THE RACE FOR MARKETS MAKING CANOLA CANADIAN A

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

GAME PLAN Outline ü Assess the field of play ü Understand the competition ü Build on our strengths ü Trust the market ü Be innovative ü Play to win!

THE FIELD OF PLAY

Millions MT Global Oilseed Production: 1991 -2004 7. 5% p. a. 3. 5% p. a. 1. 4% p. a. 12. 2% p. a. 1. 8% p. a. Source: MREADS USDA

OILSEEDS: The Past 15 Years GLOBAL: ü Increased population & income, esp. in Asia increased demand for oil & livestock products ü Palm & soybean major beneficiaries ü Palm = low cost oil, Soybean = high value meal CANOLA: ü Moderate growth mainly in China & EU ü Consumption driven by popularity & oil properties

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

2004 -05 Worldwide Canola/Rapeseed Production and Consumption Thousand Metric Tons Source: MREADS USDA

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!

UNDERSTANDING THE COMPETITION

The Competition… SOYBEANS!! 800 lbs

CANOLA vs. SOYBEANS ü Value driver for canola is OIL, for soybean is MEAL ü US soybean industry = 6 -8 x Canadian canola ü Both driven by innovation soybean has much larger R&D investment & less regulation ü Both depend on domestic consumption & exports ü 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!

BUILDING ON CANOLA’S STRENGTHS

CANOLA vs. SOYBEANS Canola oil is BETTER than soybean oil because… ü Lower saturates (7% vs. 15%) ü Higher 18: 1 (60% vs. 24%) ü High omega-3 (12% vs. 8%) Other strengths of canola vs. soybean… ü Hybrid crop faster genetic gain possible ü Oilseed more efficient producer of OIL ü Broad adaptation, fits easily into many rotations worldwide

TRUSTING THE MARKET

Canadian Canola Value Chain USA, Japan, Mexico, China, Pakistan, etc. EXPORT SEED FARMER GRAIN HANDLER CRUSHER OIL MEAL REFINER END USER

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

HARNESSING INNOVATION

Improving Canola’s Position Continue Pushing Productivity ü YIELD gains blurred by heat/drought of 2001 -2003 but evident in high yield environments ü Need to extend yield gains to entire geography ü Key = HYBRIDS – just scratching the surface!! ü Agronomics & disease greatly improved ü Next decade = improved harvestability, stress tolerance, frost/cold tolerance NEED TO MAINTAIN – EVEN INCREASE – R&D INVESTMENT!!

U. S. Average Corn Yields 1920– 2003 Yield in buacr 142 b=1. 52 Open Pollinated b = -0. 67 b = 2. 85 b = 1. 17 19 1974 Single Cross Hybrids 1947 1936 1970 1983 Double Cross Hybrids Year 1988 1993

Improving Canola’s Position Increasing Oil Content ü Adds value for ALL users ü Variation (>2%) in elite Canadian germplasm ü Variety registration as a tool? üMake oil priority #1 – working in Germany ü Bonification as a tool? üUsed in EU (esp. Germany) & Australia üMore likely to get what we want if we pay for it! ü US soybean oil% down in past decade great opportunity for canola to be MORE competitive!

Improving Canola’s Position High Stability Oil ü ü ü LL & MOLL canola = best available solutions to TFA’s 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!

Canola & Soybean Specialty Oil Profiles

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

Improving Canola’s Position What About The Meal? ? ü Opportunities will drive increased OIL use what about the meal? ü Need to close value gap w/ SBM = protein & energy, fiber ü Complements effort to increase oil contents ü 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!

PLAYING TO WIN – POSSIBLE STRATEGIES

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

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