University Of Lethbridge

1. University Of Lethbridge Canadian Wheat Board

2. 1 CWRS 13.5 vs. DNS 14

3. 1 CWAD 12.5 vs 1 HAD

4. SS CW Two-Row vs US Malt Barley

5. Global Commercial Storage

6. Producer Cars

7. Railway Service Performance

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 World wheat trade is controlled by a handful of very large players Billions of dollars Canadian Annual company revenue (2006 available data)

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 companies 4,947 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) W. Canada France 1,450 320 Russia USA Ukraine 675 650 - 1450 340 Australia Argentina 160-280 350

16. Always a Wheat Harvest Somewhere

17. Canada has 6 concluded agreements, 2pending implementation and 6 under negotiation. Canada is negotiating with: Colombia, South Korea, Singapore, Dominican Republic, and Central America - 4. Bilateral and Regional Free Trade Agreements • Canada’s key agriculture competitors are aggressively pursuing bilateral trade deals with key customers for Canadian grain. • 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. 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 Western Canada Soil Moisture (November 1, 2007)

21. CWRS Pool Returns to Farmers In store Vancouver or St. Lawrence Cdn$/tonne $390 $360

22. World Durum Production vs Consumption

23. Major Exporters Durum Wheat Exports (July-June) Source: CWB, IGC

24. Durum Wheat Pool Returns to Farmers In store Vancouver or St. Lawrence Cdn$/tonne $468 $439 $125

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 spreads To 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)