THE RACE FOR

MARKETS

MAKING MAKING CANADIAN CANADIAN CANOLA A CANOLA A WINNER!WINNER!

Dave CharneCanola & Sunflower ResearchPioneer Hi-Bred International

GAME PLAN Outline

Assess the field of play

Understand the competition

Build on our strengths

Trust the market

Be innovative

Play to win!

THE FIELD THE FIELD OF PLAYOF PLAY

0

20

40

60

80

100

120

140

160

180

200

220

240

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

Soybeans Canola Sunflowerseed Palm Oil Cottonseed

Source: MREADS USDA

Millions MTGlobal Oilseed Production: 1991-2004Global Oilseed Production: 1991-2004

7.5% p.a. 3.5% p.a. 1.4% p.a. 12.2% p.a. 1.8% p.a.

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

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!

2004-05 Worldwide Canola/Rapeseed

Production and Consumption

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

16,000

Australia Canada China EU-25 India Japan ROW

Production ConsumptionThousand Metric TonsSource: 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 UNDERSTANDING THE THE

COMPETITIONCOMPETITION

800 lbs

The Competition…

SOYBEANS!!SOYBEANS!!

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 R&D 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!

BUILDING ON BUILDING ON CANOLA’S CANOLA’S

STRENGTHSSTRENGTHS

CANOLA vs. SOYBEANSCanola oil is BETTER than soybean oil because…

Lower saturates (7% vs. 15%)

Higher 18:1 (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

TRUSTING THE TRUSTING THE MARKETMARKET

Canadian Canola Value Chain

SEED FARMERGRAIN

HANDLER

EXPORT

CRUSHER OIL REFINEREND

USER

MEAL

USA, Japan, Mexico, China, Pakistan, etc.

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 canola’s 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

HARNESSING HARNESSING INNOVATION INNOVATION

Improving Canola’s 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 – R&D INVESTMENT!!

U.S. Average Corn Yields 1920–2003

Yie

ld i

n b

uac

r

Year

1947

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100

120

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180

1920 1930 1940 1950 1960 1970 1980 1990 2000

b=1.52

b = 2.85

Open Pollinated

Open Pollinated

b = -0.67b = 1.17

Double Cross Hybrids

Double Cross Hybrids

Single Cross Hybrids

Single Cross Hybrids

198819831970 197

4

1993

193619

2003142

Improving Canola’s Position

Increasing Oil Content Adds value for ALL users Variation (>2%) 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) & AustraliaMore 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!

Improving Canola’s Position

High Stability Oil 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!

7%

15%

7%

16%

7%

7%

12%

61%

24%

67%

29%

75%

54%

83%

21%

53%

23%

52%

15%

11%

8%

3%

3%

3%

2%

36%

3%

3%

Canola

Soybean

LL Canola

LL Soybean

MOLL Canola

USDA Soybean

HOLL Soybean

Saturates Oleic Linoleic Linolenic

Canola & Soybean Specialty Oil Profiles

Improving Canola’s Position

BiodieselEconomic w/ high oil prices & GH gas

considerationsEU leading the way BUT makes sense in CanadaNeed strong lobbying effort for tax breaksCould petroleum industry be incented to invest??First NA plant in ND (German investors)Complements bonification & chlorophyll gradingCCC involvement?

Canola oil is superior to soybean oil as a biodiesel source!

Improving Canola’s 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!

PLAYING TO WIN PLAYING TO WIN – POSSIBLE – POSSIBLE

STRATEGIESSTRATEGIES

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?

Go forward with a Go forward with a passion to make passion to make

canola better and canola better and the Canadian canola the Canadian canola

industry more industry more competitive & competitive & successful!!successful!!