2012 SUSTAINABILITY REPORT ABOUT THIS REPORT TABLE OF CONTENTS

Welcome to our second Farmland Foods Sustainability Report. About Farmland Foods 1 This report highlights five key pillars of our sustainability focus: Key Data Summary 2 care, employees, environment, food safety and quality, Letter from President Michael E. Brown 3 Value Creation 4 and helping communities. New to this report is a sixth pillar, Animal Care 5 value creation, which underpins our sustainability strategy and Employees 8 connects it with our business results to further focus our goals Environment 11 and commitments. Food Safety & Quality 16 Helping Communities 18 Farmland Foods, Inc., is an independent operating company of Governance & Management 22 Contact Us 24 Smithfield Foods. A comprehensive sustainability review covering Recognition & Awards 25 all of Smithfield Foods’ operations, including Farmland Foods, is available on the Web at smithfieldcommitments.com. That review follows the Global Reporting Initiative (GRI) G3 Guidelines, which provide a recommended sustainability reporting framework and indicators.

FORWARD-LOOKING INFORMATION

This publication may contain forward-looking statements within the meaning of federal securities laws. In light of the risks and uncertainties involved, we invite you to read the Risk Factors and Forward-Looking Information sections of Smithfield Foods’ Form 10-K for fiscal 2012. ABOUT FARMLAND FOODS AT A GLANCE [Fiscal 2012]

HEADQUARTERS Kansas City, MO Farmland Foods, Inc., provides a broad selection of products for retail and foodservice customers in the United States and PRESIDENT Michael E. Brown abroad. Its primary lines of business include fresh pork, case ready EMPLOYEES 8,700 pork, , , fresh , processed sausage, lunchmeat, and specialty sausage. Since our founding in 1959, Farmland Foods CORE BRANDS Farmland has maintained a proud heritage of working side by side with Cook’s American families. Smithfield Foods acquired the company SUPPORTING BRANDS Ember in 2003. We have a large and growing international business, Premium Standard Farms exporting products to more than 35 countries across six continents. Stefano Foods Farmland Foods is one of three Pork segment independent FACILITIES Carroll and Denison, IA operating companies (IOCs) within the Smithfield Foods family. Monmouth, IL Wichita, KS Kansas City and Milan, MO Charlotte, NC Crete and Lincoln, NE Arnold, PA Salt Lake City, UT

FRESH PORK SOLD 2.0 billion pounds

PACKAGED MEATS SOLD 762 million pounds

PRODUCTS Fresh pork, case ready pork, hams, bacon, fresh sausage, processed sausage, lunchmeat, and specialty sausage

SALES 1 $4.4 billion

1 Reflects intercompany sales

1 FARMLAND FOODS Below are some key performance indicators we feel are particularly important to internal and external stakeholders. The data included here are specific to KEY DATA SUMMARY Farmland Foods. Data for all of can be found online at smithfieldcommitments.com.

CY 2011 CY 2010 CY 2009 CY 2008 CY 2007

EMPLOYEES Total Case Rate 3.49 4.16 5.39 5.76 5.35 Days Away, Restricted, Transferred Rate 2.44 2.74 3.0 3.87 3.17 Days Away from Work Illness and Injury Rate 0.65 0.84 0.88 0.86 0.49 OSHA Notices of Violation 10 5 2 4 7 OSHA Penalties $9,350 $7,445 $2,450 $2,485 $8,312

FY 2012 FY 2011 FY 201 0 FY 2009 FY 2008

ENVIRONMENT 1 Water Use (gallons per cwt 2) 68.3 69.0 66.4 67.1 69.4 Energy Use (decatherms per cwt) 0.123 0.127 0.123 0.121 0.124

GHG Emissions (metric tons CO 2e per cwt) 0.0118 0.0123 0.0119 0.0132 0.0139 Solid Waste to Landfill (lbs per cwt) 0.84 0.88 0.94 1.16 1.12

FY 2012 FY 2011 FY 2010 FY 2009 FY 2008

HELPING Learners to Leaders ® Contributions $105,600 $53,050 $0 $0 $0 COMMUNITIES Total Food Donations (servings) 3 1,249,612 1,597,112 1,934,972 4,313,664 2,248,196

1 Data from previous reports were adjusted due to improved data collection and reporting. 2 100 pounds of product 3 Prior to 2010, we counted any food donation as a charitable contribution. Beginning in fiscal 2011, we began to count only those food donations that went to feed people in need.

2 Dear Farmland Foods Stakeholders:

In this, our second sustainability report, we share our thinking about wellness, which not only benefits the individual, but lowers our how we build value for those within and outside of Farmland Foods. company’s health care costs, too. Recently, we added a fitness center Our commitment to value creation hinges upon many things, but at our corporate headquarters to promote healthy habits. chief among them is a reliance upon our 8,700 employees. We also look for ways to improve the health of our communities, At Farmland Foods, our employees share in our pledge to deliver good whether through contributions of food ($1.2 million worth in fiscal food responsibly and in ways that nourish our consumers, enrich our 2012), donations of cash, or funding for education. This past spring, communities, and minimize our impacts on the environment. Our members of Farmland Foods’ management team were especially proud workforce is more engaged in these efforts than ever before, helping to see the first cohort of teenagers graduate from the Learners to to make Farmland Foods a much stronger business. At the same time, Leaders/Science Bound program in Denison, Iowa. It’s incredibly we’re stepping up our efforts to offer our workforce the tools they gratifying to know that a program funded by Farmland Foods need to grow personally and professionally. inspired these students to complete high school and continue on to Iowa State University, which is allowing them to attend tuition-free. This past year, for example, we conducted our first companywide employee survey to identify and measure those issues that most affect Programs such as these define what we mean by “value creation.” our workers. About 86 percent of our workers responded—a high Other examples, including a number of efforts that are simultaneously figure by any measure, but especially for a first-time survey. On the reducing our environmental impact and saving money, can be found whole, we got positive feedback on areas ranging from compensation throughout the pages of this report. I encourage you to take a look to recognition for a job well done. Our employees told us they would and to let us know your thoughts on how we might improve. like to contribute more to our productivity improvement initiatives. We’re taking a close look at how we might address their comments Sincerely, and create a working environment that not only meets, but exceeds, their expectations.

It’s our responsibility to provide the safest possible workplace, and we Michael E. Brown continue to reduce the rate of worker injuries. In fact, we finished 2011 President at record lows for two categories of injuries that we report to federal authorities. We also aim to encourage better employee health and October 1, 2012

3 VALUE CREATION

Smithfield Foods and Farmland Foods have a responsibility to drive growth and improve shareholder value. We believe that financial stability and Fiscal 2012 Sales: $4.4 billion * sustainability go hand in hand. Our sustainability strategies help us connect with our company’s core values and, at the same time, improve our Fiscal 2012 Expenditures to Communities company’s overall performance. Doing the right thing is a strong motivator for our work, but highlighting the link between sustainability and financial h Wages and benefits: $489.6 million success also demonstrates the long-term viability of our approach. h Community donations: $1.6 million

*Reflects intercompany sales Farmland Foods has worked with Smithfield Foods and its other independent operating companies (IOCs) to embed sustainable practices and principles systematically across all our business. In 2010, Smithfield Foods created a new sustainability management program, including board- FEEDING THE WORLD and corporate-level oversight committees, a new executive-level position to develop and oversee our sustainability strategy, and a core team to drive The world’s population is expected to rise from 7 billion today to further progress. The company also set specific goals and targets for the five 9 billion by 2050. This growth will put further pressure on the cost pillars of our sustainability program: animal care, employees, environment, and availability of natural resources—including land, water, energy, food safety and quality, and helping communities. seed, and —to produce sufficient food. Just as important, it will challenge global systems of and food distribution This year, we have established a sixth pillar, which we call “value creation.” to provide nutritious diets to those who need it—when they need Under this new pillar, we demonstrate how our sustainability program it and wherever they are located. creates value for all our stakeholders while simultaneously improving company financial performance. We can create greater value for each of We, along with others in our industry, play an important role our stakeholders by recognizing the intrinsic interconnections between in providing affordable sources of protein that are produced in our business objectives and our sustainability objectives. responsible ways. We recognize food security as a growing and complex issue that requires collaboration, creativity, and new Our sustainability programs have been helping Farmland Foods and approaches to solve. Our Producing Enough Sustainable Food Smithfield Foods build and deliver value for many years—and will do video can be found at youtube.com/smithfieldfoods. so even more in the future. Now, through this sixth pillar, we have the ability to highlight the specific ways that they do.

4 VALUE CREATION ANIMAL CARE

Smithfield Foods aims to raise healthy by promoting their safety Program. The program complements and overall well-being, and the company has a long history of industry existing procedures at Murphy-Brown, OUR ANIMAL CARE GOAL leadership in responsible animal production. An animal care management which are designed to supplement the h Keep our animals safe, program guides the care of the animals at every stage of their lives, from internal evaluations of day-to-day comfortable, and healthy gestation to transport to processing plant. All farm employees and contract practices. Our processing plants, hog producers must employ this management system, and Smithfield Foods Murphy- Brown, and many of its contract OUR ANIMAL CARE TARGETS takes steps to verify their compliance. growers also participate in the U.S. Department of Agri cul ture (USDA) h Remain 100% Pork Quality As the world’s largest producer of pork, Murphy-Brown LLC, 1 Smithfield Process Verified Program (PVP), which is Assurance Plus (PQA Plus ®) Foods’ hog production independent operating company (IOC), raises modeled on ISO 9000 quality manage- compliant at company- on approximately 460 farms that it owns in the United States alone. ment and assurance standards and helps owned and contract farms* Murphy-Brown also contracts with approximately 2,100 contract hog farms to ensure that standards are upheld and h Maintain PQA Plus (“contract producers”) in the United States. In addition, our meat processing procedures followed. certification for all suppliers operations purchase pigs from numerous independent hog producers whose and move toward site numbers fluctuate depending upon market conditions. Details on Smithfield Foods’ animal care assessments auditing policies and procedures can be h Complete conversion from Murphy-Brown created its own animal care management system more than found at smithfieldcommitments.com. individual gestation stalls to a decade ago. Developed in consultation with two of the world’s foremost group housing for pregnant experts in animal behavior and handling, this system continues to guide ANIMAL CARE AT OUR PLANTS sows on company farms by operations today. The Murphy-Brown Animal Care Policy, which applies end of 2017 to Murphy-Brown, its subsidiaries, and its contract producers, articulates We treat animals with respect at our a commitment to sound animal care and identifies five specific areas of processing plants, using a systematic * The wording of this target has been slightly revised from our previous report. responsible practices. Suppliers that provide animal products to our facilities approach that includes the following: Where “PQA Plus compliant” is used are expected to have similar operating policies and procedures to ensure the throughout this report, we mean that our farms have been site assessed and that proper care of their animals during all stages of production, transportation, h An animal welfare and humane specific employees have been certified and processing. handling manual; according to PQA Plus program guidelines. h A comprehensive training program; All company-owned and contract farms are subject to random third-party and audits and site assessments under the Pork Quality Assurance Plus (PQA Plus) h An auditing system with internal verification and third-party audits.

1 Throughout this report, when we refer to Murphy-Brown, we mean Murphy-Brown LLC and its subsidiaries.

5 ANIMAL CARE Our plants all have developed quality programs following the standards set HOUSING OF PREGNANT SOWS in the USDA’S PVP. Our PVP programs monitor aspects of traceability, country of origin, PQA Plus adherence on farms, and Transport Quality Assurance Increasingly, food companies are looking to suppliers to phase out indi v idual (TQA) status of drivers. All Murphy-Brown farms that send animals to our gestation stalls for pregnant sows. In early 2012, for example, several of our plants must participate in the program. Additionally, many external suppliers restaurant customers announced that they would require all U.S. pork suppliers participate in and meet all the requirements of the PVP. These programs help to provide plans to eventually phase out the stalls in favor of group housing. ensure that the animals that come to our plants were raised where manage - ment systems address health, animal well-being, and proper use of antibiotics. Smithfield Foods remains on track toward our goal of phasing out individual All suppliers are certified to the PQA Plus guidelines and are progressing gestation stalls for pregnant sows at all company-owned sow farms by 2017. toward completing the on-farm site assessment portion of the National Pork The decision to move away from gestation stalls and into group housing has Board’s PQA Plus Program. been controversial within our industry. Smithfield Foods has never argued that the science suggests one type of housing is better than another. We decided In addition to the PQA Plus requirements, our processing plants follow a to move to group housing after consulting with many of our customers. quality management program based on the American Meat Institute’s Animal Smithfield Foods estimates the total cost of the transition to group pens will Handling Guidelines. The Guidelines, which were updated in 2012, were be approximately $300 million. The cost ranges from $250 per sow to as first developed by Colorado State University’s Dr. , who has high as $650 per sow at older farms with more complicated barn conversions. provided Smithfield Foods with her animal welfare expertise for many years.

HOG HANDLING AND QUALITY SOWS IN COMPANY-OWNED GROUP HOUSING 2007 2008 2009 2010 2011 2017 Our plants continue to make significant investments in animal handling facilities with new barns, improvements to existing barns, and improved GOAL unloading areas in order to ensure that our pigs are safe and comfortable. 100% We have also recently initiated the use of electronic data collection systems at our processing facilities to track animal audit information and report on 30.4% plant-specific trends. This allows us to maintain our records electronically and to analyze data on a real-time and trending basis. 4.8% 6.6% All values 2.6% 3.8% reported by calendar year. In addition, Smithfield Foods has led the U.S. pork industry toward a procedure known as CO 2 anesthetizing. All company facilities use the ® Butina CO 2 Backloader anesthetizer system. This allows the pigs to move ANTIBIOTICS USE slowly, in small groups, which is much less stressful for the animals and their handlers. CO 2 anesthetizing is very effective and produces higher- Smithfield Foods’ commitment to food safety and animal care includes the quality meat than the older, single file, electrical stunning systems. appropriate administration of antibiotics to prevent, control, and treat

6 ANIMAL CARE FEED-GRADE ANTIBIOTICS USE (lbs/cwt) VALUE CREATION 2007 2008 2009 2010 2011 2012 07 –12 change Smithfield Foods recognizes that animal health is critical to the success 0.167 0.116 0.106 0.124 0.147 0.157 –6% of its products and, therefore, to the success of its business. The company’s animal care management systems, policies, and procedures are designed to ensure the proper treatment of the hogs raised for fresh and packaged meats. The better Smithfield Foods cares for the All values reported by fiscal year. The amount of antibiotics purchased varies from year to year based on a number of factors including weather conditions, emergence of illnesses, pigs, the better the company’s results as a whole. inventory decisions, type of antibiotic used (feed, water, or injected), and active ingredient concentration. The purchases went up slightly in fiscal 2012 due to herd health needs. Sound animal care management systems result in healthier animals that gain weight faster and are more resistant to disease. Healthy sows also have larger litters. Our systems benefit both the pigs and diseases and to ensure good health in its pigs. 1 At the same time, the the company’s overall financial health. Animal care performance can company strives to limit antibiotics use through enhanced management influence the following: practices and vaccines intended to improve animal health.

h Our reputation Adherence to the company’s antibiotics policy is obligatory for anyone who h Our relationships with customers and consumers works with the animals owned, or managed by, or under contract to Smithfield h Production levels Foods’ IOCs. The policy calls for the responsible use of antibiotics for three specific purposes: to prevent disease, control disease, and treat disease, with Smithfield Foods’ contract grower relationships provide opportunities proper diagnostic confirmation. Smithfield Foods reviews the policy periodi - for hundreds of to stay on their family farms, make investments cally to confirm that it is up-to-date with current regulatory guidance. for the future, stabilize their incomes, and diversify their operations. The company also creates markets for thousands of grain farmers In April 2012, the U.S. Food and Drug Administration (FDA) issued new regu - across the United States, who grow corn, wheat, sorghum, and other la tory guidance with two key principles on the use of antibiotics in food pro - feed that Smithfield Foods purchases. duction. The principles are consistent with Smithfield Foods’ existing anti bi otics use policy, and Murphy-Brown already follows the FDA’s recommendations. By the Numbers Fiscal 2012

Company and contract farmers administer antibiotics only when necessary Contract grower payments $348 million for animal health. Whether treating one individual animal or administering U.S. grain purchases $1.2 billion to a group of animals, all antibiotics choices and applications are based on guidance from licensed veterinarians. Smithfield Foods believes that respon - sible use of antibiotics protects the animals and enhances their quality of life.

1 When we refer to “its pigs,” we mean all animals produced by Smithfield Foods’ production subsidiary Murphy-Brown, its subsidiaries, and their contract farms. 7 ANIMAL CARE Employees receive special training to deal with potentially hazardous situations. EMPLOYEES

Our company’s success can largely be turn over rate by 10 percent year-over- attributed to the hard work of our 8,700 year. In fiscal 2012, this rate was roughly OUR HEALTH & SAFETY GOAL employees. Often we are the largest 20 percent—down from 22 percent in h Reduce employee injury rates regional employer where we operate. fiscal 2011 and far below the industry Protecting employees’ health and safety average of around 50 percent. OUR HEALTH & SAFETY TARGETS is a priority, as is creating a fair and ethical workplace environment. We offer competitive wages and robust benefits packages, including tuition DIVERSITY h Meet or beat general reimbursement and educational scholarships. manufacturing industry We are always seeking new markets for national average for injuries Jobs in our industry can be demanding. To maintain a supportive work envi- our products, and our company benefits h All safety leadership to r onment for our employees, we emphasize safety and training. We have a when our employee base reflects our participate in 10-hour general variety of programs, provided free of charge to employees, to promote health diverse customer base. We aim to industry training programs and wellness. Healthier employees contribute to a more positive work cultivate a workforce that provides a h Increase formal employee environment and drive down company health care costs. Programs include variety of perspectives and experience, safety enga ge ment to 25% blood pressure and cholesterol screenings, mammograms, weight-loss pro - enhancing our company’s competitive - by fiscal 2015 grams, health coaching, and flu shots. We recently added a fitness center at ness in an increasingly diverse and h Host Safety Roundtable our Farmland Foods corporate headquarters to encourage a healthy lifestyle. interconnected world. meetings at all locations

OUR WORKFORCE

Our goal is to hire the right person, for the right job, at the right time. FARMLAND FOODS 2011 EMPLOYEE BREAKDOWN Once on board, we aim to retain the workers that are thriving in their jobs 9.71% 0.51% and provide them with opportunities to advance or expand their roles to other areas of operation. We support promotions from within wherever White (39.27%) possible and encourage our workforce to enhance their careers with 13.22% Hispanic (37.28%) further education opportunities and tuition reimbursement. Approximately 39.27% 40 percent of open positions each year are filled with internal candidates. Asian (13.22%) We actively recruit on college campuses to attract young people to work in 37.28% African-American (9.71%) food production. As our workforce ages, it becomes increasingly important Other (0.51%) to encourage younger generations to pursue careers in our industry. We actively work to reduce employee turnover and aim to decrease our

8 EMPLOYEES HEALTH & SAFETY MINORITIES AND WOMEN AT FARMLAND FOODS 2007 2008 2009 2010 2011 07 –11 change Ensuring employee safety is one of our highest company priorities. Our extensive safety systems and programs, which go well beyond regulatory 56.85% 57.55% 62.07% 60.81% 60.73% Not Available requirements, yield measurable results and protect employees while reducing our workers’ compensation costs. Minority Employees

14.21% 14.43% 10.90% 11.23% 12.67% Not Available OSHA INSPECTIONS, NOVS, AND PENALTIES

Minorities in Management Data reported as of 2007 2008 2009 2010 2011 07 –11 change September each year. 35.25% 35.65% 34.73% 34.26% 35.01% Not Available Percent change could not be calculated. Due 45245 25% All values reported Female Employees to a change in how by calendar year. The federal govern- we gather and report Inspections ment has been en- employee data, 34.87% 34.55% 22.98% 23.53% 24.92% Not Available hancing its inspection the values for 2007 742510 43% processes in recent and 2008 are not Women in Management years, leading to a comparable to metrics Notices of Violation significant increase in reported since 2009. notices of violation and penalty amounts $8,312 $2,485 $2,450 $7,445 $9,350 12% in 2011. There contin - ues to be a national EMPLOYEE ENGAGEMENT Penalties OSHA trend toward industry inspection and enforcement. This past year, we conducted our first companywide employee survey to identify, measure, and prioritize issues that affect our workers and drive business results. The surveys, typically offered in English and in Spanish, Historically, the meatpacking and processing industry has ranked among evaluate topics such as commu ni cation, recognition, supervisory relationships, the most hazardous professions in the U.S. Prior to 2010, our target had and leadership. The response rate for this inaugural survey was 86 percent. been to meet or beat safety averages for the , which we The results indicate employees feel they are paid well and recognized for were accomplishing. In early 2010, we established new, more challenging their work. They also believe they have a place at Farmland Foods over the targets to meet or beat the lower general industry safety averages for three long term and are given better-than-average opportunities to develop pro - performance metrics we report to the U.S. Occupational Safety and Health fessionally. Respondents also feel Farmland Foods produces high quality and Administration (OSHA): Total Case Rate (TCR); Days Away, Restricted, or safe products. They also indicated that they would like to contribute to efforts Transferred (DART); and Days Away From Work Injury and Illness (DAFWII). to improve plant productivity. By answering survey questions, employees This shift is significant because the averaged general industry injury rates directly impact action plans that contribute to an improved work environment. are much lower than rates for the meat industry alone.

9 EMPLOYEES average, U.S. beef and pork processors report 6.9 injuries per 100 employees ,1 TCR, DART, AND DAFWII RATES nearly twice the average for all private industry occupations. Farmland Foods’ COMPARED WITH NATIONAL AVERAGES injury rate for 2011 was 3.49 injuries per 100 employees. Our OSHA TCR, DART, 2007 2008 2009 2010 2011 07 –11 change and DAFWII rates con tinued to decline, and 2011 finished with Farmland Foods at record lows for TCR and DART, thanks to the imple men tation of 9.00 our Employee Injury Prevention Management System and other programs. 8.00 All values reported VALUE CREATION 7.00 by calendar year. We track trends throughout our Farmland Foods creates value through our employment of approxi- 6.00 fiscal year but report the OSHA mately 8,700 people, many of them in rural areas where there are 5.00 rates by calendar year. National limited job opportunities. Our operations also contribute to the –35% 4.00 averages for meat economic stability and development of our local communities, where industry and all industries are our employees reside and purchase goods and services. Committed to 3.00 based on 2010 the development and maintenance of a skilled workforce, Farmland –23% data from the U.S. Foods invests in employee training, workplace safety, and health and 2.00 Department of Labor’s Bureau of wellness activities. These programs have an impact on our bottom Labor Statistics. 1.00 32% Data for 2011 were line, particularly around the following issues: not yet available 0.00 when this report was produced. h Workplace safety h Workers’ compensation costs TCR DART DAFWII h Absenteeism Farmland Foods h Employee satisfaction and engagement National averages for animal h Turnover rates slaughtering and processing industry National averages for all industries, By the Numbers Fiscal 2012 including state and federal government Total salaries and wages $385 million In calendar 2011, Farmland Foods beat the injury rates for the meat industry Total benefits (including pension) $104 million and also beat the injury rates for all industries for TCR and DAFWII. Our TCR and DART rates dropped by 16 per cent and 11 percent, respectively, Total compensation expense $489 million while our DAFWII rate finished 23 percent lower than our previous year. On

1 Source: 2010 data from the U.S. Department of Labor’s Bureau of Labor Statistics (the most recent data available prior to this report’s publication)

10 EMPLOYEES A new air conditioning system in Denison, Iowa, is lowering that plant’s energy use. ENVIRONMENT

It makes good economic and environmental sense to ENVIRONMENTAL PERFORMANCE 1 use all resources—including water, energy, and land — OUR ENVIRONMENTAL GOALS responsibly. Over the last 10 years, our environmental Water Use h Reduce natural resource management systems have evolved, and our perfor- demand mance has significantly improved. WATER USE TARGET h Eliminate notices of h 10% reduction over fiscal 2008 violation (NOVs) In 2010, Smithfield Foods, Farmland Foods, and the other independent (normalized) by fiscal 2016 h 100% compliance, 100% of operating companies (IOCs) adopted a set of challenging targets to further the time elevate our performance as we work to reduce water and energy usage and PROGRESS TO DATE solid waste. In 2011, we added new targets for greenhouse gas (GHG) h Reduced normalized use by 2% OUR ENVIRONMENTAL TARGETS emissions and packaging reduction projects. In addition, each IOC is working toward at least one zero-waste-to-landfill facility by fiscal 2018. At Farmland The availability of quality fresh water h Water: 10% reduction over Foods, we strive to continuously improve our environmental programs each is a growing global concern, with fiscal 2008 by fiscal 2016 year and increase employee engagement in sustainable practices. More potential implications for agriculture, h Energy: 10% reduction over information about companywide targets, performance, and management such as increased costs per gallon and fiscal 2008 by fiscal 2016 systems is available at smithfieldcommitments.com. more stringent wastewater discharge h Greenhouse Gas (GHG) standards. Our processing facilities use Emissions: 10% reduction In fiscal 2012, we continued to demonstrate progress toward our targets. water for cooling, cleaning, sanitizing, over fiscal 2008 by fiscal 2016 Since 2008, on a production-weighted basis, Farmland Foods has and making our products. Farmland h Solid Waste to Landfill: 10% accomplished the following: Foods used a total of 2 billion gallons reduction over fiscal 2008 by in fiscal 2012. We monitor water use fiscal 2016 h Improved water efficiency by 2 percent; at each facility and continuously seek h Packaging: One new packag- h Reduced energy use by 0.5 percent; opportunities to become more efficient. ing reduction project per year h Lowered GHG emissions by 15 percent; and Since 2008, we have reduced water used h Zero Waste: One zero-waste- h Cut waste to landfill by 25 percent. per 100 pounds of product by 2 percent. to-landfill facility by fiscal 2018 h Compliance: Reduce NOVs each year 1 The data are normalized per 100 pounds of product (cwt) to better compare year-over-year progress in water use, All water, energy, GHG, and solid waste energy use, GHG emissions, and solid waste management targets are normalized by production levels. efficiency. Some previously reported data were adjusted New GHG, packaging, and zero-waste-to- due to improved data collection and reporting. landfill targets were added in fiscal 2012.

11 ENVIRONMENT For example, our plant in Denison, Iowa, eliminated several inefficient, outdated practices, reducing water use by nearly 29 million gallons at a WATER USE (gallons/cwt) savings of $69,000 each year. 2008 2009 2010 2011 2012 2016

69.4 69.0 VALUE CREATION 68.3 67.1 66.4 Sound environmental stewardship creates value for Farmland Foods, GOAL for Smithfield Foods’ shareholders, and for our broader communities. 62.4 By using resources more efficiently, we minimize our negative environmen tal impacts, save operating costs, and improve our All values reported by fiscal year. economic performance.

Going beyond regulatory compliance requirements sometimes costs Energy Use our business. However, we recognize and promote the importance of protecting our reputation and the environment as we build strong ENERGY USE TARGET relationships with our stakeholders based on common environmental h 10% reduction over fiscal 2008 (normalized) by fiscal 2016 stewardship desires. PROGRESS TO DATE We seek opportunities to capture additional value by exploring h Reduced normalized use by 0.5% creative ways to turn our operational byproducts and underutilized resources into valuable assets for our company. We track the costs and To monitor our progress and identify best practices, we track energy use savings associated with projects submitted for annual consideration (electricity and other fuels combusted in stationary sources such as boilers for a Smithfield Foods environmental award. and heaters) at our facilities. Our target is to reduce our energy intensity (energy use per 100 pounds of product) to 10 percent below fiscal 2008 By the Numbers Fiscal 2012 levels by fiscal 2016. During fiscal 2012, we implemented a variety of energy Savings attributable to environmental award projects $4.96 million efficiency projects. For example, our Milan, Missouri, facility analyzed refrigeration equipment efficiency and identified a number of underutilized Capital costs associated with environmental coolers. After shutting these down, plant electricity usage decreased award projects $1.96 million 9 percent over fiscal 2010.

12 ENVIRONMENT Because of this and other newly implemented energy reduction efforts, In 2012, we adopted a new GHG reduction target, largely in response to we reduced normalized energy use by 0.5 percent. This progress was made stakeholder requests. We have lowered our normalized GHG emissions over despite a continuing shift to the production of resource-intensive, fully the past four years by using energy more efficiently and using lower- cooked (ready-to-eat) products for foodservice customers and consumers. emission fuels, among other initiatives. In fiscal 2012, our normalized GHG emissions were 15 percent below 2008 levels.

ENERGY USE (decatherms/cwt) 2008 2009 2010 2011 2012 2016 DIRECT AND INDIRECT GHG EMISSIONS (metric tons CO 2e/cwt) 2008 2009 2010 2011 2012 2016 0.127 0.124 0.121 0.123 0.123 0.0139 0.0132 GOAL 0.0123 GOAL 0.111 0.0119 0.0118 0.0125 All values reported by fiscal year. All values reported by fiscal year.

Greenhouse Gas (GHG) Emissions 1 Materials Use & Solid Waste GHG EMISSIONS TARGET h 10% reduction over fiscal 2008 (normalized) by fiscal 2016 Our waste reduction approach is to divert materials with a residual value away from our waste streams toward recycling or reuse. Our greatest PROGRESS TO DATE solid waste reduction and recycling successes come from adjustments h Reduced normalized use by 15% in packaging waste, such as corrugated board and a variety of plastics.

Climate change, which has been linked by many scientists to GHG emissions, SOLID WASTE TO LANDFILL TARGET may have future impacts on water availability, energy prices, weather h 10% reduction over fiscal 2008 (normalized) by fiscal 2016 patterns, and demand for consumer goods. As in any industry, GHG emissions occur during the production and distribution of our products. PACKAGING REDUCTION TARGET h One new packaging reduction project per year

1 Farmland Foods reports GHG emissions using the Greenhouse Gas Protocol Initiative developed by the World Resources Institute (WRI) and the WBCSD (ghgprotocol.org). Publicly available emission figures are used where no reliable data are available from energy providers. We report on scope 1 emissions (direct) and scope 2 emissions, which include indirect emissions associated with the use of purchased electricity.

13 ENVIRONMENT ZERO-WASTE-TO-LANDFILL TARGET h One zero-waste-to-landfill facility by fiscal 2018 SOLID WASTE TO LANDFILL (lbs/cwt) 2008 2009 2010 2011 2012 2016 PROGRESS TO DATE h Reduced normalized solid waste to landfill by 25% 1.16 1.12 h Introduced new packaging reduction projects in fiscal 2012 h No facilities achieved zero-waste-to-landfill status in fiscal 2012 0.94 GOAL 0.88 1.01 New packaging reduction and zero-waste-to-landfill targets were added 0.84 in fiscal 2012. To be classified as a zero-waste-to-landfill facility, a facility must not send any waste to landfill for a full 12 months. Because we All values reported added this target in fiscal 2012, none of our facilities will be able to by fiscal year. qualify until at least fiscal 2013.

We have reduced solid waste landfill disposal per 100 pounds of product To challenge us further, Smithfield Foods and its IOCs introduced a new by 25 percent since fiscal 2008. Some examples of our waste reduction waste target in fiscal 2012. Each domestic IOC must have at least one facility efforts include the following: achieve zero-waste-to-landfill status by fiscal 2018.

h The Stefano Foods plant in Charlotte, North Carolina, replaced aluminum Packaging Reductions baking pans with silicone parchment paper. This shift saves the facility nearly $47,000 per year and reduces materials sent to landfill. The packaging surrounding our products helps ensure food quality and safety. It offers protection during transit, extends shelf life, and communi- h The Farmland Foods plant in Lincoln, Nebraska, installed automated cates important nutrition and safe-handling information to consumers. box-making equipment and “right-sized” boxes, significantly reducing To continue to drive improvement, Smithfield Foods and its IOCs recently material usage while saving more than $500,000 annually. adopted a new annual target that requires each IOC to develop a successful packaging reduction project. Reduced packaging practices are shared across We have reduced solid waste landfill disposal per all the operations of Smithfield Foods.

100 pounds of product by 25 percent since fiscal 2008. We have introduced mechanically assembled boxes to our production process, which decreases the amount of cardboard used, saves money, reduces our We are also making efforts to recycle more materials and use packaging carbon footprint, and improves shipping efficiency. We have also expanded with post-consumer recycled materials. Although we have already surpassed use of resealable or reusable packaging. Recycled materials can be used in our waste reduction target, we continue to push for greater efficiencies. some packaging as long as food safety and quality requirements are met.

14 ENVIRONMENT Our facility in Monmouth, Illinois, for example, invested in a new bagging Compliance system that right-sizes packaging to the specific product, significantly reducing the amount of packaging material required. This greatly reduced COMPLIANCE TARGET plastic waste to landfill and saved $698,000 in fiscal 2012. The same facility h Reduce NOVs each year also implemented a program to reuse bacon slab combo boxes, which more than doubled the facility’s reuse rate while saving $54,000 in fiscal 2012. PROGRESS TO DATE h 69% of Farmland Foods facilities received no NOVs in calendar 2011 In Salt Lake City, Utah, our facility reduced product bag sizes for all outgoing products, resulting in a cost savings of over $927,000. We seek full compliance with local, state, and federal environmental requirements at all times and have compliance management programs that train and motivate employees to prevent, detect, and correct violations. We track several indicators of compliance, including Notices of Violation (NOVs) Our facility in Salt Lake City, Utah, received a 2012 National and penalties. We take any NOV or fine seriously. When taking corrective Environmental Excellence Award from the National Association of actions, we work quickly to determine how our management systems can be Environmental Professionals. For this project, the Salt Lake City plant improved. We also work with regulators to resolve all environmental issues teamed up with the local Catholic Community Services to set up as they arise. training courses that taught basic life skills to refugees who had recently come to the U.S. One area focused on the importance of recycling, preserving our natural resources, and protecting the environment. The goal was to teach information that the refugees could take back to their families and communities. Many of them were not aware of recycling issues.

15 ENVIRONMENT Our microbiological testing lab plays an important role in ensuring food safety. FOOD SAFETY & QUALITY

Producing safe, high-quality, and nourish - food safety hazards. Since then, the ing food is the most important thing company has updated and enhanced OUR FOOD SAFETY Farmland Foods does as a business. We the protocols to meet changing & QUALITY GOALS work to ensure traceability and to provide customer and consumer demands, the highest-quality meats and packaged and to ensure continuous improvement. h Deliver safe, high-quality foods to our customers. Smithfield Foods’ vertically integrated business Our rigorous microbiological testing meat products and eliminate model helps to support the safety and quality of our products through programs constitute a significant part of recalls careful management, strict policies, and dedicated food safety professionals. our ready-to-eat food safety programs. h 100% compliance, 100% of the time Food safety is a complex undertaking that we take very seriously. We partner NUTRITION with industry, government, and independent experts to create and implement OUR FOOD SAFETY rigorous food safety and quality practices. We believe our systems lead the Farmland Foods offers affordable & QUALITY TARGETS industry, and we work hard to adopt the most up-to-date, science-based products that are a significant source h Obtain 100% Global Food procedures. Our food safety systems are based on the Hazard Analysis of protein. We believe it’s important to Safety Initiative (GFSI) and Critical Control Points system required for all U.S. meat and poultry provide consumers with a wide range certification for all relevant companies. These systems are reviewed and validated at least annually as of dietary choices. Some consumers facilities* part of the Global Food Safety Initiative (GFSI) certification process. want products with reduced fats, sugar, h Assure a wide variety for and salt, while others resist making different diets and needs, Our original food safety target was to obtain GFSI certification for all compromises on flavor or convenience. and include products relevant facilities. Today, 100 percent of relevant facilities are GFSI certified Our research and development teams of designed to address health and subject to GFSI’s annual third-party audits. Our target now is to nutritionists, chefs, and food scientists and wellness in accordance maintain the certification at all facilities. work with our customers—including with accepted standards supermarkets, public school systems,

Maintaining a companywide culture of safe food requires that our and restaurant chains—to develop * Relevant facilities are those producing employees meet our strict food safety requirements and are familiar innovative products that respond to meat for human consumption. with best practices. All employees undergo rigorous training in these evolving customer needs. food safety and quality policies and procedures to keep our foods safe. Over the years, we have developed leaner cuts of pork, and several of our Smithfield Foods developed first-generation, comprehensive auditing products meet the American Heart Association’s certification criteria for protocols about 30 years ago to improve our ability to effectively control foods that are low in saturated fat and sodium content. All our packaged

16 FOOD SAFETY & QUALITY We have been evaluating the sodium levels in all our products to ensure VALUE CREATION that we are offering a balance of choices for a variety of preferences, diets, and lifestyles. At the end of fiscal 2012, Smithfield Foods had about 100 reduced- Producing safe, high-quality food not only helps support the health and sodium products in the marketplace, up from about 75 the previous year. well-being of our consumers; it also builds value for our business, our investors, and our customers, including the restaurants and retail chains Smithfield Foods’ sodium policy, which is based on our commitment to that sell our products. One of our biggest risks as a company is food producing wholesome food products for our customers, is consistent with safety. We have systems in place designed to monitor food safety risks our view that a healthy lifestyle is not based on just one nutrient, but throughout all stages of our vertically integrated process. However, any rather on a range of factors, including dietary patterns and exercise. perceived or real health risks related to our products—or to the food industry in general—could adversely affect our company’s reputation Farmland Foods rolled out two new lower sodium hams in calendar 2011. and our ability to sell our products. One was a 25-percent reduced sodium and the other a 50-percent lower sodium ham for the foodservice trade. Virtually all food is susceptible to contamination by disease-producing organisms or pathogens that are found in the environment. Any con- tami nation of our products could subject us to product liability claims, adverse publicity, and government scrutiny, investigation, or intervention , TAME THAT FLAME! resulting in increased costs and decreased sales as customers lose confidence in the safety and quality of our food products. Forget what your mother might have told you: It turns out that cooked pork can be pink in the middle after all. In May 2011, the As a company, we invest millions of dollars each year in capital U.S. Department of Agriculture’s Food Safety and Inspection Service improvements to facilities and equipment, focusing on the safety of announced that it had lowered its recommended temperature for our products and protection of our employees while simultaneously cooked pork by 15 degrees. The decision came as a result of significant enhancing production at existing and new facilities. food safety improvements in the pork industry in recent years. For example, the parasitic disease trichinosis has been eliminated from the commercial U.S. pork supply. According to the agency, pork can be meat product categories—bacons, hams, hot dogs, and —include safely consumed if cooked to an internal tempera ture of 145 degrees product lines that are nutritionally improved with either lower sodium, (Fahrenheit) and allowed to rest for three minutes rather than the reduced fat, or less sugar. 160 degrees it previously recommended. This means pork is now held to the same temperature criterion as cuts of beef, veal, and lamb. Salt is a key ingredient in many of our products and helps us meet customer and consumer demands for quality, authenticity, flavor, and convenience.

17 FOOD SAFETY & QUALITY In fiscal 2012, Farmland Foods donated 1.24 million servings of food to those in need. HELPING COMMUNITIES

Farmland Foods values the importance of fundraisers generate dollars that further strong, vibrant communities and strives to our hunger relief efforts. OUR COMMUNITY GOAL make a positive impact in the areas where h Provide food to those in our employees work and live. In many of In our nation’s food banks, sourcing and need and enhance education the regions where we do business, we are a providing fresh meats and other protein in our communities primary employer. Assisting our employees and those who live around our presents a special challenge. Though it facilities helps the community get to know us. Contributing to thriving local is critical for good health, fresh protein OUR COMMUNITY TARGETS communities enables us to become a stronger, more vital company. is more expensive than shelf-stable food such as canned soups, cereals, h Provide 4 million servings We focus in particular on programs that nourish the body and the mind. In and pasta. It is also more expensive a year of food for those addition to hunger relief and learning-related initiatives, we also provide to transport because it requires in need* support for environmental stewardship efforts, disaster relief, support of refrigeration. With food banks facing h Each Pork Group IOC to first responders and military families, and an emerging area of focus: health record demand for services, the need support two Learners to and wellness. In fiscal 2012, Farmland Foods contributed approximately for protein is greater than ever. Leaders ® programs $342,000 in cash donations to programs and organizations we support. h Each fresh pork facility Helping Hungry Homes is Smithfield to support two FFA Organ- HUNGER RELIEF Foods’ corporate-level initiative to help ization or equivalent address the growing problem of food education events As a food company, we believe we have a responsibility to help feed insecurity in the United States and, h Each facility to participate families who are struggling to afford the food they need. According to the specifically, to help address the growing in at least one cleanup day national hunger relief nonprofit, Feeding America ®, more than one out of need for protein. Since its launch, h Each facility to participate six children in the United States lives in a food-insecure household, which Farmland Foods, Smithfield, and its in at least one World Water means they do not always know where they will find their next meal. other IOCs have donated 56.5 million Monitoring Challenge servings of pork to food banks and other event per year Farmland Foods and Smithfield Foods have a long history of stocking food organizations that provide food for banks, supporting after-school nutrition programs, and providing food relief people in need. In fiscal 2012, Farmland * The 4 million servings total is for all of Smithfield Foods and its U.S. inde- in the wake of natural disasters. We are especially proud of our partnerships Foods donated nearly $1.3 million of pendent operating companies (IOCs). with our retail grocery customers across the country, whose in-store product to those in need.

18 HELPING COMMUNITIES Within our headquarters community of Kansas City, Missouri, we have VALUE CREATION partnered with Harvesters and its network of community food banks, committing food donations, dollars, and the time of our employees. Once Contributing to local communities by offering employment and paying a month, we have been giving our employees paid time off to volunteer taxes is one of the primary ways we create value for communities, at Harvesters and put together “snack packs” for children who are at risk but we also create value by supporting areas such as hunger relief, of going hungry over the weekends. On average, 25 of our employees education, and health and wellness. Our activities also support participate each month. agricultural communities in the regions where we operate. We also ran a special promotion from Memorial Day through Labor Day We are interdependent with our communities in many ways: 2012 to benefit Harvesters. Through the “Bacon A Difference” campaign, we donated 4.3 cents to Harvesters for each bacon product sold at h Strong communities support our ability to recruit and retain good participating grocery stores in Kansas City. We raised a total of $43,000. workers and enable us to become a stronger, more vital company. The campaign featured our partnership with Richard Petty Motorsports NASCAR team to help raise awareness of food security issues. h The economic vitality of our local communities—and agricultural communities more broadly—provides the basis for a reliable supply “ The donations we received from Farmland through the ‘Bacon of the goods and services we need to operate. A Difference’ partnership will put much-needed food on the h Stable, well-governed communities provide a good place for our table for Kansas Citians at a time when one in four children in employees to live. both Missouri and Kansas are at risk of being hungry.”

—Karen Haren, President and Chief Executive Officer, Harvesters By the Numbers Fiscal 2012

Cash donations $341,870 EDUCATION Food donations (cash value) $1.29 million

We believe that education is the bedrock of any strong community. Food donations (servings) 1.24 million We’ve long supported programs that offer learning opportunities in the Total amount of donations $1.6 million communities where our employees live, work, and raise their families. One of our company’s core values is helping to extend educational opportunities to young people who will be tomorrow’s leaders in our communities.

19 HELPING COMMUNITIES For the past decade, the Smithfield-Luter Foundation has provided educa- tional scholarships for our employees’ children and grandchildren at select universities. Since the inception of this program, Smithfield Foods has awarded 127 annual scholarships worth more than $2 million. In fiscal 2012, Learners to Leaders in Denison, Iowa, the Smithfield-Luter Foundation awarded 34 scholarships totaling $256,000. Graduates First Class

Our Learners to Leaders program focuses on students from disadvantaged For eight 17- and 18-year-old backgrounds who have the desire to succeed but don’t yet have the skills to students in Denison, Iowa, May overcome their challenges—whether academic, social, or economic. In fiscal 2012 was a momentous month. 2012, Smithfield Foods provided nearly $356,000 in funding to 350 students. They celebrated their graduation, not just from high school but also Learners to Leaders partners with the TeamMates Mentoring Program in from the prestigious Learners to Crete, Nebraska. Farmland Foods and Smithfield Foods have donated Leaders/Science Bound program, $100,000 to date to fund the TeamMates initiative, providing positive role a rigorous five-year college models for the community’s middle and high school students. The program preparation course. matches a student with an adult volunteer mentor to provide one hour of individual mentoring each week during the school year. Mentors are Since 2007, Farmland Foods and encouraged to continue in the mentoring relationship until the student Graduates of the Learners to Leaders/ Science Bound program in Denison Smithfield Foods have sponsored graduates from high school. have earned scholarships to Iowa State. the Learners to Leaders/Science Bound program, a community AMERICAN HEART ASSOCIATION educational partnership between the Denison, Iowa, Community School District and Iowa State University. The program, which runs One of Farmland Foods’ largest charitable efforts focuses on the American from eighth through twelfth grade, aims to inspire ethnically Heart Association (AHA). This past year, we challenged our plants to raise, diverse students to pursue higher education in math and science, collectively, $75,000 for the organization through auctions and other fund- thereby helping to close the economic gap that often separates raising events. We have supported the AHA for many years and have been students from low-income or minority backgrounds. increasing each year the amount we raise for the organization. In fiscal 2011, we raised about $86,800; in fiscal 2012, we succeeded in raising Students who successfully complete the academically challenging nearly $91,700. program earn a full four-year tuition scholarship to Iowa State, so

20 HELPING COMMUNITIES long as they pursue degrees in agriculture, science, technology, engineering, biologists, or engineers—especially as the first in their families to attend or mathematics. In the fall of 2012, the first group of Denison program college,” she says. “We launch them off on this program, then they continue graduates (eight total) will be attending Iowa State University, tuition-free. to work with their high school teachers. Now that they’re graduating, we get to look back and say, ‘A part of us helped them into Iowa State.’” “When we first began, parents were skeptical,” says Collette Huntley, a middle school teacher who helped launch the program. “These students are Aransa Soriano plans to study chemistry or chemical engineering at Iowa typically the first in their families to be thinking about a college education. State. Her father works at our Denison processing plant, and he encouraged We had to convince their parents that we had the best interests of their Aransa to pursue the program and her dreams. Aransa, who also won a children at heart. Now, the program sells itself.” separate scholarship through the Smithfield-Luter Foundation for room and board, is the first in her family to graduate high school and attend college. Teachers work together to identify students for the program, based on test scores, classroom performance, and a desire to succeed. To continue in the “I hadn’t really been thinking of going on to college, but the Learners to program each year, students must maintain a 3.0 grade point average (GPA), Leaders program changed my mind over the years. I’ve been encouraged participate in the Learners to Leaders curriculum and activities, and offer an by a lot of people,” she says. “I think I cried more at the Science Bound oral defense of what they have learned and why they deserve to remain in banquet than at my graduation because it’s really meaningful to me that the program. Since enrolling in the program, 62 percent of the students in I actually graduated from the program.” Denison have continued year after year, a testament to the hard work and commitment of the students and their teachers. This rate is nearly double Carlos Velasquez is also among Science Bound’s first graduating class. that of similar programs sponsored by Iowa State in other communities. His mother works in the Denison processing plant. Carlos plans to major in computer engineering at Iowa State through his Science Bound scholar ship. “The program is academically challenging,” says Dr. Connie Hargrave, When Carlos first started the program, he saw it as primarily a way to hang director of Science Bound at Iowa State. “It helps us develop early talent out with his friends. But once he got to ninth grade, he began to look at among students with a propensity for math and science and helps the the program differently. students arrive at college prepared to excel.” “I realized that I’m now in high school, and I needed to start thinking Kathy Jones, a middle school teacher, agrees. “For me, one of the greatest about my future,” he says. “Then I started to understand that I could get things has been seeing students embrace the idea that they can be scientists, a scholarship to Iowa State if I stuck with the program.”

21 HELPING COMMUNITIES GOVERNANCE & MANAGEMENT

Sound governance and management are foundations for trust, SUPPLY CHAIN MANAGEMENT transparency, and progress at our company. Our systems for ethical FARMLAND FOODS MISSION conduct, the way we engage with stakeholders, our approach to public Our suppliers are integral to our policy, and our management of supply chain issues are all important promise to produce good food elements of our company’s overall sustainability strategy, cutting across We use our passion for pork responsibly. In fiscal 2012, our key pillars and contributing to overall value creation. In recent years, to bring goodness to every bite. Smithfield Foods and its IOCs Farmland Foods, Smithfield Foods, and its other independent operating implemented a Supplier Code of companies (IOCs) have significantly advanced our sustainability strategy Conduct to help ensure that our and tied it more closely to our overall business strategy. suppliers continue to meet or exceed our high standards. The code, which is incorporated into all new and renewed contracts with our largest suppliers, sets forth the business conduct SMITHFIELD FOODS SUSTAINABILITY GOVERNANCE requirements for all suppliers who do business with Smithfield Foods and its IOCs. The degree to which suppliers comply with the requirements—and BOARD OF DIRECTORS the extent of their sustainability efforts— will be a consideration for future business with Smithfield Foods and its IOCs. The code outlines expecta tions COMMITTEES OF THE BOARD around legal compliance, envi ron mental sustainability, and business integrity , as well as labor and human rights issues. Smithfield Foods and its IOCs Audit Compensation Nominating and Sustainability, Community, Governance and Public Affairs monitor suppliers’ performance, although we do not conduct formal audits.

We also survey our largest suppliers to understand what they are doing in CEO areas such as energy reduction, natural resource use, employee safety, and community giving. In fiscal 2012, Smithfield Foods distributed a supplier Ethics and Compliance Chief Sustainability Executive Sustainability survey for the first time to Murphy-Brown’s independent hog producers. Committee Officer Committee The questions focused on environmental policies and targets, nutrient management plans, and certifications on animal care issues. SUSTAINABILITY COUNCIL

Smithfield Packing John Morrell Food Group Farmland Foods, Inc. Murphy-Brown LLC Company Sustainability Officer Sustainability Officer Sustainability Officer Sustainability Officer

22 GOVERNANCE & MANAGEMENT SUSTAINABILITY TARGETS ERM is an ongoing process that includes continuous risk evaluation. As a result of this process, the company is further strengthening reporting In 2010, Smithfield Foods and its IOCs adopted a series of aspirational goals practices around risk, internally and to the board of directors. Smithfield and corres ponding targets in its domestic operations for five primary Foods also assigned senior-level “risk owners” to coordinate ERM programs sustainability focus areas: animal care, employees, environment, food safety for specific risk areas and, as a result, provide greater accountability and and quality, and helping communities. (See smithfieldcommitments.com for a more coordinated approach. As necessary, the company will adjust its a full list of goals and targets.) In 2011, the company added new targets framework as its risk profile changes. including greenhouse gas (GHG) emissions reductions and packaging reduction projects. In addition, each IOC must have at least one zero-waste- ETHICS & COMPLIANCE to-landfill facility by fiscal 2018. Safeguarding integrity remains a critical business priority. Ethical and lawful ENTERPRISE RISK MANAGEMENT conduct is an essential part of our company’s culture, and we are committed to conducting our business with the highest standards. Smithfield Foods Managing risk is not a new concept for Smithfield Foods. In the company’s maintains a Code of Conduct and Business Ethics applicable to all Form 10-K, it has already been highlighting the most significant risk factors employees, officers, and directors, and the board’s Nominating and that could materially impact our operations. These include, but are not Governance Committee reviews it periodically. limited to, fluctuations in the commodity prices for hogs and grains; outbreaks of disease among, or attributed to, livestock; perceived or real PUBLIC POLICY health risks related to our products or the food industry in general; and environmental regulation and related litigation. Smithfield Foods participates in legislative and regulatory processes both as an individual company and through industry associations. Smithfield Foods In fiscal 2012, Smithfield Foods conducted the company’s first formal believes that engagement in the political process is important in making Enterprise Risk Management (ERM) assessment as part of an effort to its views heard on issues of significance to the business. Representatives develop an aligned, integrated ERM framework across the entire company. of Smithfield Foods and its IOCs participate in many cross-industry boards The goal of the ERM program is to proactively understand and deal with and commissions at the national and state levels. Smithfield Foods follows complex business risks—both tangible and intangible, existing and several public policy issues that it believes are important to the company, emerging—that could negatively influence the achievement of the including those related to ethanol, free trade agreements, immigration, organization’s objectives. and the U.S. Farm Bill. Discussion of those issues and our positions on them is available at smithfieldcommitments.com.

23 GOVERNANCE & MANAGEMENT CONTACT US This report is printed on Neenah Paper Classic Crest Recycled 100 Bright White stock. This paper The feedback we receive on our performance and communications contains 100 percent post-consumer recycled efforts is very valuable to Farmland Foods. We look forward to hearing fiber and was made using 100 percent renewable from you as we proceed along our performance improvement journey. electricity. We achieved the following by printing on this stock instead of virgin paper:

Mark Garrett Trees saved 19 Vice President of Human Resources, Safety, and Logistics +1 816 243 3310 Water saved 8,744 gallons [email protected] Solid waste not produced 531 pounds

Energy saved 6 million BTUs Susan A. Murphy Carbon emissions Environmental Engineering Manager not generated 1,816 pounds +1 816 243 2730 [email protected]

Collette Kaster Vice President of Quality Technical Services and Hog Procurement +1 816 243 3386 [email protected] Designed and produced by RKC! (Robinson Kurtin Communications! Inc)

Content developed by BuzzWord, Inc.

Location photography by Timothy Llewellyn

Printed by J.S. McCarthy

24 THIRD

• National Association of Environmental Professionals Smithfield Foods was selected by McDonald’s 2012 National Environmental Excellence Award Corporation as one of the restaurant chain’s for Refugee Training Program in Salt Lake City, Utah 2012 Global Best of Sustainable Supply Chain winners for the company’s ongoing efforts to • Missouri “Show Me Heroes Flag of Freedom Award” protect the health and safety of our employees. to Martin City plant for its hiring of Missouri veterans

• Missouri Water Environment Association’s Gold Award for Pretreatment Excellence and Industrial Water Quality Achievement Award to Martin City plant for its efforts to save energy and improve wastewater efficiency

25 FARMLAND FOODS, INC.

A Smithfield Foods Independent Operating Company

P.O. Box 20121 Kansas City, MO 64195-0121 +1 888 327 6526 farmlandfoods.com