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What Our Clients are Looking For
• Commodity costs are a significant cost of goods sold

• Supplement internal commodity expertise

• Develop and implement a strategic business strategy to manage cost

• Track, report, and forecast key commodity costs

In short:
Become their trusted source for agricultural commodity and energy
information and management processes

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www.BeesonInc.com Beeson & Associates, Inc. (502) 241-8460

What We Heard
• Commodity cost surprises have impacted results multiple times

• An active search for commodity risk management help is underway

• Exposure to: flour, soybean oil, palm oil, and sugar

• Evaluating the need to establish a margin account

• Would like support during the 2013 planning process

In short:
The issue is on the “radar screen” and solutions are being evaluated

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Customized Commodity Solutions
We strive to institute a complete solution Who We Have Helped
What is risk to the organization?
• Volume at risk is the mismatch of forward sales and commodity
ownership
• Price risk is the volatility of the market
• Risk = Volume X Price risks

What capability is there to manage risk?
• People, processes, and financial tools

What is our market opinion?
• Research and outlook

What are the benefits?
• Execute and track results

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Our Team
Blend of experience and education delivers results

Matt Beeson Alex Norton
• Founder 1995 • Director: Risk Management
• Key commodity purchasing roles • Economics: Wake Forest
– Pillsbury, Brach Candies, KFC (PepsiCo) • MBA U Mass in progress
• M.S. in Ag Econ University of Illinois • Joined Beeson & Associates, Inc. in 2008

James Stewart Philip Beeson
• Energy leader • Director: Commodity Services
• Key energy management roles • Finance at Johnson & Johnson
– Summit Energy, GE Appliances, Integrys Energy
• Finance: Miami of Ohio
• MBA University of Louisville
• Joined Beeson & Associates, Inc. 2011
• Joined Beeson & Associates, Inc. 2011

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The Process
We end with market outlook What we hear?
2-day launch “This process changed the way
we think about and manage
• Learn your business needs the markets.”
• Get underlying volume information “We no longer start with a
• Mutually set objectives of the program panicked feeling about
market direction, but put
together a business strategy
Ongoing support based on market conditions.”
• Weekly market outlook “The positions we do take are
understood, quantified, and
• Monthly strategy webinar tracked.”
• Execution of strategies (if desired) “We have not had an
unmanageable commodity
surprise in the 4 years we
Track the results
have been using this model.”
• Provide results tracking
• Utilize proprietary web-based reporting Bundle(if desired)

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Weekly Update

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Monthly Strategy Meeting

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Example: You See What We See

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Example: You See What We See

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Reporting

Comparison vs. Market
1000s better/(worse)
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 2011 Total

Flour $363 $372 $538 $308 $243 -$109 $12 $188 $152 -$94 -$72 -$49 $1,851

Palm Oil $90 $225 $368 $391 $418 $522 $197 $227 $314 $89 $97 $81 $3,020

Buttermilk $11 $0 $41 $69 $3 $52 $27 $8 $19 $5 $6 $4 $244

Sugar $30 $41 $83 $63 $33 $49 $36 $57 $78 $84 $41 $41 $635

Natural Gas $0 -$4 -$3 $1 $1 $1 $0 -$1 -$2 -$3 $0 $0 -$10

Total $493 $635 $1,027 $831 $699 $514 $272 $479 $561 $81 $72 $76 $5,740

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Reporting
Comparison vs. Budget
1000s better / - worse

Flour $79 $84 $90 $28 $37 -$72 -$47 $29 $44 -$50 -$59 -$41 $121

Comparison vs. Budget
Palm Oil $1 $11 $7 $3 -$1 -$3 -$72 -$75 -$108 -$116 -$86 -$83 -$522
1000s better / - worse
Buttermilk $13 -$2 $20 $34 -$43 -$20 -$38 -$54 -$48 -$49 -$38 -$30 -$255

Flour $79 $84 $90 $28 $37 -$72 -$47 $29 $44 -$50 -$59 -$41 $121
Sugar -$2 -$3 -$4 -$3 -$3 -$3 -$2 -$3 -$3 $15 -$14 -$14 -$39

Palm Oil $1 $11 $7 $3 -$1 -$3 -$72 -$75 -$108 -$116 -$86 -$83 -$522
Apples $10 $3 $34 -$16 -$15 -$75 -$67 -$34 -$37 -$95 -$95 -$95 -$482

Buttermilk $13 -$2 $20 $34 -$43 -$20 -$38 -$54 -$48 -$49 -$38 -$30 -$255
Cherries -$12 -$24 -$34 -$26 -$31 -$36 $16 $0 -$2 -$3 -$7 -$9 -$168

Sugar -$2 -$3 -$4 -$3 -$3 -$3 -$2 -$3 -$3 $15 -$14 -$14 -$39
Natural Gas -$2 -$2 -$2 $1 $1 $0 $0 $0 $0 $0 $1 $1 -$2

Apples $10 $3 $34 -$16 -$15 -$75 -$67 -$34 -$37 -$95 -$95 -$95 -$482
Total $87 $66 $111 $22 -$55 -$209 -$210 -$135 -$155 -$299 -$298 -$271 -$1,347

Cherries -$12 -$24 -$34 -$26 -$31 -$36 $16 $0 -$2 -$3 -$7 -$9 -$168
Last Month's Update -$1,336

Natural Gas -$2 -$2 -$2 $1 $1 $0 $0 $0 $0 $0 $1 $1 -$2

Total $87 $66 $111 $22 -$55 -$209 -$210 -$135 -$155 -$299 -$298 -$271 -$1,347

Last Month's Update -$1,336

Note: several commodities were deleted for confidentiality reasons. Total does not add correctly
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Implementation of Margin Account
Is it really necessary? Our Experience
Accounting treatment Few of our clients manage their
own margin account
• Mark-to-market
• Hedge accounting
• Vendors will embed option
strategies
Cash impact
• Accounting and cash impacts
• Margin can be significant are insurmountable
• Most of the risk management
Training programs do not require it
• Understanding and use of options
However, it cannot be debated…
Flexibility of having an account
has advantages!

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