Canadian Wheat BoardUniversity Of Lethbridge

2

1 CWRS 13.5 vs. DNS 14

US$ /buAverage Price Received

(USDA) Average Elevator Bid      

DNS ND MT ND MT DPC Offered DPC Paid PRO US$/bu

Aug $ 5.46 $ 5.61 $ 5.84 $ 6.06 $ 4.85 $ 4.83 $ 5.08

Sep $ 6.42 $ 6.09 $ 7.03 $ 7.45 $ 6.43 $ 6.39 $ 6.59

Oct $ 6.69 $ 7.55 $ 7.98 $ 8.50 $ 6.99 $ 7.12 $ 6.50

Nov $ 6.81 $ 7.08 $ 8.24 $ 8.59 $ 7.22 $ 7.57 $ 6.33

Dec $ 7.60 $ 7.29 $ 10.07 $ 10.31 $ 8.70 $ 8.58 $ 7.32

Jan $ 8.50 $ 8.40 $ 11.46 $ 11.67 $ 10.02 $ 10.20 $ 7.99

Feb to date     $ 17.23 $ 17.83 $ 15.63 $ 16.97 $ 8.97

Weighted Average $ 6.50 $ 6.56 $ 9.69 $ 10.06 $ 7.37 $ 6.70  

3

1 CWAD 12.5 vs 1 HAD

US$/buAverage Price Received

(USDA) Average Elevator Bid  

Durum ND MT ND MT PRO US$/bu

Aug $ 6.93 $ 6.64 $ 7.32 $ 7.31 $ 6.65

Sep $ 9.73 $ 7.05 $ 9.66 $ 10.58 $ 10.47

Oct $ 12.30 $ 9.50 $ 14.54 $ 15.18 $ 11.26

Nov $ 12.50 $ 9.13 $ 15.07 $ 15.38 $ 11.09

Dec $ 13.00 $ 10.60 $ 16.78 $ 17.63 $ 11.10

Jan $ 14.50 $ 11.90 $ 18.78 $ 19.18 $ 11.63

Feb to date     $ 21.45 $ 22.29 $ 12.65

Weighted Average $ 10.45 $ 8.15 $ 14.80 $ 15.36  

4

SS CW Two-Row vs US Malt Barley

US$/buAverage Price Received

(USDA) Average Elevator Bid  

Malt Barley ND MT ND MT PRO US$/bu

Aug $ 3.38 $ 3.65 $ 3.15 $ 3.20 $ 4.15

Sep $ 3.86 $ 3.73 $ 4.40 $ 4.19 $ 5.07

Oct $ 4.42 $ 4.02 $ 4.96 $ 4.81 $ 5.09

Nov $ 4.53 $ 3.22 $ 4.62 $ 4.62 $ 5.02

Dec $ 4.16 $ 5.15 $ 4.88 $ 4.61 $ 4.90

Jan $ 5.30 $ 4.13 $ 5.39 $ 4.77 $ 4.92

Feb to date     $ 4.89 $ 4.64 $ 5.00

Weighted Average $ 4.27 $ 4.12 $ 4.61 $ 4.41  

5

Global Commercial Storage

9

41

33

219

23

21

26

110

0 50 100 150 200 250

Canada

Australia

Argentina

U.S.

Millions of Tonnes

Storage Exports

6

Producer Cars

12,500

2,883

11,969

2,342

10,912

2,320

7,933

1,797

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Rai

lcar

s

'07/08 '06/07 '05/06 '04/05

Crop Year

Annual To Nov 17

7

Railway Service Performance

Country Loading Performance for CWB Grain on CN/CP Lines

0%10%20%30%40%50%60%70%80%90%

100%

Aug-06

Sep-06

Oct-06

Nov-06

Dec-06

Jan-07

Feb-07

Mar-07

Apr-07

May-

Jun-07

Jul-07

Aug-07

Sep-07

Oct-07

Nov-07

CN Loading Percent CP Loading Percent

8

2006-07 Logistical Issues

• Incremental Capacity– Maximizing use of BN and trucking directly to the U.S.– Taking advantage of lower freight rates

• Lowering Supply Chain Costs– Churchill– Producer cars– Commercial agreements– Tendering

• New rail allocation system introduced by CN Feb. 1, 2008– a system where grain is “pushed” from origin, instead of being

“pulled” to destination – 6 grain shippers have applied to CTA for emergency relief

9

Railway Costing Review

• Freight cost on grain movement single largest marketing cost to farmers

• Prior to the railway revenue cap – transportation costing review every four years

• Need to reduce farmer freight costs

• CWB requesting that the CTA pursue the continuation of regular costing reviews to ensure productivity gains are shared with farmers

10

Costing study

• What is fair and adequate railway compensation?

– July 2007 Travacon Costing Study reviewed 05-06 and 06-07

rail compensation

Result: railways have been earning more than $6 per tonne in excess of fair and

reasonable levels (50 per cent contribution rate versus 20 per cent)

11

Global agriculture

• World-wide, the agriculture industry is consolidating:

– Four firms control over 70 per cent of world grain trade

– A handful of companies dominate agriculture input production and sales

– Farmers must vertically integrate to succeed

12

Global concentration

Billions of dollars

Canadian

World wheat trade is controlled by a handful of very large players

Annual company revenue (2006 available data)

Annual company revenue (2006)

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

Cargill ADM Bunge L.Dreyfus Conagra AWB CWB

$C

ND

Bill

ion

s

13

Domestic concentration

• Viterra, Cargill and JRI– 5 of 6 terminals in Vancouver and Prince Rupert– 3 of 5 terminals Thunder Bay

• Rationalization of CN’s and CPR’s networks increases captivity of farmers

• Malting, milling, crushing, foreign owned

14

Concentration

• Canadian Industry

– Millers

– Maltsters

– Handling companies4,947 elevators (1970)1,300 elevators (1998) 950 elevators (2000)

376 elevators (2005) 284 delivery points

• Transportation– 6 major North American Railways– Short lines

15

Growing Region Distance from Water(kms from center of growing region to port)

USA

France

Australia

W. Canada

Argentina

Russia320

340

350

650 - 1450

1,450

160-280

Ukraine 675

16

Always a Wheat Harvest SomewhereWorld Wheat Harvests

January ArgentinaFebruaryMarch Mexico, April India, Pakistan, May U.S.(HRW), China, North Africa, Middle EastJune U.S.(SRW), Eastern EuropeJuly Canada (CWRW), Russia, Ukraine, EUAugust U.S.(HRS), September Canada (CWRS), Kazakhstan, OctoberNovember Australia, BrazilDecember Argentina, South Africa

17

Bilateral and Regional Free Trade Agreements

• Canada has 6 concluded agreements, 2 pending implementation and 6 under negotiation.

• Canada’s key agriculture competitors are aggressively pursuing bilateral trade deals with key customers for Canadian grain.

Canada is negotiating with:– Colombia,– South Korea, – Singapore,– Dominican Republic,– and Central America - 4.

• Continue to lobby the government for additional agreements with markets such as Morocco, Japan and South-East Asian nations.

18

Northern plains percent soil moisture: February 20, 2008

19

U.S. HRW February 2008

20

Western Canada Soil Moisture (November 1, 2007)

0 mm to 25 mm (Very Dry)

25 mm to 50 mm (Dry)

50 mm to 100 mm (Moist)

>100 mm (Wet)

Millimeters of Available Soil Water

21

Cdn$/tonneIn store Vancouver or St. Lawrence

CWRS Pool Returns to Farmers

100125150175200225250275300325350375400

85-86

87-88

89-90

91-92

93-94

95-96

97-98

99-00

01-02

03-04

05-06

07-08P

1CWRS 13.5 3CWRS

$390$360

22

World Durum Production vs Consumption

0

5

10

15

20

25

30

35

40

45

2003-04 2004-05 2005-06 2006-07 2007-08E 2008-09P

Mil

lio

n T

on

nes

Production Consumption

23

Major Exporters Durum Wheat Exports (July-June)

0

1

2

3

4

5

Mil

lio

n T

on

ne

s

Canada U.S. EU-27 Australia Others

2006-07 2007-08E 2008-09PSource: CWB, IGC

24

050

100150200250300350400450500550

86-8

7

89-9

0

92-9

3

95-9

6

98-9

9

01-0

2

04-0

5

07-0

8P

1CWAD 13% 3CWAD

Cdn$/tonne

Durum Wheat Pool Returns to Farmers

In store Vancouver or St. Lawrence

$125

$468$439

25

Pricing Alternatives

• The following pricing alternatives are available to farmers:

– Early Payment Option – prices based on Pool Return Outlook (PRO), best used as a cash flow tool for earlier payment.

– Basis Price Contract – can price basis or futures separately.

– Fixed Price Contract – provides a locked-in price.

– Daily Price Contract – similar to the FPC except that it offers a spot basis and cash spreads based on the U.S. market.

Note: Pricing contracts only – not delivery contracts

PPO contracts require 100% application of tonnage

26

Direction and Planning

• July 2007 board of directors planning session – unanimous agreement to focus on improving the flexibility and

control farmers have in pricing and delivery

• Goal to increase farmer flexibility and choice with more options within the single desk

• A complete overhaul of programs to be considered where appropriate

• Consider different programs for different crops / classes to address their specific marketing circumstances

27

Objectives

• Flexible and easy for farmers to use

• Provide farmers fair, reasonable and timely access to delivery

• Provide more predictable timing of delivery

• Better match farmers’ deliveries with CWB

sales requirements– Improved logistical efficiency– Increased ability to capture sales opportunities– Better overall return

• Farmers want a daily cash price

• Program risks must be manageable (price and basis risk)

28

Improvements to existing programs for 2007-08

Changes approved by board of directors in October

• Enhanced guaranteed delivery contracts

• Delivery exchange contract (DEC) expansion

• Early payment option improvements

• Expanded direct selection (malt barley)

• Cash buying (feed barley)

29

Moving Forward

• Consultations with farmers on new programs and program amendments for malting barley, CWRS and durum

• Programs approved by the board of directors in Nov. and Jan. board meetings:• CashPlus for malting barley• Pricing option year round on tonnage declared up front

– CWRS pilot program to begin this July for 2008-09

• Defined delivery contracts – pilot program to begin August 2008 for CWRS

• Churchill specific contract

• Consultations on minor classes(CWRW, CPSR, CPSW, CWES, CWSWS)

30

Future Programs in the works for 2009-10

Lock in grade & protein spreadsTo enable farmers to lock in grade & protein spreads that are more reflective of

market conditions

– Based on the PRO– For FPC/BPC contracts

Additional EPO lock-in options To provide more payment values to choose from (e.g. 75, 85, 95 per cent of PRO)