NAVIGATING THE TRENDS OF PECANS

1. NAVIGATING THE TRENDS OF PECANS By Alexander J. Ott Executive Director, American Pecan Council

2. Pecan industry facing several challenges, and pain points exist for both growers & shellers • Pecans lag other tree nuts on key dimensions • Pecan awareness is low, demand is flat… • …while other tree nuts are growing on back of nutrition and snacking trends • 'Adversarial' industry practices hinder industry's ability to grow • Meanwhile, supply growth in other markets (e.g. South Africa, China) presents potential oversupply situation if no change in demand • We have a great product and the potential to grow demand for it… • ...but must work together collaboratively to solve challenges & move industry forward Case for changeKey messages

3. There are many structural challenges grounded in the nature of the pecan market • Variations in growing costs both across & within regions • More costly to grow pecans than other tree nuts • Pressure from low-cost Mexican growers and shellers

4. 2 Case for change Production expense: Pecans more expensive to grow than other tree nutsRegardless of region, pecans generally cost more to grow vs. other tree nuts given lower yield per acre ~$3.10-$3.60 Weighted Average Cost per pound highly variable—both across and within regions—given differences in scale, yield, weather, alternate bearing seasons, etc. 1. Based on USDA ERS "Fruit and Nut Tree Yearbook" average walnut kernel yield Note: Growing cost per acre excludes amortization of land and tree/establishment investments. Almond figures reported in meat yield basis only. Source: Almond Board; UC Davis; USDA; market interviews

5. Mexican shellers: US shellers are under pressure & struggling to compete vs. Mexico Ranges of total shelling costs ($ / meat lb.) • Mexican shellers benefit from lower costs • With right processes / investments, and tailwind from lower transport costs, some US shellers competitive with MX shellers US shellers • ~$0.70-$1.80 Larger MX shellers • ~$0.45-$0.85 • 0.00 • 0.50 • 1.00 • 1.50 • 2.00 Directional cost estimates; excludes carrying / transportation costs & mill loss Source: Market interviews

6. Pecans currently lag other tree nuts on several dimensions critical to growth • Domestic consumer demand has been stagnant, with US awareness & growth lagging other tree nuts • Transaction model causes tension between growers and shellers, with limited sharing of risk & upside

7. The industry is at a crossroads and in need of a paradigm shift • Imminent global supply growth threatens to create pecan surplus • If we do nothing, 2018 may be a glimpse into our future • We must unite to address these challenges

8. Confidential DRAFT – for discussion 2 Case for change Significant supply coming online from S. Africa & China, and if no corresponding change to consumer demand, market will be hit with surplus Annual pecan production across top markets Millions of pounds, in-shell • US • South Africa • Others • Chinamay produce up to 5-10% of global pecan supply; may affect U.S. imports • South Africa to continue rapid growth, comprise >10% of world supply in ten years – well suited to cater to Chinese demand • Must stimulate demand to capture new supply and diversify global demand beyond China • Mexico • China • 16 • ~1% • 116 • 10% • 9 • ~1% • 91 • 10% • 403 • 34% • 145 • 12% • 88 • 9% • 36 • 5% • 10 • ~1% • 348 • 37% • 8 • ~1% 949M lbs • 294 • 44% 1.2B lbs 680M lbs • 324 • 48% • 411 • 43% • 516 • 43% 2017 2022 2027 Base case estimate of supply; sources of supply growth may vary based on actual productivity of S. Africa, China, & others Source: USDA FAS/GATS; USDA NASS/ERS; SIAP-SAGARPA; Comenuez; SAPPA; Industry Interviews; Stakeholder survey Forecasting does not account for cyclical nature of crop, or loss of production capacity due to Hurricane Michael; should be viewed as directional approximation

9. Context:At current rates, global pecan supply will exceed demand by 15% in ten years • Key Takeaways: Growth of global market supply and demand (steady-state forecast) % of base value Illustrative; excludes impact of price changes • 15% forecasted excess supply within 10 years • Supply growing 33% faster than demand under current projections • Conservative estimate of gap between supply and demand; 20% of global demand growth driven by Chinese market • 80% 6%Projected supply CAGR • 15% • Excess Supply • 60% • 40% 4.5% Historic demand CAGR • 20% • 0% • 2017 • 2018 • 2019 • 2020 • 2021 • 2022 • 2023 • 2024 • 2025 • 2026 • 2027 Source: USDA FAS/GATS; USDA NASS/ERS; SIAP-SAGARPA; Comenuez; SAPPA; Industry Interviews; Stakeholder survey; INC Statistical Yearbook Forecasting does not account for cyclical nature of crop, or loss of production capacity due to Hurricane Michael; should be viewed as approximation

10. Multiple Industry Groups Working Together To Address Challenges Associations by tree nut Source: USDA Indicates FMO

11. Confidential DRAFT – for discussion • Today, more than ever, the pecan industry is in need of a long-term strategic plan • Together, we've crafted that plan, with input from you and others across the industry • This strategic plan represents a shared vision for industry – for both growers and shellers • It's comprised of five intertwined and reinforcing priorities to rally the industry • Plan is not about mandating change • Goal is to provide options and tools we can use to resolve long-standing challenges, with the hope these will be adopted as benefits are realized Vision and strategic prioritiesKey messages for today

12. Confidential DRAFT – for discussion 3 Vision & strategic priorities STRATEGIC PRIORITIES • Win fair share of tree nuts • Lead amongst global suppliers • Five priorities underpin APC's strategic vision • To increase demand for American pecans and provide industry with a path to sustainably grow profitability across the value chain • Strengthen our infrastructure • Modernize the industry • Unite pecan stakeholders

13. APC - Moving Forward • Examples • Activities • Competing share • of tree nuts • Lead amongst global suppliers • Strengthen our infrastructure • Modernize the industry • Unite pecan stakeholders

14. ACTIVITIES TO DATE: 2017 – 2019 • DOMESTIC MARKETING • Media Launch – Not just a pie shop • Pecan – A – Thon • Superfy • Chef Summit • Social Media presence • Awareness Driven Campaign (15 – 19%) • Conducting Nutrition Research • Consumer Research Studies • Newsletters • Influencers • Building baseline data for tracking • GLOBAL/INTERNATIONAL ACTIVITIES • Contributed $1,743,993 to USPGC for International Activities • Signed Unified Strategy for future International funding – APC leading on UES • Gathering Global Data • Focus on 5 Markets • International Nut Congress Panelists • APC being recognized for international • Research on top priority markets for US • Coordinating International Marketing activities with other US organizations

15. ACTIVITIES TO DATE: 2017 – 2019 Continued • Infrastructure & Modernizing Industry • Completed Strategic Planning • Updated Forms from 7 – 5 (hopefully 4) • Establishing electronic Filing system • Begun Compliance Reviews • Beginning Discussions on Grades & Stds • Data: • 2016 – Summary • 2017 – Year Completed • 2018 – Monthly • 2019 – (comparable) • Informing industry on transaction models • Monthly articles to publications • Unifying the Industry • 21 Organizations – Establishing a communication process • Pecan Congress • Newsletter/Memos • Attending national/regional/state conferences to update on APC • Sponsorships • Completing Annual Report (August 2019) • Working with Research Universities and Foundations in sharing information

16. Confidential DRAFT – for discussion • Land IQ – US Acreage Survey for top 8 states • Nutritional Research • Increase Influencers • Looking at specific demographic groups and target consumers • Increase Awareness • Grades and/or quality standards • Continue Pecan Congress • Monitor & Educate industry on market activities both domestic & international • Economic base line survey • Consumer tracking • Provide the necessary data to industry to make informed decisions ACTIVITIES IN PLAYProjects in Progress

17. APC BECOMES RESOURCE FOR CONSUMERS • NEW DYNAMICS OF PECAN INDUSTRY: • Moving Away From Competing to Cooperating with other Pecan Producers • Unifying the Industry • Providing a Healthy Product to Consumer • Better Data, Better Decisions for Everyone • Established Industry Reports to Track: • Shipments & Inventory on Hand • Mexico Exports & Foreign Purchases • Destination Reports • End of the Year Reports APC Creating Electronic Reporting Provide Buyers & Consumers with Pecan Information Work With Other Countries to Develop Global Data and Assist the Market Place with Driving Demand www.americanpecan.com

18. THANK YOU 9