equity Analysis

15. Cooperative System Ag Supply Grain $ Sales $(0-10) $(10-25) $(25-50) $(50-75) $(75-100) $(100+) Volume -------------------------------------------- 278 accounts 63% savings -------------------------------------------- 49 accounts 49% savings 9%+ 5-9% 0-5% Below 0 # accts. 216 savings- 96% 203 accounts (10%) savings 23 accounts (2%) savings Summary # accounts 481 # accounts 72 % savings 53% % savings 47% Return on local equity

16. 2 4 Pursue operational excellence Drive customer integration 5 Create performance obsession 1 3 Leverage horizontal scale Exploit vertical opportunities PFP success model Strategy Structure Existing Emerging

17. Thank you!!