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Marlene Boersch Mercantile Consulting Venture Inc. Outline Lentil  Ending stocks ’20/21 & acres ’21/22  Balance sheets for 2020 & 2021  YTD & ‘21/22 exports & outlook Dry  Global ed. situation  How do Cdn. beans fit in?  Production & usage  Where to go from here?

Mercantile, March 2021 2 What is different this year?

 Demand for pulses unusually high vs stable supply  Partially supported by high feed demand  Rail availability in Cda. unusually good  Though cntr. frt. difficult; cntr & bulk frt. costs increasing  Prices for major crops at multi-year highs  Much bigger competition for 2021 acres !!  Excellent pxg opportunities for the ‘21/22 crop Have gone from S push to D pull markets.

Mercantile, March 2021 3 Rail availability …

Canadian Exports (CGC numbers) ('000 MT) Canola Lentils All Crop Year To date (wk. 29) 6,707 1 ,784 5 78 31,051.0 Year Ago (to wk. 29) 5,092 1 ,555 4 59 23,148.0

Change this Year in MT 1,615 2 29 119 7 ,903 Change this Year in Percent 132% 115% 126% 134%

Mercantile, March 2021 4 2021 premiere pulse virtual session

Mercantile, March 2021 5 What factors do you need to make decisions?

Current crop (2020)  Starting supply base Cda. (& competitors)  Pace of usage/ exports (YTD offtake)  Expected X pace  Remaining stocks (here/ elsewhere) New crop (2021)  Forecast C/I + Expected acres (+/-) = Forecast Supply  (Cda. & competitors)  Demand outlook/ timing new supplies

Mercantile, March 2021 6 ‘20 Lentil numbers: comparison to last year

Lentil Balance AAFC Feb. Merc Merc Sheet Merc 17/'21  Cdn. acres up ~15% & Merc ('000 mt) 2017-18 2018/19 2019/20 2020/21 2020/21 prod’n up ~26% seeded Ha Harvested HA (-14% ac) (no ∆) (+15%) sdd. acreage 4,405 3,767 3,767 4,350  Supply ~unchanged! (due low C/I) hrvstd. acreage 4,383 3,729 3,700 4,307 4 ,233 Yield (mt/Ha)  Big question: usage Yield (lb/acres) 1,280 1,250 1,370 1,500 1,499 production 2,558 2,136 2,341 2,960 2,868  Exports up or down?? imports 30 40 90 90 100 ttl supply 2,988 3,101 3,148 3,135 3,177 exports 1,542 2,034 2,863 2,700 2 ,700  Merc: 2.7 mln mt; AAFC now ttl dom. use 520 350 200 250 327 ttl. usage 2,062 2,384 3,063 2,950 3,027 2.7 mln mt vs. 2.9 prev. carry-out 926 717 85 185 150 stock-use ratio 45% 30% 3% 6% 5%

Mercantile, March 2021 7 By lentil type

Est. - Canada - 2020 Lentil & Prod'n Acres By Type (mt)

2020/'21 crop est. large green small green red other total acreage (est.) 973,300 265,800 2,931,700 65,000 4,235,800 % acres 22% 6% 67% 1% yield est. 1,329 1,634 1,684 1,200 prod'n proj'n 586,729 197,003 2,239,378 35,380 3,058,491 C/I (est.) 55,000 20,000 8,000 2,000 85,000 imports 55,000 supply est. 641,729 217,003 2,302,378 37,380 3,198,491 Export est. 550,000 165,000 2,017,100 20,000 2,752,100 Dom. Use est. (Dom., Sd, Fd, Waste) 60,000 10,000 153,000 2,000 225,000 Ending stock est. 31,729 42,003 132,278 15,380 221,391 stock-use ratio 5% 24% 6% 70% 7%

Mercantile, March 2021 8 Export performance  1.2 mln mt to end Dec.  : Took 391k mt during shipped Ytd prorated Country 18/19 19/20 P'20/21 (Dec.) '20/21 Aug.-Dec. Are using an 2,030,837 2,863,024 2,700,000 1,193,673 2,864,815 India 5 53,266 907,024 8 50,000 390,872 938,093 850k mt for ‘20/21. 1 22,076 418,674 5 25,000 221,552 531,725 1 69,078 250,426 2 00,000 73,772 177,053  Need to ship 65k mt/mos. Jan.- Egypt 84,357 7 0,786 60,000 38,895 93,348 Sri Lanka 84,335 6 6,413 60,000 29463 70,711 July to reach the export target UAE 2 04,275 265,312 2 40,000 102,197 245,273 Pakistan 1 14,400 8 3,592 75,000 34,256 82,214  Turkey: Increased export Spain 16,944 1 9,541 20,000 8,563 20,551 Italy 24,443 2 7,207 25,000 13,767 33,041 est. to 525k mt for the yr.; Algeria 61,004 5 8,653 60,000 30,225 72,540 less competition . Mexico 73,839 3 2,050 30,000 12,340 29,616 Morocco 30,597 6 2,588 60,000 37,084 89,002  At 222k mt shipped to Dec., Colombia 91,442 109,243 90,000 23,018 55,243 Other 4 00,781 491,515 405,000 177,669 426,406 leaves 43k mt/mos. rest cr. yr. Merc., Feb. 5/ '21 Mercantile, March 2021 9 2020 crop lentils

 Ending stocks: ~185k mt; small 6% stock-use ratio  Recent pxs strong!  GOI: “1.3 mln mt lentil crop” (+18% to the prev. yr.), think > likely ~1.1 mln mt.  pigeon crop down by ~15% from earlier est’s due to weather?  Recommendation: Sell out O/C at prevailing pxs: $38 Lrge Grns; $36 Sm. Grns.; $30 Reds

Mercantile, March 2021 10 Harvest weather in India (pigeon pea, lentil)

Mercantile, March 2021 11 …. Harvest weather in India ()

Mercantile, March 2021 12 2021 lentil crop considerations

 Domestic factors:  Moisture outlook  Rotations/ Disease pressure  Return per acre calculations  Cdn. production outlook (acres)  International factors:  Global competitive supply outlook  Global demand trend for commodity  Reliability export destinations

Mercantile, March 2021 13 Return per acre comparisons

Current N/C Prices & Ret/Acre over Full Costs

lentils green $90.50 current market prices for new crop and return/acre est's Sell lentils red $72.00 yield per value per gross minus variable net full costs profit/loss over acre bushel return cost per acre return per acre per acre full costs variables in blue after var. costs green peas $12.50 canola 41 $13.00 $533.00 $240.00 $293.00 $455.00 $78.00 25% durum wheat 55 $7.75 $426.25 $200.00 $226.25 $415.00 $11.25 peas $97.50 spring wheat 60 $7.00 $420.00 $200.00 $220.00 $415.00 $5.00 flax 35 $17.50 $612.50 $170.00 $442.50 $385.00 $227.50 oats $5.00 Barley 75 $5.00 $375.00 $190.00 $185.00 $405.00 -$30.00 Malt Barley 60 $6.00 $360.00 $200.00 $160.00 $415.00 -$55.00 oats 100 $3.50 $350.00 $130.00 $220.00 $345.00 $5.00 -$55.00 Malt Barley peas 50 $9.75 $487.50 $175.00 $312.50 $390.00 $97.50 15% green peas 45 $8.50 $382.50 $185.00 $197.50 $370.00 $12.50 -$30.00 Barley lentils red 1650 $0.28 $462.00 $175.00 $287.00 $390.00 $72.00 lentils green 1550 $0.31 $480.50 $175.00 $305.50 $390.00 $90.50 15% flax $227.50 MCV, Feb. 19/'20

spring wheat $5.00

durum wheat $25.00

canola $78.00

-$100.00 -$50.00 $0.00 $50.00 $100.00 $150.00 $200.00 $250.00

Mercantile, March 2021 14 N/C balance sheet

 Acreage: +2% Lentil Balance AAFC Feb. Merc AAFC Feb. Merc Merc Sheet Merc 17/'21 P2021/22 17/'21 Merc N/C  Prod’n: down 4% (dep. yields) ('000 mt) 2017-18 2018/19 2019/20 2020/21 2020/21 P2021/22 P2021/22 seeded Ha  Supply: down 1.4% Harvested HA (-14% ac) (no ∆) (+15%) (+2%) (-1%) sdd. acreage 4,405 3,767 3,767 4,350 4,437 4,201  Exports: Down 5%?? hrvstd. acreage 4,383 3,729 3,700 4,307 4 ,233 4,393 4,139 Yield (mt/Ha)  Ending stocks: up 45% from low Yield (lb/acres) 1,280 1,250 1,370 1,500 1,499 1,400 1,436 production 2,558 2,136 2,341 2,960 2,868 2,818 2,700 level last year imports 30 40 90 90 100 90 75 ttl supply 2,988 3,101 3,148 3,135 3,177 3,093 2,925 exports 1,542 2,034 2,863 2,700 2 ,700 2,575 2,500 ttl dom. use 520 350 200 250 327 250 275 Hwvr, also think pulses well ttl. usage 2,062 2,384 3,063 2,950 3,027 2,825 2,775 positioned due increasing carry-out 926 717 85 185 150 268 150 stock-use ratio 45% 30% 3% 6% 5% 9% 5% shortage (per Husain et al) This is not a supply-push market! Mercantile, March 2021 15 Export details

shipped Ytd prorated Country 18/19 19/20 P'20/21 (Dec.) '20/21 P'21/22  To which destination World 2,030,837 2,863,024 2,700,000 1,193,673 2,864,815 2,575,000 India 5 53,266 907,024 8 50,000 390,872 938,093 800,000 could we increase Turkey 1 22,076 418,674 5 25,000 221,552 531,725 475,000 Bangladesh 1 69,078 250,426 2 00,000 73,772 177,053 180,000 exports? Egypt 84,357 7 0,786 60,000 38,895 93,348 6 0,000 Sri Lanka 84,335 6 6,413 60,000 29463 70,711 6 0,000  What are other UAE 2 04,275 265,312 2 40,000 102,197 245,273 240,000 Pakistan 1 14,400 8 3,592 75,000 34,256 82,214 7 5,000 producers & exporters Spain 16,944 1 9,541 20,000 8,563 20,551 2 0,000 Italy 24,443 2 7,207 25,000 13,767 33,041 2 5,000 going to do?? Algeria 61,004 5 8,653 60,000 30,225 72,540 6 0,000 Mexico 73,839 3 2,050 30,000 12,340 29,616 3 0,000  (global competitive outlook) Morocco 30,597 6 2,588 60,000 37,084 89,002 5 0,000 Colombia 91,442 109,243 90,000 23,018 55,243 9 0,000 Other 4 00,781 491,515 405,000 177,669 426,406 410,000 Merc., Mch. 1/ '21

Mercantile, March 2021 16 Global lentil prod’n: F2021 (major producers)

Global Lentil Production Est's 8,000.0  Total: 6.5 mln mt (6.7 lst

7,000.0 yr.), down 4%

6,000.0  Canada: 2.9 mln mt (-1%)

5,000.0  India: 1.3 mln mt (+18%)??

4,000.0 (think 1.1 more likely) '000 mt '000 7,000.0 6,691.0 6,400.0 6,453.0 3,000.0 5,800.0 5,300.0 5,471.0  : 600k mt (-29%) 4,353.0 2,000.03,989.3  Turkey: 475k mt (+7%) 1,000.0  USA: 30-5k mt (-9%) 0.0 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 E2020/21 P2021/22

2021: Canada ~45% of total, India 17-20%, Australia 9%, Turkey 7%, USA 5% Mercantile, March 2021 17 Recommendation 2021 lentils:

 At up to $31/cwt large greens; $28/cwt reds  are sold 10-15% to reduce px risk and gain delivery opportunities at harvest. (-cover variable costs-)  Set ret/acre targets (ret. on investment/ acre) and execute

Mercantile, March 2021 18 2021 premiere pulse virtual session

Mercantile, March 2021 19 Who are the major producers in edible beans?

Majors (2019, FAO):  Myanmar (5.85 mln mt)  India (5.3 mln mt)  Brazil (2.9 mln mt)  China (1.3 mln mt)  Tanzania (1.2 mln mt)  Uganda (980k mt)  USA (932k mt)  Canada (319k mt)  Total prod’n: ~21.3 mln mt  Ttl. Trade: ~4.6 mln mt

Mercantile, March 2021 20 Cdn. status within global bean production

Canada: ~1.6% of global prod’n

Mercantile, March 2021 21 Factors ‘20/21 global bean market

Demand-pull market Mercantile, March 2021 22 Ed. beans: Small crop in SK – addit’l considerations

 Agronomic fit  Access to buyer/ processing (>1?)  Access to market intel

Mercantile, March 2021 23 Ed. bean production within Canada

Bean Production (mt) 2015 2016 2017 2018 2019 2020  MB: Canada White beans 75,000 69,200 91,600 88,500 86,200 144,800 Coloured beans 168,500 174,900 230,700 252,600 230,600 345,000 33% Cdn. white Total beans 243,500 244,100 322,300 341,100 316,800 489,800 bns; Quebec White beans ...... F 0 0 Coloured beans .. .. 9,600 11,100 7,700 4,600 44% Cdn. clrd. Ontario White beans 57,800 48,800 64,400 62,600 56,400 97,000 Coloured beans 57,000 54,000 56,500 70,800 67,900 97,200 bns. Prairie Prov's White beans 17,200 20,400 27,200 .. .. (terminated) Coloured beans 111,500 120,900 164,600 .. ..  SK: Manitoba White beans 17,200 20,400 27,200 23,100 29,800 47,800 Coloured beans 63,500 59,400 103,100 83,600 79,800 151,500 5% clrd. bns. Saskatchewan White beans ...... F 0 0 Coloured beans ...... 14,200 9,300 18,200  Alberta White beans ...... 2,900 F 0 AB: Coloured beans 48,000 61,500 61,500 69,900 65,300 73,000 21% clrd. bns.

Mercantile, March 2021 24 … Some basic numbers

 Bean trends Canada: > coloured vs white bns.  White bean acreage and production have been decreasing in Canada (-43% & -28% since 2000)  Coloured bean area and production has increased significantly (+35% & 62%)  Overall bean acreage (white and coloured beans combined) has decreased by 3%, but production is up by 21% to 490k mt in 2020, indicating improved yields.

Mercantile, March 2021 25 Major participants in the Supply Chain

 Cleaning/ distribution into mkt channnels: ~30 processors (10 ON, 1 QU., 8 MB, 8 SK, 3 AB) -- known  ~ 7 canners (3 large canners, others smaller); 3 maj. packers (excl. on-farm packers) – hard to ascertain  All major retailers (6 operating Co’s; 32 retailer chains) stock ed. beans canned and dry packed.  Wholesalers may or may not be involved depending on operating Co’s

Mercantile, March 2021 26 Supply chain - major points

Processors:  Co’s tend to ship 95%(+) of their cleaned product into the export markets  Concurs with our analysis that the domestic market is about 4.4 to 5.7% of the size of the export market.

Mercantile, March 2021 27 Listed processing/ handling of beans in SK

 DIEFENBAKER PROCESSORS LTD  ALLIANCE PULSE PROCESSORS INC  HENSALL DISTRICT COOP INC  MARTINA COMMODITIES INC.  OLEET PROCESSING LTD.  PRIME INT’L INC.  PS INTERNAT’L LLC  SCOULAR CANADA LTD

Mercantile, March 2021 28 US & Cdn. Pinto beans (biggest class)

Mercantile, March 2021 29 2020 N American ed. bean overview

2021 acres up moderately….

Mercantile, March 2021 30 Cdn. numbers

Edible Bean S & D, '19/20-F'21/22  Cda. exports ~365k mt 600 575 annually, and imports ~75k 500 mt annually

395 400  Kidney Bns: primarily to UK 355 365  Sm. Reds: prim. Japan 300

'000 AC MT & AC '000  Others: prim. USA, Angola, 200 155 Italy, Jpn., , Mex.,

100 75 55 France, Tky., UK

0 Area Sdd Production Imports Total Exports Total Dom. Carry-out Stats not kept by type…. supply Use Stocks

Series1 Series2 Series3

Mercantile, March 2021 31 Ed. bean outlook

 Ending stocks are minimal  Demand has been increasing with Covid/ changes in eating patterns  Prices are off highs lst summer, but some recovery  Pintos: $37.50; DRK $48.10; LRK $52/cwt dlvd  N/C pxs FOB MB: DRK $40; Pintos $38; Blacks: $36

Mercantile, March 2021 32 2021 premiere pulse virtual session

Mercantile, March 2021 33 Global markets

 Very tight due high demand by China  US ending stocks: 120 mln bu, lowest ever projected in a Feb. USDA report, though higher US prod’n put pressure on Cdn pxs earlier  525 mln bu in ‘19/20; 909 mln bu in ’18/19  Current US commitments are 96% of the revised US export number with 7 months of the season remaining  S American crop size in question due weather

Mercantile, March 2021 34 USDA outlook conf. on oilseeds

 ‘21/22 US soybean acres are projected at 90 mln ac (vs. 83.1 mln ac last year).  ‘21/22 outlook for U.S. SBN’s: Lower supplies and exports, & higher crush and ending stocks.  Soybean ending stocks for ‘21/22 are projected at 145 mln bu, up 25 mln from ‘20/21, still historically low relative to projected use (3.2 %)  Even the huge increase in plantings still only gave them a 145 mln bu carry-out, which would keep prices very high. The corn carryout was also tight.  The bean-corn ratio for N/C is 2.58% soybeans, which is nothing special to encourage soybean acres to corn.  Should continue to be supportive to all oilseed prices in the sh./med. term

Mercantile, March 2021 35 Global context

Global SBN Production, '16/17-'20/21 Global SBN Crush, '17/18-'20/21

Brazil Argentina China India Paraguay Canada Other China United States Brazil Argentina 400,000 European Union India Mexico Russia Egypt Paraguay Bangladesh Thailand 350,000 Pakistan Bolivia Japan Other 350,000

300,000 300,000

250,000 250,000

200,000 200,000

150,000 150,000

100,000 100,000

50,000 50,000

0 0 2017/18 2018/19 2019/20 2020/21 2020/21 2017/18 2018/19 2019/20 2020/21 2020/21 Global prod’n: 361 mln mt Global crush: 322 mln mt

Mercantile, March 2021 36 Cdn. SBN balance sheet

Cdn. SBN Balance Sheet, '19/20-F'21/22 2021 crop: 2019-2020 2020-2021[f] ''2021-22F

8,000 7,600  Cda.: ~ 1.75% of global SBN prod’n 7,000 6,600

6,000  Ac. up 12%; prod’n up 4%

5,000 (lower avg. yields) 5,000 '000 ha, mt ha,'000  Exports up 14%; imports up 4,000 25%; dom. use down 4% 3,000 2,300 2,375 1,900  C/O: down 55% to 225k mt 2,000

1,000 500 Prairie pxs follow global mkt, 225 0 but at a discounted level Area sdd Prod'n Imports (kt) Total supply Exports Food & Ind. Total Dom. Carry-out Use Use Stocks

Mercantile, March 2021 37 Saskatchewan context within Canada

Cdn. SBN Prod'n by Prov., 2010-2020 4,500,000

4,200,500 4,000,000 3,908,700 Ontario 3,791,100 3,796,600 3,728,500 3,708,200 3,500,000 3,401,900 3,429,200 3,238,600 3,129,800 3,189,700 3,000,000

2,500,000

2,245,300 MT 2,000,000 1,769,000 1,731,600 1,500,000 1,390,700 Manitoba 1,164,000 1,162,800 1,107,700 1,088,100 1,129,400 1,115,000 1,122,300 1,159,700 1,000,000 1,068,200 898,000 823,000 800,000 843,000 847,000 Quebec 500,000 479,000 231,800 107,200 0 0 0 0 0 0 0 0 0 68,800 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Sask. Québec Ontario Manitoba Saskatchewan

Mercantile, March 2021 38 Cdn. prices – SBN’s are undervalued, espec. in SK

 There is no problem with demand  While the corn spec L reduced by 7.5k Ct’s, managed money soybean traders added 10k new longs on the week ending Feb. 23.  The USDA Outlook Conference est’s put a firm foundation on the soybean markets; we don’t expect these to get any weaker in the S.T.  Any weather consequences will add bullishness to the markets.  Given FOB PNW export values, s/b at ~$16.50/bu dlvd elevator….  N/C: Look for ard. $14.00/bu

Mercantile, March 2021 39 Mercantile, March 2021 40