Agenda

• Current Weather Impacts

• US Supply and Demand Trends

• Canadian Supply and Demand Trends

• Big”4” Supply and Demand Trends

• Current and Historical Prices

• Forward Trends in Oat Milling

Developing drought in US and Canada could impact production

U.S. Oat Production

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nsUS oat production declined, feed use fell, and acreage shifted North to Canada

Govt. programs favors beans & cornResearch developed earlier varieties

Stable production since 1999Last 5 yr avg. = 1765 mmt

(122 million bushes)

U.S. Oat Imports

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U.S. Imports rose as production declined

75% of Imports come from Canada25% from the Scandinavian Countries

Declining imports are due to US feed use down 26% (777mmt’s) since 2000

Canadian Oats - Production(000 MT.)

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Current New Crop Forecast

potential if dryness continues

Canadian Oats - Exports (000 MT.)

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1,60090

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nsApprox. 75 % of Canadian exports go to the US

Low production years

What drives feed use ?•Quality of oats•Price of oats compared to other feed grains

-- barley, wheat, and corn

Total North American oat feed use

2,0003,0004,0005,0006,0007,0008,0009,000

North American

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MM

T's

Total demand for Oats in the Big “4” has declined 27% since 1990rising food, seed, and export demand has not off-set declining feed use

Feed : down 4790 MMt’s or 45%Food and seed: up 355 MMT’s or 20%Trade : up 400 MMT’s or 28%

Total Oats Supply in the Big"4"

02,0004,0006,0008,000

10,00012,00014,00016,00018,000

Crop Years

MM

T's

Since 1990 production is down 38% or 4123 MMT’s ( 290 mill bushels)

“ B ig F o u r” O a t S u p p ly & D e m a n d

000 mt"BIG FOUR"

Area Harvested Yield (kg/ha)

Opening Stocks ProductionImportsTotal Supply

Milling/SeedFeedExportsTotal Usage

Ending stocksStocks - Use %

S TATCO M Estim a te00/01 01/02 02/03 03/04 04/05 05/06 06/07

2,932 2,704 2,967 3172 2591 2599 27532.77 2.46 2.43 2.57 2.82 2.66 2.73

2,538 2,273 1,620 1,624 2,023 2,113 1,8618,126 6,644 7,204 8,167 7,297 6,917 7,5261,777 1,707 1,661 1,578 1,539 1,520 1,370

12,441 10,625 10,485 11,368 10,859 10,550 10,757

1,718 1,928 1,936 1,942 1,995 2,045 2,0906,104 5,317 5,089 5,447 4,950 4,950 4,7902,348 1,759 1,837 1,956 1,801 1,694 1,794

10,169 9,004 8,861 9,345 8,746 8,689 8,674

2,272 1,620 1,624 2,023 2,113 1,861 2,08322.3% 18.0% 18.3% 21.6% 24.2% 21.4% 24.0%

Long-Term oat prices in cents/bushel

World wide crop problems in most grains

Poor growing conditions and low production

Speculative fund interest and developing dry conditions.

FundamentalTrading range for 06/07

1.60

2.15

Crop Year Average Oat Prices

1.80

1.51

1.06

1.74

1.20

1.77

1.38

1.25

1.761.76

1.61

2.072.06

1.501.50

1.77

2.031.94

2.02

2.33

1.34

1.38

1.321.25 1.13

1.13

1.46

0.95

1.15

1.35

1.55

1.75

1.95

2.15

2.35

2.551 3 5 7 9 11 13 15 17 19 21 23 25 27

Crop Years 1980 - 2006

$/ B

ushe

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1980 Drought

1988 Drought

1995 Global Commodity Inflation

Current forward market for 2006

Avg. price since 1980 = 1.58/ bushel

2001 production down 20%

Oat Market Trends

• Total supplies have trended lower since 1990 but have stabilized in past 5 years

•Feed demand continues to decline and has been trending lower the past 5 years

•Milling Capacity has increased by an estimated 7 mill bushels from 2000 - 2005 and is estimated to increase by another 10 mill bushels by 2007.

-- majority of the growth is by industrial millers-- total N.AM milling capacity will be an estimated 125 million bushels by 2007

•Limited availability of “peak capacities” have left some consumer demand unfilled --new capacities will allow product companies to increase offerings.• Over the past five years growth in conventional oats for food has been 2-4% and organic oats about 15-20% /yea -- combined growth has been approx. 4% -6% / yr -- organic will continue to grow faster than conventional

Supply Trends

Demand Trends

Milling and Food Trends

•Over the next five years combined organic and conventional growth is expected to be 5%/yr ( +/- 2%)

•Key market segments for growth are convenient, portable consumer products driven by increased demand for healthy food products

-- bars, snacks, healthy whole grain and multi-grain blends

•Back to back years of poor oat quality and poor growing conditions

•Acreage expansion and decline will be determined by oat prices. These prices will be strongly influenced by bio- diesel and ethanol as corn and beans compete for these acres

• Milling market growth 5% /year will be a key driver of oat prices. This food demand is basically [price] inelastic as opposed to [price]elastic feed demand

Oat Market Trends

Milling and Food Trends cont…

Considerations going forward