Confidential

CARGILL, INCORPORATED

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For the year ended May 31, 2007, compared with the year ended May 31, 2006

I. OVERVIEW…………………………………………………..….……………. 2
A. Corporate Organization
B. Corporate Strategy

II. CONSOLIDATED REVIEW………………………………….….…….……. 3

A. Financial Performance
B. Significant Developments
C. Liquidity and Capital Resources

III. SEGMENT REVIEW...…………………………….……………………….… 10

IV. OTHER OPERATING MATTERS...…….…………..………….….……..… 19

A. Business Disposals
B. CarVal Investors
C. Asset Impairment Charges
D. Litigation Summary

V. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS…....…...….. 21

A. Summary of Significant Accounting Policies
B. New Accounting Pronouncements

This document may contain forward-looking statements that reflect management’s current
view with respect to future results, achievements and financial performance. These
statements may be identified by their use of forward-looking terminology such as
“believes,” “expects,” “anticipates,” “may,” “will,” “should,” “seeks,” “approximates,”
“suggests,” “intends,” “aims,” “plans,” “estimates,” or the negative of these words or
other comparable terminology. Such forward-looking statements are subject to risks and
uncertainties that may cause our actual results, achievements or performance to differ
materially from those projected or implied. The most significant of these risks are
described in this document.
I. OVERVIEW

Cargill, Incorporated, headquartered in Minneapolis, Minn., is an international provider of

food, agricultural and risk management products and services with 158,000 employees in 66
countries. Founded as a grain warehousing and merchandising company in 1865, Cargill
today is one of the largest, privately owned companies in the world. We are committed to
using our knowledge and experience to collaborate with customers to help them succeed.

A. Corporate Organization

Cargill reports results from operations in five segments: Agriculture Services, Origination
and Processing, Food Ingredients and Applications, Risk Management and Financial, and
Industrial. Our business units operate in four geographic regions: Asia Pacific,
Europe/Africa, Latin America and North America.

B. Corporate Strategy

Cargill’s vision is to be the global leader in nourishing people. We carry out our vision
by combining our knowledge and experience in food, agriculture and risk management to
create solutions that help customers succeed. Cargill began executing our customer
solutions strategy in fiscal 2000 and has since delivered six consecutive years of
increased financial performance through fiscal 2007.

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II. CONSOLIDATED REVIEW

A. Financial Performance

Reclassification: Certain fiscal 2006 amounts in this report were reclassified to conform
with the current year presentation.

Consolidated summary of quarterly financial results

Three months ended

May 31, May 31, Percent

Dollars in millions 2007 2006 change
Net earnings $ 628 $ 168 274
Sales and other revenues $ 24,311 $ 19,768 23

Fourth quarter: Cargill earned $628 million in the fiscal 2007 fourth quarter, compared
with $168 million in the same period a year ago. Last year’s fourth-quarter results
included a one-time $190 million noncash charge to Cargill’s net earnings that was the
company’s share of a restructuring charge taken by The Mosaic Company related to its
phosphate fertilizer business. Excluding the charge, Cargill earned $358 million in the
2006 fourth quarter.

Fourth-quarter earnings in all five segments increased from a year ago. Nearly 60
percent of the business units exceeded last year’s fourth-quarter results, producing the
strong performance.

Fourth-quarter revenues reached $24.3 billion, up $4.5 billion or 23 percent, from the
same period a year ago.

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Consolidated summary of financial results
12 months ended
May 31, May 31, May 31,
Dollars in millions 2007 2006 2005
Earnings from continuing operations $ 2,343 $ 1,537 $ 2,070
Earnings from discontinued operations -- -- 81
Cumulative effect of accounting change -- -- (48)
Net earnings $ 2,343 $ 1,537 $ 2,103
Net earnings, excluding special items
related to Mosaic $ 2,343 $ 1,727 $ 1,525
Sales and other revenues $ 88,266 $ 75,208 $ 71,066
Cash flow from continuing operations 3,965 3,318 3,196
Capital investments 2,386 3,047 2,008

Full year: For the fiscal 2007 year, Cargill earned $2.34 billion. Fiscal 2006 earnings of
$1.54 billion included a one-time $190 million noncash charge to Cargill’s net earnings
that was the company’s share of a restructuring charge taken by The Mosaic Company
related to its phosphate fertilizer business. Excluding the charge, Cargill earned $1.73
billion in fiscal 2006. Fiscal 2005 earnings of $2.1 billion also included a special item: a
$578 million noncash net gain related to the formation of The Mosaic Company.

Among the company’s five segments, three delivered record earnings: Risk Management
and Financial, Origination and Processing, and Industrial. Results in Food Ingredients and
Applications were ahead of last year. Earnings in Agriculture Services nearly matched last
year’s record results.

Revenues for the full year rose 17 percent to $88.3 billion, an increase of $13.1 billion.
The improvement was broad based, with all five segments reporting increased revenues
for the year.

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B. Significant Developments

1. Acquisitions and alliances completed

No significant business investments were completed in the fourth quarter of fiscal 2007.

The following investments were completed in the third quarter of fiscal 2007:
• On Jan. 19, 2007, Cargill purchased LNB International Feed, a Dutch manufacturer
and exporter of animal nutrition products. LNB specializes in mineral- and vitamin-
based premix products, which complement Cargill Animal Nutrition’s larger global
presence in the feed concentrate and complete feed segments. The acquisition also
takes CAN into Russia and Romania, two key markets for future growth.
• On Dec. 20, 2006, Cargill acquired a soybean crush plant in Yangjiang, China, in
the southern province of Guangdong, a large soybean meal and vegetable oil
consuming region. Cargill also acquired a 49 percent share of a port operation
adjacent to the crush plant.

The following investments were completed in the second quarter of fiscal 2007:
• On Sept. 6, 2006, Cargill acquired a one-third stake in RightShip, an Australian-
headquartered ship vetting company. Through RightShip, Cargill and our
partners, BHP Billiton and Rio Tinto, expect to have the capability to improve
global shipping standards in dry bulk ocean freight.
• On Sept. 25, 2006, Horizon Milling G.P, a new partnership between Cargill and
CHS (Cenex Harvest States), purchased The J.M. Smucker Company’s Canadian
grain-based food service and industrial businesses. The acquisition included
milling and mixing operations in three provinces, a research and development
center, a licensing agreement to produce the Robin Hood® brand for food service
and industrial markets, and a supply agreement to provide branded retail baking
products, such as Robin Hood® flour, to Smucker for sale at retail. CHS
participated in the purchase at the same 24 percent ownership share it has in
U.S.-based Horizon Milling, LLC.
• On Nov. 3, 2006, Cargill Animal Nutrition acquired certain assets of Eagle
Milling’s feed milling and pet and animal wholesale products business based in
Casa Grande, Ariz. The acquisition should open growth opportunities in the
Arizona marketplace.

The following investments were completed in the first quarter of fiscal 2007:
• On June 12, 2006, Cargill purchased a majority of the shares of a sugar cane mill
and distillery in Patrocinia Paulista, São Paulo state, Brazil. Cargill owns almost
63 percent of the shares, with the balance owned by Canagril, a growers’
association that supplies 100 percent of the cane to the mill. The mill converts
sugar cane to ethanol. The investment is Cargill’s first step toward gaining a
presence in the Brazilian sugar cane milling and ethanol industry.
• On July 25, 2006, Cargill entered into a sugar processing joint venture with
Russkiy Sakhar, a Russian sugar company that owns two sugar mills. Through
the joint venture, Cargill purchased a 25 percent share in Russkiy Sakhar’s

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 Nikiforovsky facility, a major beet and raw sugar processing plant located in the
Tambov region in central Russia. The minority stake should enable Cargill to
gain experience in sugar processing in Russia.
• On Aug. 7, 2006, Cargill acquired its joint venture partner’s share of a xanthan
gum production facility in Zibo in China’s coastal province of Shandong. The
joint venture, Cargill Huanghelong Bioengineering, was formed in April 2003. It
is now part of the Cargill Texturizing Solutions business unit.

The following acquisitions were completed in the first quarter of fiscal 2008:
• Cargill purchased nine grain elevators and an export terminal in Canada from
Saskatchewan Wheat Pool. The transaction, which included an exchange of assets in
addition to cash, was completed on June 29, 2007.

2. Acquisitions and alliances announced

On July 10, 2007, Cargill announced its intention to increase its ownership of Agrograin,
a Hungarian grain company, to 100 percent from 35 percent. The acquisition enlarges
Cargill’s grain origination capacity in Central and Eastern Europe. The deal is subject to
regulatory and other approvals.

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C. Liquidity and Capital Resources

Consolidated summary of cash flow

May 31, May 31, May 31,
Dollars in millions 2007 2006 2005
Cash flow from continuing operations $ 3,965 $ 3,318 $ 3,196
Cash flow from discontinued operations -- -- 413
Total cash flow $ 3,965 $ 3,318 $ 3,609
Capital investments:
Property additions $ 1,970 $ 1,863 $ 1,447
Business acquisitions, less cash received 210 1,021 280
Investments in nonconsolidated companies
and purchase of minority interests 206 163 281
Total capital investments $ 2,386 $ 3,047 $ 2,008

1. Cash flow

Cash flow from continuing operations totaled $3.97 billion in fiscal 2007, an increase of
$647 million or 19 percent from a year ago. The increase is a reflection of the company’s
improved profitability.

In fiscal 2005, cash flow from discontinued operations was $413 million. This included
earnings generated by the operation of North Star Steel’s remaining steel assets prior to
their sale to Gerdau Ameristeel on Nov. 1, 2004, and the proceeds from that sale.

2. Capital investments

In fiscal 2007, Cargill reinvested a majority of its cash flow in food ingredient and supply
chain capabilities aimed at better serving customers in food, agriculture and risk management.

Business acquisitions, less cash received, were $210 million in fiscal 2007. Acquisitions and
investments completed in the current period are discussed in Section II.B.1.

Property additions equaled $1.97 billion in fiscal 2007. Of that, base level spending totaled
$515 million, excluding the fertilizer business. These are expenditures that maintain or
enhance existing capacity and facilities. They reflect Cargill’s commitment to maintaining
the company’s core assets and safety and environmental standards.

In fiscal 2006, business acquisitions, less cash received, were $1 billion. The larger
acquisitions included Degussa’s food ingredients operations, palm plantations in Indonesia
and Papua New Guinea, a small industrial chocolate facility in eastern Germany, a provider
of bakery product development services and premixes near Portland, Ore., a sunflower seed
crush plant in Kahovka, Ukraine, Canadian-based beef processing operations, and a group
of California-based meat processors.

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 3. Debt

The company’s consolidated debt is made up of the debt of closely owned businesses and
of The Mosaic Company, a publicly traded company in which Cargill is the majority
shareholder. Cargill total consolidated debt was $19.3 billion as of May 31, 2007, an
increase of 1 percent from Feb. 28, 2007.

As part of its ongoing term debt issuance program, Cargill completed a 30-year £150 million
debt offering in March 2007. A 10-year €500 million debt issuance was completed in May
2007. Proceeds from these transactions were used to replace maturing debt and for general
corporate purposes.

Summary of debt
May 31, Feb. 28, Increase Percent
Dollars in millions 2007 2007 (decrease) change
Cargill debt excluding Mosaic:
Recourse debt:
Short-term $ 7,189 $ 7,852 $ (663) (8)
Long-term 7,557 6,961 596 9
Total recourse debt $ 14,746 $ 14,813 $ (67) --
Nonrecourse debt from VIEs:
Short-term $ 583 $ 366 $ 217 59
Long-term 1,660 1,451 209 14
Total nonrecourse debt $ 2,243 $ 1,817 $ 426 23

Cargill debt excluding Mosaic $ 16,989 $ 16,630 $ 359 2

Mosaic debt:
Nonrecourse to Cargill, Inc. 2,340 2,552 (212) (8)
Other debt 14 14 -- --
Total Mosaic debt 2,354 2,566 (212) (8)
Cargill consolidated debt 19,343 19,196 147 1

Interest expense on short-term debt increased from a year ago by $175 million, or 62
percent, to $459 million for the year. The increase reflected a rise in short-term interest
rates and average short-term debt outstanding during the year. Interest expense on long-
term debt increased by $73 million, or 12 percent, to $686 million for fiscal 2007. In fiscal
2007, interest expense for nonrecourse debt totaled $110 million, excluding Mosaic. Total
interest expense on debt for The Mosaic Company was $185 million.

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Cargill’s syndicated committed credit facility was $4 billion on May 31, 2007. It is
structured as a revolving line of credit, consisting of a $1.25 billion, 364-day facility and
a $2.75 billion, 5-year facility. On May 31, 2007, the syndicated facility was
supplemented by $840 million of committed bilateral lines. These credit facilities
provide backup liquidity to the company’s commercial paper programs.

4. Credit rating

Cargill’s credit rating summary at May 31, 2007

Agency Long- Short-
term term
rating rating
Standard & Poor’s A A-1
Moody’s Investors Service A2 P-1

Fitch Ratings A F1

Dominion Bond Rating Service (DBRS) A (high) R-1 (middle)

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III. SEGMENT REVIEW

Reclassification: Certain fiscal 2006 amounts in this section were reclassified to conform
with the current year presentation.

Summary of earnings from continuing operations by segment

(excluding special items related to The Mosaic Company)
May 31, May 31, May 31,
Dollars in millions 2007 2006 2005
Agriculture Services $ 129.9 $ 131.3 $ 128.1
Origination and Processing 514.7 458.5 418.4
Food Ingredients and Applications 470.3 291.6 456.2
Risk Management and Financial 797.7 692.7 521.0
Industrial 368.7 183.1 224.0
Corporate and Other 62.0 (30.5) (255.9)
Total $ 2,343.3 $ 1,726.7 $ 1,491.8

Earnings from continuing operations by segment

2,500
Agriculture Services
2,000
Origination and Processing

1,500
Food Ingredients and Applications

Risk Management and Financial 1,000

Industrial 500

Corporate/Other 0

(500)
(Dollars in millions) 2007 2006 2005

Summary of sales and other revenues to unaffiliated customers by segment

May 31, May 31, May 31,
Dollars in millions 2007 2006 2005
Agriculture Services $ 7,160.6 $ 5,989.2 $ 6,498.4
Origination and Processing 30,303.7 24,486.3 23,516.3
Food Ingredients and Applications 38,822.7 34,679.5 32,350.1
Risk Management and Financial 4,983.7 3,759.0 3,435.0
Industrial 6,611.9 6,061.1 5,100.5
Corporate and Other 383.7 232.8 165.9
Total $ 88,266.3 $ 75,207.9 $ 71,066.2

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A. Agriculture Services

Segment Description Earnings Earnings

Percent Performance

130 131
128
Agriculture Services provides 6%
crop and livestock producers
worldwide with customized farm
services and products.

2007 2006 2005

Segment earnings were $129.9 million in fiscal 2007, a decrease of one percent from the
prior year. Revenues exceeded the level of the prior year by $1.2 billion or 20 percent.

Operating in a challenging environment, Cargill Animal Nutrition remained a top

contributor to company earnings, although slightly below last year’s strong performance.
Rising commodity costs narrowed gross margins and tempered overall results. LNB
International Feed, which was acquired in the third quarter, was accretive to earnings.

Higher commodity prices benefited the Cargill AgHorizons businesses in North America.
For the U.S. spring planting season, crop inputs sales increased in response to higher grain
prices. Margins also widened on a larger volume of grain handled and stored. In the
United States, earnings strengthened in the fourth quarter, although annual results were
somewhat below last year’s record performance. The business in Canada positioned
product early to capitalize on the crop inputs demand spurred by higher prices for corn and
canola. Increased availability of grain for export also contributed to results. The business
realized its best quarter ever.

Frontier Agriculture Limited, the U.K. joint venture, also benefited from crop inputs sales
and strong grain margins.

During the fourth quarter, the Renessen Feed and Processing joint venture announced that
commercial operations in Argentina would be discontinued to focus exclusively on the
development and commercialization of the Extrax™ corn processing system. The narrower
focus requires a smaller organization and infrastructure. As a result, asset impairment and
restructuring charges were incurred in the fourth quarter, which brought fiscal 2007 results
slightly below last year.

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B. Origination and Processing

Segment Description Earnings Earnings

Percent Performance
515
459
418
Origination and Processing
22%
connects producers and users of
grain, oilseeds and other
agricultural commodities through
origination, processing, marketing
and distribution services. 2007 2006 2005

Segment earnings rose to a record $514.7 million, a $56.2 million or 12 percent increase
over last year’s results. The segment’s emphasis on global coordination of information,
market analysis and risk management has resulted in six years of strong returns. Fiscal
2007 net revenues rose $5.8 billion or 24 percent.

The Cargill Grain & Oilseed Supply Chain posted record earnings in fiscal 2007. Global
interest in biofuels and growth of investment fund participation in agricultural commodities
markets created volatile operating conditions. In addition, congested conditions at many
ports tightened ocean fleet capacity utilization and returned freight rates to record levels.

The impact of unexpectedly large supplies of sucrose from Brazil entering the world
market and China and India’s eventual failure to import forecasted supplies led to trading
losses in Cargill Sugar.

For the first time ever, Cargill Cotton ended the year with a moderate loss, which reflected
a challenging period characterized by weak global demand. Operations in Africa also were
hurt by the unstable political and economic environment in Zimbabwe.

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C. Food Ingredients and Applications

Segment Description Earnings Earnings

Percent Performance

470 456
Food Ingredients and
Applications serves food makers,
292
food service companies and
retailers with food and beverage
ingredients, meat and poultry 20%
products, and new food
2007 2006 2005
applications.

Segment earnings grew $178.7 million or 61 percent from the previous year’s results,
with a majority of businesses delivering improved results over last year. Revenues
increased by $4.1 billion or 12 percent in fiscal 2007.

1. Food ingredients

In fiscal 2007, the North American and European food businesses increased earnings
significantly from last year. Several of the European businesses overcame high raw material
and energy costs in order to post improved performances.

Strong results in Cargill Corn Milling North America were driven by its ethanol, feed, risk
management and corn oil product lines. Although sweetener earnings strengthened in the
fourth quarter, annual results were below expectations due to back-order positions early in
the fiscal year.

Benefited by its multi-year effort to build a leadership position in trans fat solutions, Cargill
Dressings, Sauces & Oils realized higher margins on increased sales of specialty oils
blends. Trading gains on tropical, peanut and cottonseed oils added to the record earnings
for the year.

Horizon Milling posted solid results from good sales volumes, flour margins and processing
yields. Additionally, volatile grain markets allowed the business to take advantage of
merchandising opportunities.

Cargill Specialty Canola Oils benefited from increased demand for canola oil and seed due to
food companies’ emphasis on reducing trans fatty acids in food products. As a result, the
business generated a profit for the first time in fiscal 2007.

A strong Brazilian currency rate, and high energy and raw material cost negatively impacted
Cargill Acidulants’ ability to export citric acid from its facility in that country. A significant

13 Confidential
asset impairment charge was recorded as a result. High corn and energy costs also affected
operations adversely in North America.

Solid margins and shipments in cocoa processing generated strong earnings in Cargill Cocoa
& Chocolate for the year. Higher costs and lower volumes in the chocolate product line
tempered results somewhat and brought overall earnings below last year’s robust results.

Cargill Sweeteners Europe negotiated higher sales prices for calendar 2007, which
compensated for the prior year’s poor wheat crop that drove up raw material costs in the first
half of the 2007 fiscal year. Anticipating additional raw material increases in calendar 2007,
forward purchases were locked in early, which helped mitigate the impact.

Products supplied to the paper, corrugating and bio-chemical industries generated strong
volumes and excellent margins, which contributed to record earnings in Cargill Industrial
Starches in fiscal 2007. Higher raw material and energy costs were offset by increased
sales prices.

The foods businesses in Russia were hurt by expensive raw material and energy costs.
Although syrup and starch prices strengthened, the late start-up of its new vegetable oil
refinery in Efremov delayed anticipated shipments of edible oil product. Low sales volume
and high barley costs from the poor 2006 crop hurt results in malt.

Although one of the Latin American food businesses delivered a record performance, results
for the five business units in total were below last year.

Cargill Starches & Sweeteners Brazil posted record earnings. Corn grind at the Uberlândia
plant reached a record high to fulfill strong sales volumes. The tapioca business also was
strong, although it contended with competitive pressures.

Good flour volumes and margins in Argentina generated solid results for Cargill Flour
Mercosur. However, a bad debt charge, larger inventory levels and an unfavorable currency
exchange rate led to large losses in Brazil.

Due to a large loss in Cargill Refined Oils India, the Asian-based food businesses realized a
small loss collectively. The oils unit was hurt by high import tariffs and excess industry
capacity. Cargill's food distribution business in Japan delivered improved earnings due to
strong beverage products profits, good corn trading margins and strong cocoa bean sales.

2. Meat products

Cargill Meat Solutions matched last year’s results.

Cargill Value Added Meats increased earnings in fiscal 2007. Although margins began to
reflect the impact of higher corn costs in the fourth quarter, the balance of the year was
characterized by solid margins and volumes, and operational efficiencies.

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Cargill Case Ready delivered strong earnings by focusing on customer service and adding
new customers to the portfolio. Increased volume and improved operating efficiencies also
enhanced results.

Cargill Beef earnings for fiscal 2007 improved over last year. However, tight cattle supplies
and rising grain costs produced higher cattle costs and smaller cattle feeding margins in the
fourth quarter. Operating in the tough beef environment, Cargill Food Distribution generated
strong revenues and volumes. Cargill Regional Beef benefited from a steadier supply of culled
dairy cattle and good demand for ground beef.

Margins narrowed for Cargill Pork’s live hog production, as live hog selling prices did not
rise as quickly as corn costs. Export and U.S. retail demand for pork also softened.

Drought conditions in Australia hurt the beef processing business there. Beef sales prices
were insufficient to cover the impact of tight supplies of high-priced cattle.

3. Food service and retail products

Results for the businesses in this group fell well below last year due to the difficulties in
meat and poultry processing operations in Brazil and Thailand.

Seara, the Brazilian poultry and pork processor, incurred large losses throughout the year
due to Russia’s continued restrictions on Brazilian pork imports, high corn costs and a
strong Brazilian currency exchange rate.

The lingering threat of avian influenza weakened Sun Valley’s margins and earnings in
fiscal 2007. A strong baht currency exchange rate and start-up costs related to its new
processing plant also contributed to the downturn.

Sales price increases in the chicken retail sector offset rising feed grain costs and lifted
earnings in Sun Valley Europe slightly above last year.

Since its inception six years ago, Sun Valley Foods Canada has increased profitability
every year. Investment in automated processes delivered cost efficiencies for the business.

Improved poultry sales volumes and prices enabled Sun Valley Central America to increase
earnings over last year.

Sunny Fresh Foods continued to help customers shift to higher value items. Although
margins narrowed in the fourth quarter due to higher commodity prices that impacted the
shell egg market, Sunny Fresh delivered its 12th consecutive year of improved profits.

4. Food system design

All but one of the businesses in this group improved over last year. Results in Cargill
Sweetness Solutions fell below last year.

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A moderate loss in Cargill Sweetness Solutions was due to higher raw material and energy
costs, and competitive pressures.

Facing a competitive environment, Cargill Flavor Systems struggled to gain sales volumes
in Europe. In addition to flavors applications, the juice segment offers juice-based
beverage bases and applications; over the past year, certain juices have experienced tight
supplies and record-high prices that also pressured margins.

Significantly higher raw material and energy costs hurt results in Cargill Texturizing
Solutions but its loss was less than last year. Calendar 2007 price increases for starch
products were not sufficient to cover the shortfall.

Operating performance in Cargill Health & Food Technologies benefited from strong results
in arachidonic acid, an essential fatty acid that, in conjunction with DHA, an omega-3
essential fatty acid, is recognized as important in infant nutrition. The business secured a
significant settlement when a minority joint venture partner in a production facility decided
to exit the partnership and renegotiate its long-term supply agreement with H&FT.

Although volumes were lower and raw materials costs higher, the focus on customer
solutions improved margins in Cargill Cocoa & Chocolate North America. Earnings were
nearly double last year’s results. A liquor plant expansion was completed and processing
began in the fourth quarter; initial yields for liquor and fat exceeded target.

Cargill Juice North America faced a difficult environment due to declining demand for 100
percent juices, recent years’ hurricanes that damaged citrus crops and the loss of groves due
to real estate development. Cargill announced plans to permanently cease operations in the
Florida cities of Frostproof and Avon Park. The business will continue to fulfill existing
obligations to customers.

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D. Risk Management and Financial

Segment Description Earnings Earnings

Percent Performance
798
693
521
Risk Management and Financial
provides customers and Cargill
with risk management and 34%
financial solutions in world
markets. 2007 2006 2005

Segment earnings increased $105 million, or 15 percent, from the prior year. The diverse
businesses in this segment posted its fifth consecutive year of earnings growth.

CarVal Investors delivered its eighth consecutive year of record earnings. Investments in
corporate securities of companies undergoing reorganization or bankruptcy, particularly the
energy and aviation industries, contributed substantial earnings. Profits from real estate asset
sales in Japan and Europe, and collections in the consumer, residential and commercial loan
portfolios also enhanced results.

Funds managed by Black River Asset Management grew substantially, with $9.5 billion
of assets under management on May 31, 2007. Returns from Cargill’s fund investments
met expectations.

Earnings in Cargill Ferrous International matched last year. Tight management of the steel
service centers’ inventory in the first half, when industry inventories were high, positioned
the business to take advantage of recovering margins in the fourth quarter. Its trading
activities capitalized on trade flows and global fluctuations in steel scrap prices.

Record earnings in Cargill Petroleum were bolstered by its petroleum group, which
captured geographic, time and inter-product spreads. Its European gas and power group
also generated strong trading margins.

Cargill Coal posted record earnings for the year as it continued to expand its geographic
coverage. Physical trade in South Africa was the largest contributor to results. Trading
activities benefited from strong global coal markets.

In Cargill Power & Gas Markets, the power business generated strong earnings for the year,
driven by solid execution related to owned transmission, hourly trading and position
management in weather markets. The natural gas business realized sizable losses from
relative value spread positions taken early in the year and the lack of liquidity associated with
managing out of those positions. Overall, the business ended with a slight loss.

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E. Industrial

Segment Description Earnings Earnings

Percent Performance
369

The Industrial segment 16% 224

183
supplies customers with
fertilizer, salt, steel and
industrial uses for agricultural
feedstocks.
2007 2006 2005

Segment earnings increased by $185.6 million to $368.7 million for the year, largely due
to improved earnings in The Mosaic Company.

In its sixth consecutive year of improved results, Cargill Salt posted record earnings.
Significant price increases in nonseasonal products more than offset the negative impact
of weaker sales of weather-dependent products during a mild winter. Improved
profitability at vacuum evaporation facilities resulted in a significant increase in the
depletion tax credit. The mild winter also impacted earnings negatively in Cargill
Deicing Technology, which were moderately below last year. Mine production was
reduced in response to lower demand.

Despite higher raw material costs, strong demand for steel products generated higher
volumes and lifted earnings in the steel joint venture.

Demand for NatureWorks’ products rose, which increased revenues and decreased losses
somewhat compared with last year. However, poorer-than-expected product yields and
higher raw material and energy costs kept results below expectations.

Earnings in The Mosaic Company increased in fiscal 2007. The fiscal 2006 segment
earnings shown above exclude a charge taken by The Mosaic Company related to the
restructuring of its phosphate fertilizer business.

F. Corporate and Other

As discussed in the prior quarter, the significant improvement in Corporate and Other is
due primarily to a decrease in income tax-related expenses, which resulted primarily from
resolution of open income tax issues.

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IV. OTHER OPERATING MATTERS

A. Business Disposals

Cargill did not have any significant business disposals in fiscal 2007. Business disposals
during 2006 included the sale of Cargill Investor Services, a commodity brokerage business.
Proceeds from the 2006 disposals were $184 million with gains of $34 million, net of tax.

B. CarVal Investors

As noted in Section V.A.6., in fiscal 2007, CarVal Investors closed on the funding of CVI
Global Value Fund, a fund formed to invest in loan portfolios, real estate, corporate securities
and special opportunities. Subscriptions accepted by the fund totaled more than $5.75
billion. Cargill owns an interest of approximately 38 percent in the fund. The fund’s
remaining investors include more than 75 institutional investors consisting of pension plans,
endowments, foundations and trusts.

C. Asset Impairment Charges

Cargill periodically evaluates the carrying value of long-lived assets, including goodwill and
other intangible assets, when events and circumstances indicate the carrying value may not
be recoverable. If the carrying value of a long-lived asset is considered impaired, a loss is
recognized based on the amount by which the carrying value exceeds the fair market value.
Impairments during fiscal 2007 included food processing assets in Brazil, the United States
and Europe. Major impairments in fiscal 2006 consisted primarily of $284 million for
fertilizer assets in the United States, which equals $190 million, Cargill share after tax and
minority interest, and of food processing assets in India and Europe. Restructuring charges
also were recorded to cover exit and employee severance costs related both to assets to be
sold and assets to be held and used. In 2007, asset impairment charges totaled $60 million
after tax, and, in 2006, were $433 million after tax.

D. Litigation Summary

In July and August 2000, an outbreak of E. coli 0157:H7 occurred in two Sizzler chain
restaurants in the Milwaukee, Wisc., area. According to a report issued by the state of
Wisconsin, more than 60 confirmed cases of E. coli 0157:H7 illnesses and the death of one
child are linked to the outbreak. Cargill Meat Solutions, through distributor Sysco Services
of Eastern Wisconsin, was a supplier of meat products to the two Milwaukee Sizzler
restaurants. It was alleged that an unopened CMS sirloin tri-tip product taken from one of
the restaurants tested positive for the same strain of E. coli as that found in the affected
patrons. One consumer lawsuit remains pending in state court against CMS, relating to the
death that was linked to the outbreak. Since the onset of this litigation, several consumer
lawsuits against CMS have been settled, while several others have been dismissed. In
January 2002, Sizzler USA Franchise, Inc., filed a third-party complaint against Cargill and a
cross claim against CMS in state court for damages. In May 2002, CMS prevailed on a

19 Confidential
motion for summary judgment and the state trial court dismissed the plaintiffs’ claims and
the cross claim by Sizzler against CMS. The Wisconsin Court of Appeals reversed the trial
court’s summary judgment in favor of CMS. The Wisconsin Supreme Court declined to hear
the case. On March 22, 2004, the U.S. Supreme Court declined to hear a certiorari petition
filed by CMS asking it to hear the appeal. While the consumer lawsuit and Sizzler’s cross
claim against CMS remain pending, Sizzler’s third-party complaint against Cargill has been
dismissed. E&B Management Co. of Waukesha, the Sizzler franchisee that operated the two
Sizzler restaurants in Milwaukee, along with E&B’s insurer (Secura Insurance, a Mutual
Company), also recently filed a cross-claim and a direct lawsuit against CMS, under a
Guaranty provided by CMS to Sysco, on the grounds that E&B was a third-party beneficiary
of the Guaranty. The judge did not dismiss E&B’s claims based on the statute of limitations
or claim preclusion. Trial will be deferred to 2008.

On June 18, 2005, the State of Oklahoma filed a water quality lawsuit against Cargill and
other poultry integrators in the U. S. District Court for the Northern District of Oklahoma,
related to alleged nutrient loading in certain Oklahoma and western Arkansas watersheds.
Specifically, the lawsuit seeks damages and injunctive relief based upon the alleged adverse
environmental impact of excess nutrients associated with the land application of poultry litter
by the companies and contract growers. The parties were unsuccessful in mediating the
claims. Answers from Cargill and the other defendants were filed in October 2005. We are
preparing experts and other discovery plans. In March 2007, the court set a comprehensive
case management order, which estimates that trial will take place in January 2009.
Discovery to date has been mired in delays and motion practice, and the parties are also
submitting various motions to dismiss, strike, stay or sever third party claims.

The outcome of any litigation is not predictable with certainty, or subject to the company’s
control. However, it is the opinion of management that any ultimate liability in any known
litigation against the company has been provided for, or will not have a material adverse
effect on our consolidated financial condition, cash flows or results of operations.

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 V. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of key accounting policies and disclosures. For further
information, refer to the audited consolidated financial statements and footnotes for the year
ended May 31, 2007.

A. Summary of Significant Accounting Policies

Significant accounting policies followed in preparing the consolidated financial statements

are summarized below.

1. Nature of Business

The Company is engaged in the international marketing and processing of agricultural,

industrial and financial commodities. Operating in 66 countries worldwide, the Company
markets its products principally in four geographic regions: Asia/Pacific, Europe/Africa,
Latin America and North America.

2. Basis of Consolidation

The accompanying consolidated financial statements include the accounts of Cargill,

Incorporated and all entities that we control by ownership of a majority voting interest as
well as certain variable interest entities, where the Company is the primary beneficiary.
Intercompany accounts and transactions are eliminated. Investments in companies where the
Company does not have control, but has the ability to exercise significant influence
(generally 20 percent to 50 percent ownership), are accounted for by the equity method. Net
earnings include the Company’s share of net income in these companies. Other investments
where the Company is unable to exercise significant influence over operating and financial
decisions are accounted for at cost.

3. Variable Interest Entities

The FASB issued Interpretation No. 46 (revised December 2003), “Consolidation of Variable
Interest Entities” (FIN 46R), which requires certain variable interest entities (VIEs) to be
consolidated. FIN 46R separates entities into two groups: (1) those for which voting
interests are used to determine consolidation and (2) those for which variable interests are
used to determine consolidation. An entity is considered to be a VIE when it has equity
investors who lack the characteristics of a controlling financial interest, or the entity’s capital
is insufficient to permit it to finance its activities without additional subordinated financial
support. A VIE is consolidated by its primary beneficiary, which is the company that
absorbs a majority of the VIE's expected losses, receives a majority of the VIE’s expected
residual returns, or both. Entities not considered to be a VIE are evaluated for consolidation
under the voting control model.

In the accompanying consolidated financial statements, the Company has applied FIN 46R to
all entities. The consolidated VIEs include partnerships, LLCs, corporations and trusts that
acquire, hold, restructure and dispose of performing and nonperforming loans and real estate

21 Confidential
assets as well as a few food businesses, power plants and synthetic lease structures.
Consolidated VIEs are funded by a combination of equity and third party nonrecourse debt.
The equity interests of consolidated VIEs not owned by the Company are reported as
Minority Interests in Subsidiaries on the Company’s consolidated balance sheet.

The Company also holds variable interests in the form of loan and equity investments in a
variety of VIEs for which the Company is not the primary beneficiary. These VIEs primarily
hold, restructure and dispose of performing and nonperforming loans and real estate assets.

4. Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes. Although
these estimates are based on knowledge of current events and actions expected to be
undertaken in the future, actual results may ultimately differ from estimates.

5. Revenue Recognition

The Company recognizes revenue from commodity or product sales when the goods are
shipped or delivered depending upon when the customer has taken title and assumed the risks
and rewards of ownership, prices are fixed or determinable and collectibility is reasonably
assured. Additional revenue recognition policies for trading securities and derivatives and
inventories are shown below.

6. Affiliated Private Investment Funds

The Company’s noncontrolling investment in several affiliated private investment funds is

included in the “investments and advances” line on the consolidated balance sheet. These
affiliated private investment companies use investment company accounting and report all
assets and liabilities at fair value. Investment company accounting has been retained by the
Company for its investments in the funds and accordingly, the Company’s share of each
fund’s earnings is included in the determination of net earnings.

The Company’s subsidiary, Black River Asset Management LLC is a global asset
management company that has developed and marketed a number of affiliated private
investment funds, under the Black River name, with differing types of investment strategies.
Black River provides investment advisory services for these funds and for certain proprietary
accounts for the Company.

During 2007, the Company restructured its value investment business into CarVal Investors,
LLC (CarVal), a Cargill subsidiary. CarVal formed the CVI Global Value Fund (CVI Fund)
to provide institutional investors with a variety of value investments including loan
portfolios, corporate securities, real estate and special opportunities. CarVal provides
investment advisory services to the CVI Fund and for certain proprietary accounts for the
Company.

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 7. Foreign Currency Translation

Gains and losses resulting from translating the financial statements of foreign subsidiaries,
whose functional currency is the local currency, at the current rate are included directly in
other comprehensive income.

Translation gains and losses of foreign subsidiaries operating in hyperinflationary economies

and foreign subsidiaries where the U.S. dollar is the functional currency are included in net
earnings currently.

8. Cash and Cash Equivalents

Cash equivalents consist of short-term, highly liquid investments with original maturities of
90 days or less.

9. Short-term Investments

Short-term investments include highly liquid investments with original maturities greater
than 90 days, but less than one year.

10. Asset Retirement Obligation

The Company incurs obligations related to the retirement of certain long-lived assets. The
fair values of these retirement obligations are recorded as liabilities on a discounted basis at
the time the obligations are incurred. Upon recognition of the liability, the cost is capitalized
as part of the related long-lived asset and depreciated over the estimated useful life of the
related asset. Accretion expense in connection with the discounted liability also is
recognized over the estimated useful life of the related asset.

11. Resale and Repurchase Agreements

Financial instruments purchased with agreements to resell (reverse repurchase agreements)

and financial instruments sold with agreements to repurchase (repurchase agreements) are
treated as collateralized financing transactions and are recorded at the amount at which the
financial instruments were initially acquired or sold, including accrued interest. Interest
income is recorded on reverse repurchase agreements and interest expense is recorded on
repurchase agreements.

It is the Company’s policy to take delivery of financial instruments purchased with

agreements to resell, which are generally U.S. government or U.S. government agency
securities. The Company has the ability to sell or re-pledge the securities. The Company
monitors the market value of the financial instruments to be resold daily and obtains
additional collateral when deemed appropriate. The collateral for financial instruments sold
with agreements to repurchase consists of securities, other assets, accounts receivable and
notes receivable. The Company offsets resale and repurchase agreements that meet the
applicable netting criteria.

23 Confidential
 12. Trading Securities and Derivatives

The Company is engaged in the leveraged trading of a diverse group of securities and,
accordingly, its trading securities and trading securities sold, not yet purchased are recorded
on trade date at fair value. These instruments are marked to market with realized and
unrealized gains and losses included in the determination of net earnings. Interest on trading
securities sold, not yet purchased is netted against interest income and shown as “sales and
other revenues” in the consolidated statement of earnings.

Derivative instruments, including swaps, futures contracts, forward commitments, options

and other similar types of contracts and commitments based on either interest rates or foreign
exchange rates, as well as equity and commodity derivatives, are traded by the Company and
are carried at their fair market value as either trading securities or trading securities sold, not
yet purchased. The fair market value of almost all trading securities and derivatives, as
described above, is determined from market prices quoted on public exchanges or based on
management’s best estimate subject to independent price verification. New complex
instruments may have immature or limited markets. As a result, the pricing models used for
valuation may require significant estimates and assumptions. An insignificant amount of
positions are valued in this manner.

In addition to its trading activities, the Company utilizes various types of derivative
instruments (principally options, futures and interest rate and currency swaps) to hedge
interest rate, currency and other market risks arising from certain of its assets and liabilities.
The Company values its derivative instruments in accordance with SFAS 133, "Accounting
for Derivative Instruments and Hedging Activities" as amended. The statement requires that
all derivative instruments be recognized in the balance sheet at fair value with changes in
such fair values recognized immediately in earnings unless specific hedging criteria are met.
Effective changes in the fair value of derivatives designated as cash flow hedges and net
foreign currency investment hedges are recorded in accumulated other comprehensive
income. Amounts are reclassified from accumulated other comprehensive income when the
underlying hedged item impacts net earnings and all ineffective changes in fair value are
recorded currently in net earnings. Changes in the fair value of derivatives designated and
effective as fair value hedges are recorded in earnings and are offset by corresponding
changes in the fair value of the hedged item.

13. Inventories

Grain, cotton and other commodities for merchandising and oilseeds and other commodities for
processing and products thereof are stated principally at market, adjusted for unrealized gains
or losses on open cash contracts valued at market. Market is determined from market prices
quoted on public commodity exchanges, adjusted for expected freight costs to normal delivery
points and a price premium or discount to cover local supply and demand factors as estimated
by management. The availability and market price of agricultural commodities are subject to
wide fluctuations due to unpredictable factors such as weather, plantings, domestic and foreign
government farm programs and policies, global production and other factors. The Company
generally minimizes the risk of market fluctuations by hedging these inventories with futures,

24 Confidential
cash, and foreign exchange contracts. Generally these contracts are valued at market and the
resulting unrealized gains or losses are recognized currently in earnings. Dressed beef, poultry,
salt and other products are valued at the lower of cost (last-in, first-out) or market. All other
inventories are stated principally at the lower of cost or market.

14. Property, Plant and Equipment

Property, plant and equipment are stated at cost and depreciated principally using the straight-
line method over the estimated useful lives of the assets. The company periodically evaluates
the carrying value of these long-lived assets when events and circumstances indicate the
carrying value may not be recoverable. If the carrying value is considered impaired, a loss is
recognized based on the amount by which the carrying value exceeds fair market value.

15. Income Taxes

The Company and substantially all domestic subsidiaries are members of a group, which files
a consolidated Federal income tax return. Federal income taxes or tax benefits are allocated
to each company on the basis of its individual taxable income or loss and tax credits included
in the return. The Company owns a majority share of The Mosaic Company, a publicly
traded fertilizer company, which files separate federal and state income tax returns. Deferred
income taxes are recognized for tax consequences of temporary differences by applying
enacted statutory tax rates, applicable to future years, to differences between the financial
reporting and the tax basis of existing assets and liabilities.

It is generally the policy of the Company to reinvest unremitted earnings of foreign

subsidiaries and corporate joint ventures indefinitely, or to remit earnings only when the tax
effect is minor. Accordingly, no provision has been made for income taxes that may be
payable upon remittance of such earnings. Federal income taxes on any amounts remitted
would be partly offset by foreign tax credits.

16. Pension and Postretirement Plans

The Company and its subsidiaries have various pension and postretirement benefit plans
covering most of its domestic employees and many of its foreign employees. Pension
benefits are based on years of service and compensation. Unrecognized net gains or losses
are amortized over the expected remaining service lives of employees. Pensions are funded
in compliance with U.S. government regulations or local laws and customs.

17. Share-based Payment Plans

The Company uses the fair value recognition provisions of SFAS 123 and expenses the value
of stock options over the service period. In December 2004, The FASB revised SFAS 123.
SFAS 123R further defines the concept of fair market value as it relates to share-based
payment transactions as compensation expense. The provisions of this statement were
effective for the Company in fiscal 2007 and did not have a material effect on the Company’s
consolidated financial position or results of operations.

25 Confidential
 18. Business Combinations and Goodwill

Business acquisitions are accounted for in accordance with SFAS 141, “Business
Combinations,” with the purchase price allocated to the assets and liabilities acquired,
including goodwill and other intangibles, based on their estimated fair values at date of
acquisition. Under SFAS 142, “Goodwill and Other Intangibles Assets,” goodwill and
intangible assets with indefinite lives are not amortized, but are reviewed annually for
impairment or upon the occurrence of trigger events. Impairment assessments include
comparing the fair value of a reporting unit with its carrying value, including goodwill. The
assessments are performed using a variety of methodologies, including cash flow analyses,
estimates of sales proceeds and appraisals.

19. Reclassifications

Certain 2006 amounts have been reclassified to conform with the current year presentation.

B. New Accounting Pronouncements

Included below are significant new accounting pronouncements issued effective after the year
ended May 31, 2007.

1. Accounting for Uncertainty in Income Taxes

In June 2006, The FASB issued FASB Interpretation 48 (FIN 48), “Accounting for
Uncertainty in Income Taxes – an interpretation of SFAS 109.” This interpretation
prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return.
The interpretation also provides guidance on derecognition, classification and other matters.
FIN 48 is effective for the Company in fiscal 2008 and is not expected to have a material
effect on the Company’s financial position or results of operations.

2. Accounting for Defined Benefit Pension and Other Postretirement Plans

During September 2006, the FASB issued SFAS 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans.” This statement requires an employer to
recognize the overfunded or underfunded status of a defined benefit postretirement plan as an
asset or liability in its balance sheet and to recognize the changes in the funded status in other
comprehensive income in the year in which the changes occur. The statement also requires
measurement of the funded status of defined benefit postretirement plans as of the end of the
fiscal year instead of a date prior to the end of the fiscal year. Pursuant to SFAS 158, the
Company will recognize the funded status of its defined benefit postretirement plans in its
consolidated balance sheet as of May 31, 2008, and will adopt the measurement date
provisions of SFAS 158 on May 31, 2009. The Company does not expect that adoption of
SFAS 158 will have a material effect on consolidated stockholders’ equity.

26 Confidential