Feeder Cattle Market Update

1

© 2016 AgriClear, All Rights Reserved.

• Have stressed over when to sell your calves…especially this past fall?

• Have hoped to capture more value for your calves…especially with the additional costs you have invested in

them?

• Wished you had more marketing options?

Let’s talk… How many of you…

We’ll talk more about how AgriClear can

help, but first…

• Review of the 2015 Canadian Feeder Market

• Review of the 2015 U.S. Feeder Market

• When has (historically) been the best time to sell your cattle?

• Changes in feeder cattle marketing

• Overview of AgriClear

Agenda

Feeder Market Dynamics - CA

Canadian Dollar Decline

Source: XE Currency Charts (CAD/USD)

CAD / West Texas Intermediate – 0.89 r2

0.0000

0.2000

0.4000

0.6000

0.8000

1.0000

1.2000

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

Can

adia

n D

olla

r

WTI

WTI Canadian Dollar

Source: CanFax / CME

Canadian 550 Wt. Feeder Steer – CAD

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

01-Jan 01-Feb 01-Mar 01-Apr 01-May 01-Jun 01-Jul 01-Aug 01-Sep 01-Oct 01-Nov 01-Dec

2013 2014 2015 2016

Source: CanFax

Canadian 550 Wt. Feeder Steer – USD

$100.00

$120.00

$140.00

$160.00

$180.00

$200.00

$220.00

$240.00

$260.00

$280.00

$300.00

01-Jan 01-Feb 01-Mar 01-Apr 01-May 01-Jun 01-Jul 01-Aug 01-Sep 01-Oct 01-Nov 01-Dec

2013 2014 2015 2016

Source: CanFax

The elastic band stretched too far…

Source: Canfax, Feb. 2016

Fed Cattle Exports to U.S.

Feedlot – Profit/Loss Margin (Yearling Steer)

Source: CanFax

Feeder Supply Outlook – U.S.

U.S. Beef Cow Inventory

2014

Heifer Retention & Cow Culling

as % of Jan1 U.S. Cow Herd

Source: Dr. Durrell Peel, USDA, NASS

U.S. Jan 1 Beef Cow Inventory

Source: Dr. Durrell Peel, USDA, NASS

US beef replacement heifers expected to calve 3.9 million hd. Canada’s total beef cow inventory…3.8 million hd.

Kansas Feedyards Net Returns ($/hd.)

Source: AgManager (as of December, 2015)

Jan 1 U.S. Feeder Supply (residual outside feedlots)

Source: LMIC, USDA

Historical LC Volatility Analysis

CME Locked Limit

31

9

1

S&P 500® / Live Cattle Futures – 0.85 r2

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00

0

500

1000

1500

2000

2500

S&P

50

0

S&P 500 LC Futures

Sources: CME, CBOE, S&P Dow Jones Indices

Feeder Cattle Marketing

When has (historically) been the best time to

sell your cattle?

Avg. Weekly Fed Cattle Price – 1992-2015

01-Jan 01-Feb 01-Mar 01-Apr 01-May 01-Jun 01-Jul 01-Aug 01-Sep 01-Oct 01-Nov 01-Dec

Source: CanFax

Oct / Dec Live Cattle Futures - Historical

October LC

December LC

Source: Moore Research Report

-0.0600

-0.0500

-0.0400

-0.0300

-0.0200

-0.0100

0.0000

0.0100

0.0200

0.0300

0.0400

0.0500

0.0600

0.0700

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

5/6 Feeder 7/8 Feeder

Fed Cattle Long-term Profitability by Feeder

Placement Month (1992-2015)

Calves

Back-grounded

Calves

Most Profitable

Source: David Moss

90.00%

95.00%

100.00%

105.00%

110.00%

01-Jan 01-Feb 01-Mar 01-Apr 01-May 01-Jun 01-Jul 01-Aug 01-Sep 01-Oct 01-Nov 01-Dec

5-6 Weight 7-8 Weight 8-9 Weight

Indexed Feeder Cattle Prices (1992-2015)

Source: CanFax

The feeder market is changing…rapidly…

Time

The Market is Differentiating

Phenotypical / Grid Fit

Preconditioned / Herd Health Program

Certifications / i.e. Verified Beef Production

Channel Marketing

2012 Study

$11/cwt.≈

$60/hd.

Traditional Selling

Feeder Cattle Sold at Alberta Auction Markets as a % of

Total Feeder Supplies

48.43%

45.85%

47.57% 47.65%

43.88%

41.04%

39.45%

34.98%

38.37%

36.64%

34.80%

30.00%

32.00%

34.00%

36.00%

38.00%

40.00%

42.00%

44.00%

46.00%

48.00%

50.00%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

AB. Auction Feeder Inspections / AB. Feeder Inventory

Auction Feeder Inspections / Feeder Inventory

Source: Livestock Identification Services / Stats Can

So how can you access these channels?

AgriClear is a secure web-based marketing platform that connects North American Cattle Producers.

Producers can now list, transact, and be assured of payment from their computer, smartphone, or tablet.

AgriClear lets you market to anyone, anywhere, anytime – with confidence

Empowering buyers and sellers!

What is AgriClear?

Who are we?

Introduction to TMX Group

Major TMX

Shareholders

AIMCo

La Caisse de dépôt et placement du Québec

CIBC

CPP Investment Board

Desjardins

Fonds de solidarité FTQ

Manulife

National Bank

Ontario Teachers’ Pension Plan

Scotiabank

TD

This platform is unique because of its partnership with TMX Group and NGX, a wholly-owned subsidiary of TMX, bringing together a wide array of knowledge and expertise. TMX Group’s businesses operate cash and derivative markets, including Toronto Stock Exchange, TSX Venture Exchange, Montreal Exchange and NGX, provider of electronic trading, central counterparty clearing and data services to the North American natural gas and electricity markets.

TMX also provides clearing facilities, data products and other services to the international financial community. Backed by the financial support and clearing expertise of these two entities, you are assured of receiving payment for delivered

cattle and receiving cattle as negotiated.

• Leading regulated exchange and clearinghouse for physical energy

commodities across North America

– Provider of electronic trading, central counterparty clearing and data

services to North American natural gas, electricity and crude oil

markets

– Manages over $2B in collateral holdings

– No clearinghouse defaults since inception in 1994, including major

failures, such as Enron and Lehman Brothers

– Comprehensive Enterprise Risk Management framework in place to

manage strategic operational and financial risks

We knew enough to know…we don’t know

Industry Advisory GroupSeed Stock

Commercial Herds

BackgroundersOrder Buyers

Finishers Packers

So how does AgriClear work?

AgriClear Transactional Process

AgriClear Transactional Process…cont.

Benefits to You

Cost Savings

Lower cost structure at $6/head/side, with no registration or listing fee(s).

Expanded Marketplace

Access to a broader network of buyers and sellers.

Attribute Based Marketing

Ability to capture more value from your genetic and/or management inputs.

Reduced Payment Risk

Market across North America with financial certainty.

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Let’s take a walk through the platform…

https://transact.agriclear.com/login/

Registration

Platform Dashboard

Search Results

44

Create Listing

Additional Listing Details

For Sale Listing

Counter Offer

SOLD!

Contract

50

Deposit Paid / Free to Ship

Received

Complete

Feedback

AgriClear Marketing

agriclear.com

AgriClear Advertising Campaign

Social Media Sites

Why AgriClear?

Why AgriClear?

As an industry, we need a more efficient,

secure, and empowering way to buy and

sell cattle.

– Buy and sell on your terms;

– Take control of your cattle marketing; and

– Join the over 1,000 producers who make up the

AgriClear Community!

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AGRICLEAR LETS YOU

MARKET YOUR CATTLE

TO ANYONE, ANYWHERE,

ANYTIME — WITH

CONFIDENCE.

www.agriclear.com