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 animal 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 pork 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, hams, bacon, fresh sausage, 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 farm families. Smithfield Foods acquired the company SUPPORTING BRANDS Ember Farms 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 Smithfield Foods 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 fertilizer—to produce sufficient food. Just as important, it will challenge global systems of agriculture 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 animals by promoting their safety Program.