GREAT AMERICAN GROUP ADVISORY & VALUATION SERVICES Food Monitor May Volume 6

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1 GREAT AMERICAN GROUP ADVISORY & VALUATION SERVICES Food Monitor May Volume 6 In this Issue: Overview 4 Recent Appraisal Trends 5 Monitoring Points 5 Pricing Trends 6 Food and Beverage Processing Equipment 14 Food Reference Sheet 15 Introduction Welcome to the sixth issue of the Food Monitor from Great American Group Advisory & Valuation Services ( GA ). This publication will provide you with market value trends for a variety of segments within the food industry. The enclosed information represents a composite of GA s industry expertise, wellrespected industry publications, liquidation and appraisal experience, and conversations with industry specialists. Due to the commodity nature of certain food products, timely reporting is necessary to understand an ever-changing marketplace. GA strives to contextualize important indicators in order to provide a more in-depth perspective of the market as a whole. In this issue of the Food Monitor, we have included market pricing and trends for beef, pork, poultry, dairy, fruits and vegetables, seafood, commodity goods, and wholesale distributors and their relation to the valuation process. Trends in Recovery Values Net orderly liquidation values ( NOLVs ) have been mixed for the first quarter versus the prior appraisal period. Results have increased for some companies up to six percentage points due to positive inventory mix, higher prices, and higher overall margins, while other companies experienced declines of up to five percentage points due to increased weeks of supply and higher slow-moving product levels. Sales have largely increased as market consolidation has continued to occur and new stock keeping unit ( SKU ) rationalization has continued. Companies continue to do everything they can to purchase raw materials at favorable prices and limit margin compression. This has largely been achieved through targeted price increases and the elimination of underperforming SKUs. Trend Tracker NOLVs Sales Trends Gross Margin Inventory Pricing Mixed Increasing Increasing Increasing Increasing Raw materials and finished goods inventory levels have continued to increase due to higher overall market prices. High fuel prices and feed costs continue to impact inventory supply, as farmers are faced with higher costs for both cash crops and feed stocks, which has limited plantings and, in certain cases, rushed them to market. Export demand continues to strengthen, based on strong foreign currencies and the ever expanding global market. Emerging markets such as China and Brazil continue to seek out opportunities to strengthen and grow in the international marketplace and will continue to compete with domestic competitors for market position. GA internally tracks recovery ranges for numerous commodity food segments, as well as finished and cooked products and trends in food service, retail, and food distribution, but we are mindful to adhere to your request for a simple reference document. Should you need any further information or wish to discuss recovery ranges for a particular segment, please feel free to contact your GA Business Development Officer. 1

2 ABOUT GREAT AMERICAN GROUP GA is a leading provider of asset disposition solutions and valuation and appraisal services to a wide range of retail, wholesale, and industrial clients, as well as lenders, capital providers, private equity investors and professional services firms. In addition to the Food Monitor, GA also provides clients with industry expertise in the form of monitors for the metals, building materials, auto parts/oil and fuel, and chemicals, plastics, and packaging industries, among many others. EXPERIENCE Headquarters: Burbank Blvd. Suite 300 South Woodland Hills, CA GREAT Atlanta Boston Charlotte Chicago Dallas London Los Angeles New York GA has been involved in the liquidation of several food processing and distribution companies, including Metropolitan Foods; BSB, Inc.; New Sam Woo Trading; Markel Johnson; and Gulf Shrimp Company, as well as food processing, storage, and distribution equipment for companies such as Winn Dixie, Maui Pineapple Company, Humboldt Creamery, Loeb Equipment, and Webvan. Food processing, storage, and distribution equipment liquidated included blow molding lines, bagging machines, bottle conveyors, milk separators and pasteurizers, filling lines, pizza manufacturing lines, vacuum sealers, freezers and coolers, stainless steel tanks, liquid lines, and frozen and refrigerated box trucks. Liquidation results were positive, as stainless steel equipment recoveries have been strong due to elevated steel prices that have made new equipment more expensive. There is a limited supply of equipment less than five years old in the marketplace and those assets are in high demand during liquidations. GA has worked with and appraised many large and well-known companies within the food service industries. While our clients remain confidential, they have included meat processors and distributors, leading fresh and processed fruit and vegetable distributors, and specialty and prepared food distributors servicing restaurants, retailers, food service companies, and wholesalers across the U.S. GA s extensive list of appraisal experience includes: One of the nation s largest independent canning and frozen food companies, which maintains production facilities throughout the country and exceeds $700 million in sales annually; One of the world s largest producers of fresh and packaged fruits and vegetables, which exceeds $800 million in annual sales; Processors of both conventional and organic frozen vegetables; A manufacturer and distributor of frozen and canned vegetable and fruit products, including greens, beans, fruit, peanuts, and assorted vegetables; Multiple importers and distributors of fresh and frozen seafood products to large national food wholesalers; Leading portion-controlled beef and poultry cutting operations for the casual dining and quick serve restaurant segments; A distributor of sweeteners, non-dairy creamers, croutons, crunchy toppings, stuffing, breadcrumbs/cracker meals, foodservice stuffing mixes, snacks, and snack mixes; A producer and distributor of ice cream and related frozen products; Vertically-integrated producers of high-quality coffees for the restaurant and supermarket industries; A producer and distributor of various fruit juices, as well as vitamin-enriched water and cocktail mixers; Producers and distributors of desserts, such as frozen cheesecakes, gourmet cakes, mini desserts, and brownies, as well as batters, fillings, frozen dough, icings, and spreads; and Distributors of specialty food products, including pasta, sauces, marinades, and fine artisan cheeses. In addition to our internal personnel, GA maintains contacts within the food industry that we utilize for insight and perspective on recovery values. 2

3 APPRAISAL & VALUATION TEAM BUSINESS DEVELOPMENT Mike Marchlik National Sales & Marketing Director Drew Jakubek Managing Director, Sponsor Coverage Bill Soncini Senior Vice President - Midwest Region bsoncini@greatamerican.com OPERATIONS Ken Bloore Chief Operating Officer kbloore@greatamerican.com Ryan Mulcunry Executive Vice President - Northeast Region, Canada & Europe rmulcunry@greatamerican.com David Seiden Executive Vice President - Southeast Region dseiden@greatamerican.com Michael Petruski Executive Vice President, General Manager, Machinery & Equipment mpetruski@greatamerican.com Jonathan Deptula Project Manager jdeptula@greatamerican.com T: MACHINERY & EQUIPMENT OPERATIONS Marc Musitano Chief Operating Officer mmusitano@greatamerican.com

4 OVERVIEW Overall food prices as reported by the Consumer Price Index remained above average in March 2012, increasing 0.2% from February figures. The increase was driven primarily by an improvement in the meats, poultry, fish, and eggs category, which was the largest monthly increase for that segment since May Several categories posted declines, however, including fruits and vegetables (which includes frozen and canned varieties), fresh vegetables, cereals and bakery products, and dairy products. The following table illustrates CPI changes by category for the month of March 2012 as compared to 2011: Casey Langan, spokesman for the Wisconsin Farm Bureau, attributed the overall price increases to rising petroleum costs. Energy prices have such an impact on food prices because everything in the grocery store comes from someplace else, he said. After food leaves the farm the costs of transportation, processing, packaging and cold storage all factor into what the consumer ultimately pays at the grocery store. Considering the pain we ve experienced at the pump so far in 2012, the uptick in food prices did not come as sticker shock. Category CPI Index Meats, poultry, fish, and eggs 0.8% Fruits and vegetables (0.4%) Fresh vegetables (1.6%) Cereals and bakery products (0.2%) Dairy products (0.1%) Year-over-year indices were more favorable, with five major grocery store food groups posting increases. The dairy group experienced the largest gain of 6.3%, while the food at home index increased 3.6%. However, the fruits and vegetables index fell 3.9% for the 12-month period, representing its largest annual decline since November SUPERMARKETS Supermarket food prices increased slightly during the first quarter of 2012, according to the latest American Farm Bureau Federation Marketbasket Survey. Of the 16 items surveyed (which included items from all of the food groups), prices for 13 products increased and three decreased as compared to the prior quarter. The overall increase was driven by higher prices for meat and cheese due to a rise in demand and restricted supplies. Those categories with the strongest increases in price included cheddar cheese, bacon, ground chuck, sirloin tip roast, and sliced deli ham. RESTAURANTS The restaurant industry continues to show signs of optimism, driven by increased customer traffic and same-store sales. The National Restaurant Association s monthly Restaurant Performance Index ( RPI ) a composite index that tracks the health of and outlook for the U.S. restaurant industry was at in March, representing a 0.3% increase from the prior month. This represented the fifth consecutive month in which the RPI stood above 100. An RPI below 100 signifies contraction in the index of key industry indicators. The majority of restaurant operators reported higher same-store sales and customer traffic levels in March, and remain positive for the coming months. OUTLOOK Overall food prices remain on track for continued increases through year-end, with predicted increases ranging from 2.5% to 3.5% in all categories. Grocery store prices are expected to increase between 2.5% and 3.5%, while restaurant prices will increase 2.0% to 3.0%. However, these figures could be impacted by abnormal weather patterns and any significant changes in the global market for major commodities. 4

5 RECENT APPRAISAL TRENDS RECENT RECOVERY TRENDS Companies have begun to see a reverse in recovery trends, as higher pricing has largely led to margin increases and increased recovery values. While higher raw material prices have impacted overall liquidity in most sectors, the increases in overall sales have caused inventory levels to rise. Recovery values have been mixed, ranging from average increases of up to six percentage points, due to improved inventory mix and higher margins, to declines of up to five percentage points as a result of higher weeks of supply and increased slow-moving inventory levels. Higher raw material prices have pushed companies to look at ways in which they can better preserve margins, which has been achieved through both formula-based pricing models that allow for more flexibility, as well as contract prices that take into account higher raw material prices. Margins have increased as companies have been able to implement multiple price increases due to the continued rising raw material costs; however, as customers continue to seek value, balancing demand and pricing has been extremely important. MONITORING POINTS Monitoring Point Monitor acquisition prices for raw materials and gross margin results. Monitor raw material and finished good inventory levels. Monitor aged/slow-moving inventory levels. Monitor USDA and ERS market prices for commodity traded products such as meats, dairy, and corn; and the International Coffee Institute for coffee prices. Monitor customer contracts and relationships. TRENDS IN MARKET PRICES/INVENTORY Inventory levels have increased due to positive sales trends and higher overall prices for finished goods as a result of increased raw material costs. Companies continue working to keep their inventory levels in-line with current demand requirements, while remaining cognitive of market pricing and purchasing requirements. INDUSTRY/SALES OVERVIEW Sales have largely shown positive results, as companies have been able to secure additional business with existing customers, as well as expand into new sectors. Companies have been looking at ways in which to maximize cash availability in light of higher material costs. This has largely been achieved by focusing on stocking products that have immediate sales needs. While dollar sales have certainly benefited from higher market prices and raw materials costs, unit demand has also increased as companies have been able to secure additional customers through overall consolidation in the market. Impact Increased raw material prices could result in margin compression, despite the active practice of price increases to limit margin exposure. As inventory costs increase, higher inventory levels could impact liquidity and recovery values. As the sale of aged or slow-moving inventory results in lower recovery values in a liquidation, the level of goods as a percentage of total on-hand inventory could negatively impact collateral value. These products will typically require additional discounting in a liquidation. The increasing spread between current inventory values and market values could favorably impact overall recoveries. As customer relationships are key to success during a liquidation, it is important to understand the contract relationships with current customers and the likelihood of their participation. 5

6 PRICING TRENDS BEEF AND CATTLE Smaller U.S. cattle herds and increasing feed and fuel costs continue to impact beef prices. In March, the average retail price for USDA choice grade round steak increased 13% from the prior year. Choice grade boneless sirloin was up 16%, while ground beef was 11% higher than 2011 and 35% above 2010 prices. U.S. beef exports for 2012 are forecasted at 2.8 billion pounds, fractionally below 2011 export levels. Quarterly growth in exports is anticipated in the first half of the year, with growth levels diminishing as the year progresses and domestic beef supplies become tighter. Growth of over 8% was anticipated in the first quarter of this year, with 685 million pounds exported. Export levels in the second quarter are expected to total 735 million pounds, or nearly 5% higher than the same time last year. Total U.S. beef production levels in the first two quarters are expected to fall between 1.7% and 2.2% as compared to the same periods of the prior year. The market continues to be challenging for processors as they face higher market prices in conjunction with the recent announcement that mad cow disease had been found in a California dairy cow. Major importing countries, such as Canada and Mexico, have said they have the necessary safeguards in place and confidence in the U.S. food safety system and would not limit imports. Japan limited imports of U.S. beef to cows of 20 months or younger and believes that increased inspections will satisfy any concerns regarding food safety. $3.00 Monthly Choice Beef Wholesale Value Per Pound of Retail Equivalent April March 2012 $2.90 $2.80 $2.70 $2.60 $2.50 $2.40 $2.30 6

7 PRICING TRENDS PORK Thus far in 2012, U.S. consumers appear willing to pay more for larger quantities of pork. U.S. pork production is expected to rise about 2% in 2012, primarily on productivity gains and possible rebuilding of domestic herds. Retail prices are indicative of strong consumer demand. USDA s monthly retail/wholesale pricing for pork showed a record spread of $2.04 per pound, which signals retailers ability to pass along higher prices to consumers. Retail prices averaged $3.49 per pound in the first quarter of 2012, a 7.8% increase from the prior year, and per capita pork consumption was estimated at 11.5 pounds annually. Much of the outlook for the remainder of 2012 will depend on pork export demand, which accounted for 22% of production in China continues to be a major importer, accounting for nearly 12% of total volume, according to the research firm Rabobank. U.S. export volumes increased 36% from the prior year, as China, Japan, Mexico, and Canada increased their imports by approximately 60 million pounds. Also supporting the outlook for U.S. pork prices in 2012 are significant reductions in beef and poultry production. Higher prices for substitute animal proteins, especially beef, are expected to provide some continued support for the pork sector. $1.75 Monthly Average Pork Wholesale Value Per Pound of Retail Equivalent April March 2012 $1.70 $1.65 $1.60 $1.55 $1.50 $1.45 $1.40 7

8 PRICING TRENDS POULTRY Broiler meat production for the first quarter of 2012 was reported at 9.1 billion pounds, down 2.6% from the year prior. The decrease was the result of small declines in the number of birds slaughtered and the average live weight at slaughter. In the first quarter, stocks of almost all broiler products were well below the previous year s levels. Due to such lower production, wholesale prices for most products are expected to continue to gradually increase throughout Over the first two months of the year, whole broiler prices averaged $0.84 per pound, up almost 15% from the same period in 2011, and by March, prices had risen as high as $0.90 per pound. Prices for boneless/ skinless breast meat for the first two months of 2012 averaged $1.27 per pound, up almost 10% from the same period last year, while prices for rib-on breasts were approximately 20% higher. Even broiler wing prices have remained strong, falling only slightly from their normal seasonal high in late January at $1.83 per pound, a sharp increase of almost 90% from the year prior. Retail poultry prices are expected to increase between 3% and 4% through year-end 2012 as the pressure of reduced supply and higher feed costs continue to influence demand and overall market prices. Monthly Wholesale Broiler Composite Per Pound April March 2012 $0.90 $0.85 $0.80 $0.75 $0.70 $0.65 8

9 PRICING TRENDS DAIRY Overall dairy prices were down 0.1% from February to March, but remain 6.3% above March 2011 levels. Similarly, while milk and cheese prices decreased in March, they remained well above the prior year s prices. Extended milk production and slightly lower forecasted economic growth are expected to continue to pressure prices. Fluid milk prices are expected to level off early in 2012 and will remain below the average 2011 farm prices, which should restrict overall dairy retail price inflation for the rest of the year. In terms of retail pricing, natural cheddar cheese saw a slight decrease from $5.71 to $5.66 per pound and fresh whole milk prices decreased from $3.58 to $3.49 per gallon between January and March. Milk production in the first quarter was approximately 3.4% above the prior year s totals. The relatively mild winter temperature in most of the U.S. was ideal for milk production, boosting yields per cow in the first quarter of However, weaker producer returns are expected to result in herd contraction and lower milk per cow in the second half of the year. Overall milk production is forecasted at billion gallons this year, an increase over 2011 and slightly higher than first quarter forecasts. $3.80 Average Monthly Milk Retail Prices Fresh, Whole Fortified Per Gallon April March 2012 $3.70 $3.60 $3.50 $3.40 $3.30 $3.20 9

10 PRICING TRENDS FRUITS AND VEGETABLES Overall fresh fruit prices fell 0.4% in March, yet remained 0.1% above the same period in Apple prices rose 3.3% in March, while other fresh fruits were 1.2% above February s figures. Citrus fruit and banana prices declined 5.4% and 0.4%, respectively, during this period. In terms of fresh vegetables, the overall index decreased 1.1% in March and remained 12.6% below 2011 prices. Declines were driven by a 28.8% fall in tomato prices and a 7.9% decrease in other fresh vegetable prices. Unseasonably warm weather and favorable growing conditions in the first quarter of 2012 resulted in increased supplies and lower prices as compared to Processed fruit and vegetable prices declined 0.6% in March yet remained 5.5% above 2011 levels. This was attributed to contracts within the processed fruit and vegetable industry, which kept price inflation below that for fresh fruits and vegetables throughout However, prices are expected to increase in the coming months due to increased fuel and commodity costs. 159 Monthly Consumer Price Indexes - Processed Fruits and Vegetables (December 1997 = 100) April 2011 through March

11 PRICING TRENDS CORN AND WHEAT According to economists, grain prices have maintained a steady decline in recent months due to expectations for a large U.S. corn crop and more abundant stocks in the months ahead. Farmers have reported plantings of 95.9 million acres of corn this year, an increase of 3.9 million acres over 2011, resulting in an estimated 88.8 million acres of grain. As a result, corn futures have been volatile, reaching a high of $6.74 per bushel in August, before falling to a low of $5.23 in March and trading near $5.40 as of mid- April Despite predictions of increased stocks, the amount harvested will depend upon a variety of factors, including summer weather, which can be unpredictable. In recent weeks, U.S. wheat farmers have expressed concern regarding record temperatures, drought conditions, and soil temperatures that may threaten this year s crops. Many farmers have postponed plantings due to the lack of moisture in the soil. Other factors impacting crop yields and pricing are biofuels policies (which impact the amount of corn utilized in blends), feed usage, global production, and economic conditions. According to the USDA, an increase in consumption during the first half of the year may be offset by a slowdown during the last quarter as cattle numbers decrease and farmers opt for wheat-based feeds in place of corn. U.S. No. 2 Yellow Corn Prices - $ Per Metric Ton May 2011 through April 2012 $ $ $ $ $ $ $ $

12 PRICING TRENDS SEAFOOD Overall fish and seafood prices increased 0.6% from February to March and were 3.9% above 2011 levels. While Japanese output is expected to continue its recovery throughout 2012, seafood prices are predicted to remain elevated. Overall seafood prices are on track to increase between 4.0% and 5.0% through year-end due to steady demand and limited market supply. LOBSTER The lobster market has been impacted by unusually warm winter temperatures in late 2011 and early Warm water temperatures resulted in an abundance of softshells that were subsequently processed and frozen, resulting in higher than average stocks in cold storage. This generous supply is expected to place additional pressures on spring and summer lobster prices. The price of 5 oz. to 6 oz. tails has fallen from nearly $18.00 per pound to $15.50 per pound since last summer. In terms of live catch, a light supply in the market resulted in higher prices in early 2012, with the Boston price of live oneand-a-quarter pound lobsters increasing from $6.00 per pound in January to nearly $8.00 per pound in March. However, prices are expected to decline in May as the season resumes and supplies become more readily available. SHRIMP Overall U.S. retailers were satisfied with demand during the holiday season, as many consumers opted for home cooking rather than dining out at restaurants. Import markets were fairly quiet in January, with only sporadic declines because of the inventory build up in the market. However, prices have remained steady as reduced materials at origin and demand in East Asia are keeping prices stable in international trade. The Lunar New Year celebrations in East Asia diverted large supplies of fresh shrimp to the domestic and regional markets in China, Hong Kong, Taiwan, Singapore, Vietnam, and Malaysia. Therefore, supply from these sources will be very limited for frozen exports until the next harvest, which is due in May. SALMON The salmon market is currently being impacted by lower prices of farmed catch due to a greater supply, coupled with weaker exchange rates. Farmed Atlantic salmon imports at the start of the year increased 16.1% from 2011 levels, resulting from an overall increase in stock. As a result, the value and average price of imported farmed salmon has fallen 6.2%, while the average price has decreased by 19.3% over the past six months. Prices have fallen not only in the U.S., but also in the European and Japanese markets. In the coming months, processors will be keeping watch on other factors that could impact prices- namely the number of catches, fuel costs, and labor expenses. OTHER SEAFOODS Consumption of groundfish is on the rise, creating new markets for exporters. Increased supplies to Europe, America, and Asia are expected to come from good management of the wild stocks, but the pollock quota for Alaska s Bering Seas and Aleutian Islands this season will be 5.2% lower than last year. Prices for pollock fillet blocks and surimi are firming up due to an overall shortage of whitefish in the market. The U.S. has become the first country that limits catches on all groundfish supplies, yet the outlook for both supply and demand is positive. For fisheries in the Bering Sea and Aleutian Islands, scientists believe that current ground fish stocks could sustain a catch of 2.5 million tonnes, while in the past a 2.0 million tonnes ceiling was imposed as a conservation measure. Cod prices are currently on a downward trend, with prices 5% to 10% lower than last year, and buyers are unwilling to pay more at the current time. Demand for fillets remains solid and prices are not declining as much as those for headed and gutted fish. 12

13 PRICING TRENDS COFFEE According to the International Coffee Organization s ( ICO ) most recent Monthly Coffee Market Report, Arabica prices were subject to further downward correction in March, while Robusta prices increased. The decrease in the Arabica prices were reflected in the monthly average of the ICO composite indicator, which fell 8% from $1.82 per pound in February to $1.67 in March, which represented the lowest monthly level since October Exports during February 2012 totaled 9.3 million bags, which has resulted in a 1.8% decrease from the prior year. Total production in crop year 2011/12 is estimated at 131 million bags, representing a fall of 2.4% in relation to the prior season. This is mainly a result of decreased production in the regions of Asia, Oceania, and South America, with Brazil and Vietnam experiencing production declines of 9.6% and 10.1%, respectively. Despite the decline, Brazil is still expected to lead the export market. Adverse weather conditions in Asia, Oceania, and South America have impacted crop production. Total production in Asia and Oceania, which accounts for approximately 26% of world coffee production, is expected to be down 5.2% in the current year. The ICO believes that an expected increase in the supply of Arabica may contribute to a decrease in prices. However, despite the better crop expected in Brazil for crop year 2012/13, there are limited prospects of significant production increases in other countries. Labor costs and the current surge in prices for petroleum products may have a negative impact on the incomes of coffee producers, which could lead to a fall in productivity. SUGAR Sugar prices continue to show stability, as prices have trended from $0.346 cents per pound in January to $0.349 cents per pound in March. Prices for the current year are expected to increase 2.0% to 3.0% over 2011 levels due to higher shipping costs and lower domestic production. Since approximately 70% of domestic sugar demand is supplied by domestic crops, the USDA suspects that supply will remain tight until the government releases more product onto the market. U.S. Raw Sugar Prices Per Pound - Duty Fee Paid New York April 2011 through March 2012 $0.42 $0.41 $0.40 $0.39 $0.38 $0.37 $0.36 $0.35 $0.34 $0.33 $

14 FOOD AND BEVERAGE PROCESSING EQUIPMENT The food and beverage equipment marketplace continues to remain healthy, with improvement noted in many sectors. As has been the case over the last 12 months, the food industry has experienced growth which has led to improved demand for new and used equipment. With new equipment costs and lead times increasing, the secondary marketplace has become a strong alternative market, particularly with regard to late model equipment. However, there still exists a marketplace for older equipment in good condition, both domestically and internationally in industrializing nations. Packaging continues to be a highly stable sector of the food and beverage industry. The demand for equipment utilized in environmentally friendly packaging continues to grow as manufacturers seek to change their packaging to be more bio -degradable and eco-friendly. Nonetheless, large swings in equipment values, either positive or negative, are uncommon as the recovery values for packaging equipment are typically flat. However, due to the amount of equipment that is available in the secondary marketplace, prospective buyers are often selective with their purchases, and look primarily for late model equipment. As a result, older packaging equipment typically fairs worse in the secondary marketplace. Many pieces of equipment, such as silos, processing lines, freezers, and ovens, within the food and beverage processing industries tend to have a relatively low recovery value as a proportion of cost due to the installation, engineering, and other soft costs associated with the items. As a result, equipment that was very costly to set up and install typically is sold for a small fraction of cost when sold in the secondary marketplace. While the market for such equipment is stable, recovery values are typically not expected to be high. As such, most dispositions for these assets as of late have been in-place sales as opposed to sales of equipment with the intent of removal. The stable market that existed throughout most of 2011 for the food processing equipment industry has carried over through the beginning of The marketplace for new and used equipment has experienced slight improvements as the demand for food products has increased both in the United States and overseas. While the market has seen some improvement in the sectors with increased demand, there still does not exist a shortage of equipment in the marketplace which would drive up the values of this equipment. However, if demand continues to increase and original equipment manufacturers are unable to meet it, recovery values for used equipment could experience a significant boon. As the demand for food products increases globally, the demand for equipment will continue to increase. In industrialized nations, the demand for healthier food alternatives as well as environmentally friendly packaging will drive these sectors of the industry. In industrializing nations, the increased demand for processed food products will continue to create a stable global marketplace for nearly all related equipment. Fried food processing equipment has been flat in recent months as the desire to move toward healthier alternatives has led to a slight decrease in the demand for fried food products. Conversely, equipment utilized in baking and air popping has experienced some growth in recent months. However, equipment utilized in the frying process still generates demand, as frying continues to be one of the predominant methods of producing snack foods. 14

15 FOOD REFERENCE SHEET Choice Beef Values, Price Spread, and All-Fresh Retail Value Dollars per pound of retail equivalent March 2012 February 2012 March 2011 Retail Value Wholesale Value Net Farm Value Beef Price Spreads Wholesale to Retail Farm to Wholesale Total All-Fresh Beef Retail Value Source: ERS/USDA Pork Values and Spreads Dollars per pound of retail equivalent March 2012 February 2012 March 2011 Retail Value Wholesale Value Net Farm Value Pork Price Spreads Wholesale to Retail Farm to Wholesale Total Source: ERS/USDA 15

16 FOOD REFERENCE SHEET Retail Prices for Poultry Cuts Dollars per pound March 2012 February 2012 March 2011 Retail Broiler Composite Wholesale Broiler Composite Wholesale-Retail Broiler Spread Chicken, Fresh, Whole Chicken, legs, bone-in Chicken, boneless breast Turkey, frozen, whole Source: ERS/USDA Retail Prices for Dairy Products March 2012 February 2012 March 2011 Milk, fresh, whole, fortified-gal. ($/gal.) Butter, salted, grade AA, stick, 1-pound package ($/lb) American processed cheese ($/lb) Cheddar cheese, natural ($/lb) Source: ERS/USDA 16

17 FOOD REFERENCE SHEET Coffee: ICO Indicators and Futures Prices (New York Market) Dollars per pound April 2012 March 2012 April 2011 ICO Composite Colombian Milds Other Mild Arabicas Brazilian Natural Arabicas Robustas Source: International Coffee Organization Durum Wheat: Prices received by Farmers, Monthly and Marketing Year Average, Montana, USA (USDA) Dollars per bushel Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Source: NASS/USDA Corn and Sorghum: Average Prices Received by Farmers Dollars per bushel March 2012 February 2012 March 2011 Corn Sorghum Source: ERS/USDA 17