Livestock feed markets Trends & opportunities in feed markets

1. Livestock feed markets Trends & opportunities in feed markets Ryan Koory, Sr. Economist

2. Today’s Presentation • Introduction-- Who/What is Mercaris? • Big Picture: Canada & the Prairies • Canada & US Organic Acreage Outlook • Growth Prospects in Feed Demand • Trends and Opportunities in Trade • Organic Prices & Premiums

3. Market Data Service & Trading Platform for organic, transitional organic, & non-GMO, crops.

4. Data & Analytics for Grains/Oilseeds • Volume weighted average prices • Spot & Forward • Food & Feed • US & Canadian Regional basis • IP vs. Conventional price tracking • Trade Volume reports

5. Mercaris Grain Facilities Map

6. Mercaris On-Line Trading Platform The New Handshake

7. Features • Brings buyers to you (new & existing) • Buyers compete for your grain • Ensures credit worthiness, timely payment • Low transaction costs

8. 1. Feed leads (it’s a big category and growing) 2. Its an international market—your neighbor to the South loves eggs, dairy and and meat. 3. Given this, Canada has both Strengths & Challenges Small grains! Plant-based proteins (not feed) Canada & USBig picture

9. Acreage Outlook

10. Organic Farm Land (Acres) • How did 2015/16 look? • On par for field crops • CA: 830,263 acres • US: 807,490 acres • US sticks to Corn/Soy • US: 38% of acres • CA: Less than 15% • Likely near-even for wheat • CA: > 229,374 acres • US: 301,950 acres

11. Organic Oilseed Acres • Canadian flax acres play a major role in organic production

12. Organic Farm Land (Acres) • Since 2015/16? • US field crop acres up MORE THAN DOUBLED! • Major feed crops (corn, soy) were 31% of growth • But...CA data ends in 2015/16 • What about Canada? • Corn/soy, likely still small • Probably a lot of wheat growth • ??????? ?

13. Livestock Market Growth & Feed Demand

14. Meat Production Growth Remains Robust • 2015 data shows 618 certified organic CA livestock producers • About 1/5 the size of the US • About 1/5 were located in the prairie region (mostly cattle producers) • Like US, CA broilers and egg production leads feed demand • We don’t have data to see CA growth • But, if it’s anything like the US, then CA poultry production growth has been swift!

15. Feed demand follows • Though we don’t have exact CA livestock numbers, we can guess it’s under the same pressure • Growing poultry production escalates meal demand FASTER than grain • Upside side for feed producers, trade opportunities can come be found in the US due to this growth Broiler meat is the BIGGEST driver of US feed demand growth Higher protein feed needs pushes feed meal growth faster that grain

16. Organic Exports Opportunities for Canada A lot of those opportunities are with the USCanada viewed as more trustworthy than other countries of originCurrency strength matters’A lot US Imports are corn/soybeans, not huge crops in the prairies, so develop focus on small grains for rations--Alternatives to meat—means demand for yellow peas, lentil oats.

17. US Corn Supply Outlook ? • What role will imports play over 17/18? • 16/17 ended down 6% y/y at 19 million bu, but production up 38% y/y • So far, 17/18 imports are down 64% y/y Sep-Nov 2017 at 2 million bu • Imports from Turkey down a massive 3.3 million bu Sep-Nov 2017 • Mercaris estimates 2017/18 production at 43 million bu, up 35% y/y • But, GCAU grew 39% from 2015-2016, and 2017 2018 wont likely see a slowdown *Trade statistics sourced from USDA GATS

18. US Soybean Supply Outlook ? • Production posts large gains, but import still dominate supplies • 2017/18 US production estimated at 7.1 million bu, up an impressive 38% y/y • Imports likely to dominate supplies again in 2017/18 though • Imports accounted for 74% of US supplies in 2016/17 • So far, 2017/18 imports are up 15% y/y Sep-Nov 2017 • 2017/18 may see imports fall as a share of domestic supplies, but are likely to remain dominant *Trade statistics sourced from USDA GATS

19. Vegetable protein markets abound *Trade statistics sourced from USDA GATS

20. Opportunities in Trade *Trade statistics sourced from Stats Canada & USDA GATS

21. Prices

22. Organic Feed Corn Prices • Positive start to 17/18 • Corn lost $2 per bu. over 15/16 • 2016/17 price remain near $8.70/bu, and trading in a tighter range • Since the close of 16/17, corn prices have steadily gained $1.00, with Dec 2017 averaging $9.63/bu

23. Organic Feed Corn Prices • Corn maintains a strong price premium • $4-6/bu premium over conventional • Down from $6-9/bu seen in 2016 *Prices received for conventionally produced commodities

24. Organic Feed Wheat Prices • Feed grade wheat is a tale of two prices • Wester wheat caries a $2-3/bu premium over conventional • Easter CA wheat caries $5-7/bu premium • Wester CA discount due to transportation • CA poultry markets located in ON & BC • US import demand pulls from Vancouver and across the Great Lakes *Prices received for conventionally produced commodities

25. Organic Feed Oats & Barley Prices Organic Feed Oats Organic Feed Barley • Oats carry smaller Western discount, and a smaller premium overall, $1-2/bu • Barley looks like wheat/corn • Western premium $3/bu • Eastern $6/bu *Prices received for conventionally produced commodities

26. Organic Feed Soybean Prices • Price holds trend, but volatility picks up • Beans lost $2.50 per bu over 15/16 • 2016/17 price dipped over Q2 – Q3 but recovered to $20.20/bu by September • Since the close of 16/17, bean prices have remained near $19.25/bu, but trading on a wider range • So far, 2017/18 price range is running near $4.70/bu, up from $3.40/bu in 2016/17

27. Organic Feed Soybeans Prices • Soybean prices hold $6-12 over conventional • FOB holds bigger premium ($15/bu+) • Likely reflects more food grade exports • US also holds a robust and growing market for plant based proteins *Prices received for conventionally produced commodities

28. At the end of the day... • Canada likely has equal potential to the US for organic row crops, but…. • The composition of what Canada grows (particularly the Prairies) is very different • For feed markets, invest in research and marketing activities that promote small grains & legumes • Consider that food markets for alternative animal proteins are growing now: yellow peas, lentils, oats

29. Further Resources • Mercaris: Join our free market information service for growers! www.mercaris.com/farmers • Farmer’s Guide to Organic Contracts http://www.flaginc.org/publication/farmers-guide-to-organic-contracts/fgoc2012/ • National Center for Appropriate Technology-Marketing Organic Grains https://attra.ncat.org/attra-pub/summaries/summary.php?pub=101

30. Contact: • Alex Heilman • Alex.Heilman@Mercaris.com • mercaris@mercaris.com • (347) 522-0631 • www.mercaris.com

31. Set Your Auction Specs

32. Enter Bids/Offers • Sealed Auctions: orders are entered ’blind’ and winner(s) revealed when auction closes. • Live Auctions: participants hit bids/lift offers in real time, view order stack, may counter offer) Specs

33. A pop-up screen appears for Iowa Grain Elevator to confirm their bid