THE RACE FOR MARKETS

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THE RACE FOR MARKETS MAKING CANADIAN CANOLA A
WINNER!
Dave Charne Canola Sunflower Research Pioneer
Hi-Bred International
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GAME PLAN Outline

• Assess the field of play
• Understand the competition
• Build on our strengths
• Trust the market
• Be innovative
• Play to win!

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• THE FIELD OF PLAY

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Global Oilseed Production 1991-2004
Millions MT
7.5 p.a. 3.5 p.a. 1.4 p.a.
12.2 p.a. 1.8 p.a.
Source MREADS USDA
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OILSEEDS The Past 15 Years

• GLOBAL
• Increased population income, esp. in Asia ?
  increased demand for oil livestock products
• Palm soybean major beneficiaries
• Palm low cost oil, Soybean high value meal
• CANOLA
• Moderate growth ? mainly in China EU
• Consumption driven by popularity oil properties

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OILSEEDS The Next Decade

• Nutrition health focus in developed economies
• Reduced sats, trans replacement, omega-3
• Urbanization and income growth in China India
• Increased oil use, with growing health concerns
• Increased biodiesel production use
• Initially EU, but also NA
• ALL OF THESE TRENDS FAVOUR INCREASED CONSUMPTION
  OF CANOLA OIL!

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2004-05 Worldwide Canola/RapeseedProduction and
Consumption
Source MREADS USDA
Thousand Metric Tons
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CANOLA The Next Decade

• CANADA IS IN A UNIQUE POSITION AS
• A MAJOR CANOLA PRODUCER
• A MAJOR CANOLA CONSUMER
• THE LARGEST CANOLA EXPORTER
• WE ARE WELL-POSITIONED TO BENEFIT FROM INCREASED
  USE OF CANOLA GLOBALLY AND DOMESTICALLY!

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• UNDERSTANDING THE COMPETITION

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The Competition SOYBEANS!!
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CANOLA vs. SOYBEANS

• Value driver for canola is OIL, for soybean is
  MEAL
• US soybean industry 6-8x Canadian canola
• Both driven by innovation ? soybean has much
  larger RD investment less regulation
• Both depend on domestic consumption exports
• Canola soybean oils can substitute for each
  other ? target many of same markets end uses
• TO GAIN, CANOLA MUST OFFER A BETTER VALUE
  PROPOSITION THAN SOYBEAN!

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• BUILDING ON CANOLAS STRENGTHS

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CANOLA vs. SOYBEANS

• Canola oil is BETTER than soybean oil because
• Lower saturates (7 vs. 15)
• Higher 181 (60 vs. 24)
• High omega-3 (12 vs. 8)
• Other strengths of canola vs. soybean
• Hybrid crop ? faster genetic gain possible
• Oilseed ? more efficient producer of OIL
• Broad adaptation, fits easily into many rotations
  worldwide

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• TRUSTING THE MARKET

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Canadian Canola Value Chain
USA, Japan, Mexico, China, Pakistan, etc.
EXPORT
GRAIN HANDLER
SEED
FARMER
END USER
CRUSHER
OIL
REFINER
MEAL
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Let Market Forces Work FOR US!

• Pairs of buyer-seller relationships along value
  chain
• MUST operate efficiently for canola to be
  competitive
• Variety registration
• Interferes with seed supplier-farmer interaction
  slows delivery of innovation ? hurts canolas
  competitiveness!
• Focus on upstream-downstream disconnects, i.e.
  breeder vs. end user views on compositional
  priorities
• Tariffs (in key export markets)
• Favour soybean ? must level the playing field!
• Clear priority for CCC all stakeholders

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• HARNESSING INNOVATION

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Improving Canolas Position

• Continue Pushing Productivity
• YIELD gains blurred by heat/drought of 2001-2003
  but evident in high yield environments
• Need to extend yield gains to entire geography
• Key HYBRIDS just scratching the surface!!
• Agronomics disease greatly improved
• Next decade improved harvestability, stress
  tolerance, frost/cold tolerance
• NEED TO MAINTAIN EVEN INCREASE RD
  INVESTMENT!!

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U.S. Average Corn Yields 19202003



Yield in buacr

1947
Year
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Improving Canolas Position

• Increasing Oil Content
• Adds value for ALL users
• Variation (gt2) in elite Canadian germplasm
• Variety registration as a tool?
• Make oil priority 1 working in Germany
• Bonification as a tool?
• Used in EU (esp. Germany) Australia
• More likely to get what we want if we pay for it!
• US soybean oil down in past decade ? great
  opportunity for canola to be MORE competitive!

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Improving Canolas Position

• High Stability Oil
• LL MOLL canola best available solutions to
  TFAs
• Superior to current soy options available NOW!
• Need to eliminate yield penalty reduce premium
• Harness genetic horsepower ? challenge IP
• Solutions? Partnering along value chain,
  licensing IP
• Window of opportunity BUT soybean not standing
  still ? have new profiles true high oleic (85)
• Remember who the REAL competition is!

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Canola Soybean Specialty Oil Profiles
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Improving Canolas Position

• Biodiesel
• Economic w/ high oil prices GH gas
  considerations
• EU leading the way BUT makes sense in Canada
• Need strong lobbying effort for tax breaks
• Could petroleum industry be incented to invest??
• First NA plant in ND (German investors)
• Complements bonification chlorophyll grading
• CCC involvement?
• Canola oil is superior to soybean oil as a
  biodiesel source!

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Improving Canolas Position

• What About The Meal??
• Opportunities will drive increased OIL use ? what
  about the meal?
• Need to close value gap w/ SBM ? protein
  energy, ? fiber
• Complements effort to increase oil contents
• Yellow seed? one option ? already have that in
  canola quality juncea need to exploit this!
• Imitation is the best form of flattery and
  the most effective form of competition!

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• PLAYING TO WIN POSSIBLE STRATEGIES

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Winning Strategies

• Implement quality only variety registration
  a.s.a.p make oil top priority
• Look at options for implementing oil bonification
  direct chlorophyll measurement
• Continue efforts to reduce tariffs achieve
  parity between canola soybeans in key export
  mkts
• Lobby for biodiesel tax breaks identify
  potential investors (oil industry?)
• Review options for meal improvement
  stakeholder discussions?

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• Go forward with a passion to make canola better
  and the Canadian canola industry more competitive
  successful!!