Welcome Federal Reserve Bank of Kansas City Kansas City, MO July - PowerPoint PPT Presentation

Welcome Federal Reserve Bank of Kansas City Kansas City, MO July 17, 2012 Chris Erickson Managing Director HighQuest Partners cerickson@highquestpartners.com Proprietary information – not for distribution beyond intended recipient.

Ag Commodity Consumption versus S&P 1

Key issues driving farmland values  Population growth and increase in GDP • Increased demand in developing markets, particularly Asia, SE Asia and North Africa • Shift in diets from grain to animal protein  Increasing urbanization • Pressure on available arable land for crop production • Increasing reliance on processed foods  Constraints on supply • Access to water • Climate change • Linkage to energy markets • Slowdown in yield increases  Human capital • Generational transfer in both developed and developing markets • Lack of capacity building in developing markets 2

Demand for commodities driven by rapid GDP/capita growth in developing 3

Shrinking contribution to the global food supply Historical global harvested acreage(ha) on a per capita basis (1964 – 2012 proj.) 0.24 0.21 0.18 0.15 0.12 Note: The crops include barley, corn, millet, oats, rye, sorghum, wheat, mixed grain, rice and oilseeds (copra , palm kernel, cottonseed, peanut, rapeseed, soybean, sunflower seed). • Global harvested acreage has increased by 41% to estimated 916 million hectares in 2012 from 648 million hectares in 1964. • Global harvested acreage on a per capita basis has dropped 35% to estimated 0.13 ha/person in 2012 from 0.2 ha/person in 1964. 4

Declining productivity gains . Trailing 10-Year Yield Improvement 0.05 Soybeans 0.04 0.03 Global Yields for 4 Major Crops 0.02 Historical and Projected 0.01 (MT / ha) 0 6.0 Corn 5% Corn 4% 5.0 Rice 3% 2% 4.0 Wheat 1% 3.0 Soy 0% 5% Rice 2.0 4% 3% 1.0 2% 0.0 1% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 0% Wheat 5% Source: USDA; HighQuest Analysis 4% 3% 2% 1% 0% 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 5 5

Geography & returns Cropland Price History 14,000 12,000 Illinois, US Parana. BR 10,000 Sta Fe, AR US$ / hectare 8,000 BA North 6,000 BA Western 4,000 Mato Grosso, BR Entre Rios, AR 2,000 Rio Negro, UY - 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 6

Thesis for farmland investment 1. Fundamentals Supply < Demand a)  Increase in supply slower than increase in demand Demand Rationing b) High & volatile prices Price signal for capacity expansion New demand creation – biofuels and industrial uses Higher Land Values... c) ...and potentially attractive economics throughout the sector resulting from application of technology and efficient agronomic practices which will generate higher cash rents per unit of land which will be capitalized into the value of the land. 2. Inflation & currency protection 3. Uncorrelated returns 7

Survey of Participants Assets Under Additional AUM Management in Three Years Ag-Focused Investment Managers $16.2 billion $17.3 billion Diversified Investment Managers $3.6 billion $3.4 billion End Investors $1.2 trillion $8.2 billion 8

New Investment-Strategy 9

New Investment-Geography 10

Thank You! Chris Erickson Managing Director HighQuest Partners, LLC 978 887 8800 cerickson@highquestpartners.com www.highquestpartners.com Boston - St. Louis 300 Rosewood Dr, Danvers, MA 01923 – USA www.highquestpartners.com