Oat Outlook. Ag Commodity Research & Oatinsight.com Vancouver, Canada

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1 Oat Outlook Ag Commodity Research & Oatinsight.com Vancouver, Canada

2 Current Situation South American weather & EU debt concerns driving Ag & oat fundamentals Oat prices bucking seasonally higher trends World oat S&Ds tight but adequate for the moment Growers oat sales strong Rate of oat use at 10-year high CWB situation will create anxiety for oat markets Funds are net short, not seen in two years

3 Canadian Oat Situation Loss of nearly 1 million oat acres last spring from excessive spring moisture reduced oat supplies 2011/12 oat supplies tight but not critical 2012/13 oat production and supplies would increase if growers seed only what they intended in 2011, end stocks to rise to near the five-year average, strong chance of both occurring However, expected removal of CWB export monopoly export wheat/barley creates unknowns, one is possibility of higher competition for oat area Long term oat area declines becoming increasingly concerning, higher US equine demand needed to stem declines Canadian growers are however harvesting more oats for commercial sales, trend to continue, should offset lower seeded area

4 CBOT Continuous Monthly Oats $usbu $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 Nov/95 Nov/96 Nov/97 Nov/98 Nov/99 Nov/00 Nov/01 Nov/02 Nov/03 Nov/04 Nov/05 Nov/06 Nov/07 Nov/08 Nov/09 Nov/10 Nov/11 $2.89

5 CBOT Oat Volatility $usbu $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $

6 CBOT Oat Seasonal Trends $4.50 $4.00 $usbu $3.50 $3.00 $ /11 11/12 10 yr avg 5 yr avg $2.00

7 CBOT Corn Seasonal Trends $9.00 $8.00 $7.00 $usbu $6.00 $5.00 $4.00 $3.00 $ /11 11/12 10 yr avg 5 yr avg

8 Viterra Saskatoon Seasonal Oat Price Trends $3.80 $3.60 $3.40 $3.20 $usbu $3.00 $2.80 $2.60 $2.40 $2.20 $ /11 11/12 10 yr avg 5 yr avg

9 Minneapolis Oat Cash Basis $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 -$0.20 -$0.40 -$0.60 -$0.80 $.13 Bid Offer

10 Duluth Milling Bid/Offer Spread $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 Nov/11 Jan/12 Mar/12 May/ 12 Jul/12 Sep/ 12 Nov/ 12 Jan/13 Mar/13 May/ 13 Jul/13 Sep/ 13 Nov/ 13 Jan/14 Mar/14 May/ 14 Jul/14 Sep/ 14 Nov/ 14 Jan/15 Mar/15 May/ 15 Jul/15 Sep/ 15 Nov/ 15

11 Average Western Canada Oat Bid $usbu $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 Nov/99 Nov/00 Nov/01 Nov/02 Nov/03 Nov/04 Nov/05 Nov/06 Nov/07 Nov/08 Nov/09 Nov/10 Nov/11 Nov/12 Nov/13 Nov/14 Nov/15 $2.66

12 Supply and Demand Overview

13 Unseeded Oat Area Nearly 1 mil Acres Estimated Seeding Completed by June 13 % of seeding by crop is district

14 Provincial Oat Production 2,500 2,000 Saskatchewan 1,500 1,000 Alberta 500 Manitoba

15 US & Canadian Seeded Oat Area 16,000 14,000 Thousand acres 12,000 10,000 8,000 6,000 4,000 2,000 0 US Canada Record lows

16 Canadian Seeded & Harvested Oat Area 6,000 5,000 4,000 3,000 2,000 1,000 - Seeded Harvested

17 Total Canadian Oat Supplies 5,500 5,237 5,000 4,500 Avg 4,673 4,000 3,500 3,000 2,500 2,000 3,675 87/88 88/89 89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/ mt

18 Canadian End Stocks 363 1, ,000 1,200 1,400 1,600 1,800 79/80 80/81 82/82 82/83 83/84 84/85 85/86 86/87 87/88 88/89 89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 0/405 05/06 06/07 07/08 08/09 09/10 10/11 11/ mt Avg 968

19 Canadian Oat Rate of Use 000 mt

20 Canadian Oat Exports YTD mt

21 Canadian Oat Domestic Use YTD mt

22 Canadian Oat Deliveries Use YTD 1,200 1, mt

23 Canada Oat Stocks to Usage-Ratio 41% 26% Avg 28% 11% 13% 87/88 88/89 89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12

24 A Bull Market?

25 So What s Keeping Oat Prices Down? European debt crisis Weakening global economies Larger supplies of Black Sea grains Cheaper prices Aggressive selling Falling corn values Ethanol margins good Exports slowing

26 Managed Money Net CBOT Oat Position 000 contracts

27 Macro Markets Impacting Oats World Economy is slowing resulting in risk-off, Ag prices negatively impacted EU debt situation has become a major concern and focus of commodity markets Near term outlook depends on the ability of the EU to resolve its debt issues questions remain of willingness of Governments to make hard choices Market volatility has increased and remains high and leading to nasty surprises Rising US Dollar threatening demand for US Ag products China s economy is slowing, rising food prices at center of China's inflation fight

28 Macro Markets Impacting Oats Food prices across all major commodities have risen and remain high relative to 2010 Speculators have been impacted by macroeconomic risks and skittish, reducing risk for most commodities Food issues and security are increasingly a political issue, use of grains for biofuels adds to pressures Margin calls and liquidity constraint are increasing globally The cost of doing business in commodities is increasing, along with risk

29 CRB & CBOT Continuous Oats CRB Macro markets driving oats $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $ $0.00 Nov/00 Nov/01 Nov/02 Nov/03 Nov/04 Nov/05 Nov/06 Nov/07 Nov/08 Nov/09 Nov/10 Nov/11 Nov/12 Nov/13 Nov/14 Nov/15 Oats $usbu CRB Continuous Oats

30 What s Down the Road for Oats

31 Saskatchewan Net Black Soil Returns $250 $200 $ per acre $150 $100 $50 $0 Barley Peas Barley Lentil Wheat Wheat Lentil Peas Malt Canola Edible green Flax Feed Large Green Spring CPS Oats Red Feed

32 Canadian Oat Production Outlook Final 2011 March Intention 5 yr avg 2012 Potential seeded acreage changes -10% -5% 0% 10% 15% Planted area ac 3,024 4,001 4,319 3,601 3,601 3,801 3,801 4,001 4,001 4,201 4,201 4,401 4,401 Abandonment 81% 75% 75% 81% 75% 81% 75% 81% 75% 81% 75% 81% 75% Harvested ac 2,462 3,016 3,256 2,931 2,714 3,094 2,865 3,257 3,016 3,420 3,167 3,583 3,318 Yield - bu/ac Production 000 mt 2,738 3,354 3,621 3,260 3,018 3,441 3,186 3,622 3,354 3,803 3,521 3,984 3,689 Change prod -mt , , % 19% 10% 26% 16% 32% 23% 39% 29% 46% 35%

33 Total Canadian Oat Supplies 5, mt 5,000 4,500 4,000 3,500 4,118 3,000 2,500 2,000 87/88 88/89 89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 Avg 4,673

34 North American Oat Demand 3,500 3,000 Moderate increase expected for milling use, higher equine demand in 2012/13 2, mt 2,000 1,500 1, /89 89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13F Mill Demand Equine Demand

35 Canadian End Stocks ,000 1,200 1,400 1,600 1,800 79/80 80/81 82/82 82/83 83/84 84/85 85/86 86/87 87/88 88/89 89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 0/405 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/ mt Avg 968

36 A Good Balance For The Oat Market Commercial North American demand 2.3 to 2.5 mmt Ending stocks of 0.9 mmt 2012/ This implies an oat crop of roughly 3.8 to 4.1 mmt of 3.3 Expanded oat production would require higher US feed use

37 A Peak Ahead Good oat mill demand Feb forward Ag markets will remain skittish on global debt concerns Canadian and EU oat supplies will build some in 2012/13, no shortage expected US equine oat demand likely to increase in 2012/13, wheat prices key NA oat mill demand up slightly in 2012/13

38 Recommendations Slightly possibility of a Dec/Jan CBOT oat & cash oat price spike - but EU debt situation limiting factor too risky to wait? Oat prices will fall into spring don t wait Sell as far forward as possible to capture carry premiums Lock in 10-15% of new crop at $3.00 or better Eastern Saskatchewan

39 Viterra Saskatoon Crop Year Highs $4.50 Highs Average Lows $4.00 $3.50 $3.00 $2.50 $2.00 $ $1.00 $0.50 $0.00

40 Price Outlook Crop Year High Forecast $3.55 $3.50 $3.50 $3.45 $3.40 $3.35 $3.30 $3.25 $3.25 $3.25 $3.20 $3.15 $3.10 Alberta Saskatchewn Manitoba

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