2012 SUSTAINABILITY REPORT - Farmland Foods

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					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

                                                                           SALES1                        $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 2010              FY 2009               FY 2008


    ENVIRONMENT1   Water Use (gallons per cwt2)                                     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 CO2e 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. 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 Agriculture (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 pigs                                      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 individual
        (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. Temple Grandin, 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.
                                                                                                      3.8%    4.8%     6.6%                           All values
                                                                                             2.6%                                                     reported by
                                                                                                                                                      calendar year.
        In addition, Smithfield Foods has led the U.S. pork industry toward a
        procedure known as CO2 anesthetizing. All company facilities use the
        Butina® CO2 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. CO2 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 farmers 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
latory 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 antibiotics
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’ livestock 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       turnover 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
        ronment 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 engagement 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
                                                                                                4           5          2        4        5          25%
                                                                   not be calculated. Due                                                                      All values reported
                                                                                                                                                               by calendar year.
  Female Employees                                                 to a change in how
                                                                                              Inspections                                                      The federal govern-
                                                                   we gather and report
                                                                                                                                                               ment has been en-
                                                                   employee data,
  34.87%   34.55%      22.98%   23.53%   24.92%    Not Available   the values for 2007          7           4          2        5       10          43%
                                                                                                                                                               hancing its inspection
                                                                                                                                                               processes in recent
                                                                   and 2008 are not                                                                            years, leading to a
  Women in Management                                              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 communication, 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 meat industry, 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 continued to decline, and 2011 finished with Farmland
                                                                                                    Foods at record lows for TCR and DART, thanks to the implementation 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
          6.00                                                                fiscal year but
                                                                                                           Farmland Foods creates value through our employment of approxi-
                                                                              report the OSHA              mately 8,700 people, many of them in rural areas where there are
          5.00                                                                rates by calendar
                                                                                                           limited job opportunities. Our operations also contribute to the
                                                                              year. National
                                                                   –35%       averages for meat            economic stability and development of our local communities, where
          4.00                                                                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 percent 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 PERFORMANCE1
                       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
           environmental 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 CO2e/cwt)
                                                                                                                      2008     2009      2010     2011      2012         2016
                                             0.127
        0.124                    0.123                    0.123
                     0.121                                                                                           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) Emissions1
                                                                                                                 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
                                                                                             all the operations of Smithfield Foods.
            We have reduced solid waste landfill disposal per
            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 ham 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-
  tamination 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 sausages—include               safely consumed if cooked to an internal temperature 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
partnered with Harvesters and its network of community food banks,
                                                                                                      VALUE CREATION
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 DenisonSmithfield 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 scholarship.
“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 expectations
                                             COMMITTEES OF THE BOARD                                                         around legal compliance, environmental 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 corresponding 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
     mlgarrett@farmland.com                                                         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
     susan.murphy@farmland.com



     Collette Kaster
     Vice President of Quality Technical Services and Hog Procurement
     +1 816 243 3386
     cmkaster@farmland.com
                                                                                                   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 PARTY RECOGNITION                                                   AWARDS SPOTLIGHT

•   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

				
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