Manitoba's Soybean Processing Opportunity Summary Document

Manitoba’s Soybean Processing Opportunity Summary Document

April 27, 2018 TABLE OF CONTENTS

01 INTENT...... 4

The Westman Group—Origins...... 4

02 INTRODUCTION...... 5

National Strategic Interest...... 6

Manitoba Strategic Interest ...... 6

03 A LITTLE BACKGROUND...... 7

04 A POTENTIAL FACILITY—PROFILE...... 8

05 BUILDING A FULLY INTEGRATED INVESTMENT ATTRACTION STRATEGY...... 9

Strategy Roadmap...... 10

06 SOYBEAN ACREAGE GROWTH...... 12

07 THE CENTRE OF SOYBEAN PRODUCTION IS MOVING NORTHWEST...... 14

08 LIVESTOCK SECTOR IMPACT...... 15

09 SOYBEAN PROCESSING PLANT—Economic Impact ...... 16 .

Construction Impacts...... 16

Operation Impacts...... 17

10 APPENDIX...... 19 LETTER OF INTRODUCTION

The future is bright for soybeans in Manitoba. Recent growth in the acres planted to soybeans in Manitoba and Saskatchewan shows strong and continuing interest in this crop. Growth in key markets for soymeal and soy oil points to growing demand. These factors, and Manitoba’s open for business attitude, has led to our group actively pursuing the attraction of a major soybean facility to this Province.

In 2016 the Westman Opportunities Leadership Group (WOLG) was established to attract a world scale soybean processing facility to Manitoba. The WOLG is not seeking to build a facility—it seeks to attract a sector-leader to Manitoba to establish the facility. This investment holds significant potential to expand the Regional economic base, will help preserve and grow related industries, and will lead to significant value added downstream investment and local job creation.

The WOLG is a consortia of farm, business and community leaders . Five communities are leading the way—Brandon, Carberry, Neepawa (NADCO), Russell-Binscarth and Virden (Dennis County Partnership) . Many local municipalities also have provided support to our process . Each community believes a strong, coordinated approach to the investment attraction process is the best way to ensure a facility is developed here in Manitoba . They also recognize that while there is expected room for only one facility, they are committed to work for the common good of all, knowing that broad support is required, and knowing that a facility located anywhere in Manitoba benefits all of Manitoba .

Since the fall of 2016 our work has been extensive, with much attention focused on a November 2017 workshop where the plant was discussed in detail . Those attending agreed that the opportunity is real, and should be pursued with vigor . Much work has taken place since the conference—the WOLG launched a major design process to build a very open and widely supported Investment Attraction strategy . They mandated a Design Team to create a detailed Investment Attraction process to bring a plant to Manitoba; their work was completed in March, 2018 .

This document brings together the key findings from the conference and describes the Investment Attraction Strategy . We believe this document accomplishes two things—it describes the opportunity in enough detail to interest potential plant builders, and it confirms the willingness of all involved communities to work together and with potential builders to make a Manitoba plant a success .

Additional materials are available at the Brandon University - Rural Development Institute website: brandonu ca/rdi/attract-soybeans-mb/resources. . We are thankful for the strong support provided to us through Brandon University and the Rural Development Institute . As a volunteer organization, we rely upon their good offices to provide logistic oversight, administrative support and academic leadership as we pursue this major investment . The importance of their participation cannot be underestimated .

These are exciting times, and we look forward to growth in Manitoba’s soybean industry . If you would like more information, please contact us through the RDI website at soybeansinfo@brandonu ca. .

Sincerely,

Ray Redfern, WOLG Chair 01 INTENT

On November 16, 2017 the Westman Opportunities • Delivering long term community capacity that will apply the Leadership Group (WOLG) hosted a workshop— learnings from the soybean process to other development Soybean Building Opportunities—in partnership with opportunities in the Region . the Rural Development Institute (RDI) of Brandon University. The workshop discussed the emerging Brandon University opportunity to establish a soybean processing facility in Manitoba. It brought together leading agricultural Through agreement, the Rural Development Institute at Brandon experts from Canada and the United States that spoke University has agreed to be the agent of record to deliver the to the full soybean supply chain, facility profile and investment attraction process . Broad responsibilities include challenges and opportunities. funding and project oversight, logistics and accounting and applying intellectual rigor to ensure the products delivered meet This document brings together the key findings from the anticipated needs of the industry . They also will be integral the conference and describes the Investment Attraction to the meeting and the Investment Attraction process by helping Strategy now underway. The document accomplishes host and liaise with prospective companies alongside the WOLG . two things—it describes the opportunity in enough detail to interest potential plant builders, and it Community confirms the willingness of all involved communities to work together and with potential builders to make a Community participation is central to long term success . Today, Manitoba plant a success. participants broadly fall in two groups—those that feel they are potential locations for a processing facility, and those that seek The Westman Group—Origins to coordinate development efforts with value added spin off opportunities (like construction, hog sector expansion, etc ). . The Westman Opportunities Leadership Group (WOLG) has been Funding support reflects this grouping . RM and community council established to lead an investment attraction initiative to attract a resolutions and letters received to date confirm broad support . major soybean processing facility to Manitoba . This facility will expand Manitoba’s economic base, will help preserve and grow related industries—with a focus on the hog sector, and will lead to significant value added downstream investment and regional WOLG Board Members job creation . Ray Redfern, Rivers, MB, Chair Allan Preston, Hamiota, MB, of WOLG . Owner and CEO of Vice-Chair The Leadership Group Redfern Enterprises Owen McAuley, McAuley, MB Stuart Olmstead, Carberry, MB Formed in 2016, the Leadership Group is comprised of farm, Barry Routledge, Lenore, MB Scott Lamont, VP business and civic leaders from Manitoba . The WOLG is not Administration & Finance, seeking to build a facility—it seeks to attract a sector-leader Brandon University to Manitoba to establish the facility . It is a strategic leadership Dale McKay, Brandon, MB Dustin Williams, Souris, MB and advisory group, with a core mandate to support investment attraction by: Sandy Trudel, City of Brandon, Nick Foisy, Russell-Binscarth, MB MB • Overseeing the ongoing investment attraction efforts that Marilyn Crewe, Neepawa Area Tanis Chalmers, Dennis are being established, Development Corporation – County Development NADCO (Neepawa, Glenella- Partnership - DCDP (Virden, • Liaising with various levels of government to advance the Lansdowne, North Cypress Pipestone & Wallace- opportunity, Langford & Rosedale) Woodworth) Craig Senchuk, Brandon, MB • Liaising with key corporate officials when necessary to present the opportunity, WOLG Associate Members • Using their individual and collective influence to open results, Elton Riverdale Glenboro Rosser and, necessary doors and assist to ensure positive results, Oakview Cartier Yellowhead 02 INTRODUCTION

The expansion of soybean production acres in Central Considerations Manitoba, Western Manitoba and SE Saskatchewan, combined with potential growth of regional hog • The centre of soybean production is migrating west, with production, positions Manitoba as an advantageous significant growth now happening in Saskatchewan . location for a soybean processing plant. • Competition from US processing plants limits location Investment by a globally competitive processor is expected in the viability in SE Manitoba, as US plants will likely price next 2–4 years, with Manitoba communities, SE Saskatchewan compete for regional soybean supplies . Greater distance communities and North Dakota as potential locations . Targeted reduces this competitive pressure . investment in the soybean value chain includes a soybean processing plant, value added soy-oil uses and potentially bio- • Soybean meal competes well in the livestock value diesel . A local soymeal plant would support further growth of the chain; local soymeal production would increase sector livestock sector . viability by eliminating transport costs to and from the US for processing . Key Points • Producing soybean meal for livestock feed positions these • Soybean acreage is growing—3 15M. acres were planted industries for growth, particularly the hog sector . Cost in 2017 . effective delivery to market improves the overall profitability of the hog sector . Manitoba Pork advises that a 7%-9% reduction in feed input costs could DOUBLE per hog 2016 2017 % profitability . Manitoba 1,640,000 2,300,000 +40% Saskatchewan 240,000 850,000 +254% Growth Challenges Exist Total 1,880,000 3,150,000 +67% Soybeans are a relatively new crop . With that comes challenges .

• This is the periphery of the soybean growing region . • Continued investment in soybean varietals points to future Continued growth will be influenced by local weather expansion across Manitoba & Saskatchewan . conditions, area/price competition from more established crops, grower experience and varietal improvement, to name • A recent feasibility study indicated a critical mass soy bean a few . plant would require about 2 million tonnes of production in its catchment area . This critical mass has been reached . • International trade factors will influence global commodity prices, and with it local profitability and planting interest . • North American companies are aware of the opportunity . • Production volumes and protein content remain highly • Companies with limited North American processing capacity variable . Local grower experience and market acceptance are examining the opportunity . continue to evolve .

• The WOLG has been established to attract a world-scale • Large scale adoption of this nitrogen fixing crop delivers soybean processing facility . environmental benefits, while the impact of large scale regional mono-cropping is yet to be fully understood . • Their interest is industry attraction and not plant ownership .

Manitoba’s Soybean Processing Opportunity Summary Document 5 02 INTRODUCTION

National Strategic Interest • Soy’s use as a hog feed positions for growth in the Today there are no soybean processing facilities of industry with central distribution . Production could grow scale in western Canada. As the crop base grows it substantially, with most occurring west of the Red River . will be in Canada’s interest to establish a globally competitive large-scale soybean processing facility: • Industry sources anticipate a reduction in hog feed input costs of 7%-9% . Sources believe this would translate into a • Domestic processing capacity will protect the Canadian DOUBLING of profit on a per hog basis . industry from potential Canada/USA trade disruptions . Today, the natural home for a new soybean processing facility • Delivers value added processing in Canada rather than seems to be Manitoba . While so, competing interests in exporting a commodity product . Saskatchewan and North Dakota does not make a ‘Manitoba location’ a natural decision . • Insulates Canadian producers from fluctuation in the Canadian dollar . • North Dakota is expanding its soybean production acreage . The US agricultural industrial complex • Establishes a Canadian source of soybean meal to support contains many price supports and development programs and grow the Canadian food industry . that do not exist in Canada . The ability to export soybeans to the USA is straightforward . A new facility is being • Delivers long-term confidence in soybean production, considered for Spiritwood, North Dakota—distance limits thereby prompting further producer investment in a potential impact, but other facilities closer to the border crop with higher comparative value than many in could draw production . production today . • Saskatchewan, while on the periphery of the current production zone, has Canada’s largest agricultural land base and recent success at attracting canola processing Manitoba Strategic Interest facilities . Recent acreage growth has been substantial . Significant corporate investment in genetic development is Manitoba, and specifically western Manitoba, is well expected to expand acreage into Saskatchewan . Locations positioned to attract this investment: such as Weyburn and Moosomin, Saskatchewan will look more attractive for investment as cropping areas increase • For soybean producers a local processing plant would in that province . provide direct value added market access, bypass uneven rail service to US markets, and remove the vagaries of exchange rate fluctuations .

• A local facility is expected to generate freight savings and prompt better soybean prices to growers .

• Livestock producers would benefit by gaining a local protein feed supply at locally competitive prices . 03 A LITTLE BACKGROUND

Soybean processing plants convert soybeans into crop base grows it will be in Manitoba’s interest to support meal/hulls (~79-80%)1, soybean oil (~19-20%) and establishment of a globally competitive large-scale soybean soap/ lecithin/dockage (~1-2%)2. Soybean meal is processing facility to further grow the soybean sector the world’s most popular protein source for hog/ and to provide a local, cost competitive source of feed to animal feed; soybean oil is converted to a variety of support hog sector growth . Investment by one of the large uses, including food-grade oils, industrial products processors is expected in the next 3-4 years . and bio-diesel. Soybean processors generally are located close to supply to minimize transport costs, The accompanying chart describes the value chain and the and preferably close to a market for the soybean meal. potential synergies between the existing pork production Soybean oil refineries (bio-diesel) generally co-locate sector and the output of a soybean processing plant . with a processing facility. Producing hogs and soybeans have a synergy with other field crops in that both can be tapped to supply nitrogen The expansion of soybean production acres in Central/Western for other crops in the rotation (e g. . canola, wheat, corn) . Manitoba and SE Saskatchewan, combined with an anticipated Primary hog production also produces nutrients that can expansion of hog production, positions SW Manitoba as an become key elements to maximize the yields of soybeans advantageous location for a soybean processing plant . As the and other crops .

Phosphorus Primary Hog Production

Nitrogen

Maple Leaf Soybean Canola Wheat Corn HyLife Foods Processing Restaurants Cooked Food Food Cooked

Soybean Soybean Crushing Plant Meal Soybean Oil Edible Oil Recycling Bio-Diesel Plant

Cattle/ Corn Silage Diverse Products Livestock

1 Depending on the plant, soybean hulls (basically fibre) may be sold as a distinct product or they may be mixed back into the soybean meal . Soybean meal typically is specified as 48% protein (no hulls) or 44% protein (with hulls) . 2 https://www .google .ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUKEwiilu-nzMDTAhVG0YMKHRD6BJ0QFggiMAA&url= http%3A%2F%2Fwww .nescaum . org%2Fdocuments%2Fstakeholder-comments-on-the-low-carbon-fuels-standard%2Fcomments-from-national-biodiesel-board%2Fsoybean-processing-documentation1-26-09-nopa-board- revision- 030409 .pdf%2F&usg=AFQjCNFFQZeDvPpBDmX2MZ1rUm__t-I7-w

Manitoba’s Soybean Processing Opportunity Summary Document 7 04 A POTENTIAL FACILITY—PROFILE

The private sector ultimately will Preliminary Facility Cost Estimate determine the specifications and scale of investment for the soybean Item Plant Estimate processing facility. This includes Core Costs $125M–230M processing type, size, product line, — Processing Plant, Storage, Site Preparation (Est: $180M) location and other key decisions (such Oil Refining / Bio-Diesel TBD as linkage to bio-fuel production). However, preliminary work has been Shared Capital Investment* $30M–120M undertaken to scope the opportunity — Electrical connection, Water / Wastewater, NG (Est: $75M) and determine potential benefits to the Supply, Rail Access, Waste Management Region, the Province and the Nation. Contingency (30%) $50M–100M (Est: $75M) Two different plant configurations could be Total $200M–450M developed . First is a mechanical crush facility . (Not including bio-diesel facility) (Est: $330M)

Second is a hexane-based processing facility, Source: Prairie Practitioners Group, US General Accounting Office (GAC) cost exercise, Class 5 provides order of magnitude which usually is developed on a larger scale screening for projects, Definition to come in feasibility study and designed for higher throughput . The accompanying specifications are provided for a ‘model’ hexane based facility designed Preliminary Facility Operations to process 2500 tonnes of soybeans per day . Future work will validate these data—actual Base Parameters Inputs (Crushing & Refining) plant design will be a corporate decision . Input Capacity 2,500 t/day — Soybeans 2,500 t/day ~875–900,000 t/ — Total Water 885,000 kg/day A hexane-based facility is projected to year cost ~$330M (range of $150M—$350M) Output/Products — Total Electricity 92,000 kWh/day to construct . This does not include an oil processing facility (bio-fuel) that could be — Meal 1,962 t/day (79%) — Total Steam 735,000 kg/day built in tandem with the soybean facility . This — Oil 481 t/day (19%) — Total NG ~1800 mmBTU cost estimate includes core capital costs — Soap/Lecithin 21 t/day (~2%) — Hexane 1 .4 t/day for the facility, shared capital investments Refining: for electric connection, rail access and infrastructure like water/wastewater Land, Jobs, Impact: — Bleaching Agent 2,596 kg/day provision . A contingency of 30% has been Land Area 40–200+ acres — Phosophoric Acid 481 kg/day applied to complete the projection .3 Jobs (direct) 40–80 (60 est ). — Sulphuric Acid 962 kg/day Jobs (indirect) ~646 — Activated C 96 kg/day A separate bio-fuel or other oil processing facility could add between~$10M—$50M to Build Time 3–4 years — Sodium Hydroxide 1,346 kg/day the overall investment . Source: Prairie Practitioners Group, SJ Research Services, Soybean Crush Operating Parameters, EU Environmental Study

3 Data sources for infrastructure give highly variable metrics; a range is provided . NOPA data sources generally report higher demand than EU sources, perhaps due to more stringent environmental standards in the EU . These discrepancies confirm the need for development of a “Manitoba-focussed” model facility—this is identified in the WOLG work plan as a key action . These preliminary specifications do not attempt to define peak load requirements . 05 BUILDING A FULLY INTEGRATED INVESTMENT ATTRACTION STRATEGY

Since the fall of 2016 work has The Strategy Roadmap presents a fully defined strategy to attract the soybean investment on a been extensive, with significant single page. It clarifies strategic intentions, identifies attention focused on a November 2017 the outcomes necessary and the actions required to achieve them. It also shows stakeholders (including workshop where the plant was discussed those participating at the Open House) where they can contribute and make a difference. These then are in detail. Much work has taken place grouped into capability areas to focus and align the since then. In January 2018 the WOLG work to come. Square boxes identify actions; circles describe outcomes needed to achieve the ultimate mandated a Design Team to build a very strategic goal of “A major soybean processing facility open and widely supported Investment has been attracted to Manitoba.” Attraction “Strategy Roadmap”. The The WOLG now has a clear mechanism to set priorities, assign accountability, monitor progress and identify and WOLG then engaged Integral Strategy then allocate the resources needed to achieve success . The Strategy Roadmap also identifies broader social impacts Network to facilitate development of the and benefits that will come to Manitoba when a plant is Strategic Roadmap. established, with the end result being “Manitoba’s competitive position is enhanced” .

Work was completed in March, 2018, and the Strategic Roadmap Using this Strategy Roadmap, work now begins on an presented at an Open House to share results and attract integrated multi-phase, multi-year attraction program to additional support from the larger community . Input from the secure the investment in a world-scale plant . Appropriate Open House helped finalize the Strategic Roadmap as presented industry expertise will be engaged to fully define the here . Members of the Design Team include: opportunity, coordinate activities and engage the soybean industry around the world . This will include analyzing: WOLG Strategic Roadmap Design Team City of Brandon Town of Carberry • the western Canada soybean sector; NADCO - Neepawa Area Dennis County Development • the market for soybean-based products, including Development Corp . (Town Partnership of Neepawa, RM of North (Town of Virden, RM of livestock markets; Cypress-Langford, RM of Pipestone, RM of Wallace- Glenella-Lansdowne, Woodworth) • plant design details and infrastructure requirements; RM of Rosedale) Municipality of Russell- Westman Opportunities • potential competing jurisdictions; and Binscarth Leadership Group Board • profiling the Manitoba communities capable of hosting Assiniboine Community Association of Manitoba the plant facility . College Municipalities

Brandon University Entrepreneurship Manitoba The Westman Region aims to be ready to attract this major Manitoba Agriculture Manitoba Growth, Enterprise investment to the Province . In addition, the collaborative (Industrial Development & Trade capacity that has been created now will strongly position Specialist, Pulses Specialist, the Region to pursue future economic opportunities . This Swine Specialist) approach developed to attract a soybean processor can be Manitoba Hydro Brandon University Rural applied to other emerging opportunities, like bio-fuels and Development Institute oil processing .

Manitoba’s Soybean Processing Opportunity Summary Document 9 Strategy Roadmap – Soybean Processing Facility for Manitoba – Final, March 23, 2018

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

A A CC 06 - Identify total soybean CC 05 - Confirm and CC 04 - Develop and have CC 03 - Confirm and volumes (tonnes/day) needed for communicate EDAM’s Identify and assess completed a community communicate framework for CC 02 – Collect and CA 02 - model plant, and provide to role in investment competing locations in North CC 07 - Confirm all inputs investment readiness checklist community collaboration articulate impact of II 04 - Confirm growing communities attraction process Dakota & Minnesota needed to support model support programs or Deliver economic area of soybeans in CC 01 - processing plant, and provide to financial incentives impact assessment of potential market region II 03 - Forecast soybean communities model plant acreage growth potential in market region The input requirements of a Communities are Pertinent CA 01 - Identify and assess B EDAM plays A uniform B Model Plant are collaborating to dimensions of competing locations in understood and a key role in investment potential Western Canada II 06 - Identify size and The current encouraging and attract the The impact of Infrastructure (sewer, communicated readiness checklist Full economic competing US location of relevant hog, location of training investment to potential tax power, water, is delivered to all impact of facility is locations are poultry and cattle Market area communities to be breaks, finance or transportation, land, Manitoba identified (GDP, understood markets soybean acreage communities with grants-back are labour etc.) investment ready is known the request they identified jobs, taxes Pertinent II 02 - Identify requisite requirements are dimensions of The expected accrued, etc.) ALIGN 06 - Confirm key acres to support model identified respond in a timely potential growth of Market Federal & Provincial priorities soybean plant fashion competing area soybean supporting soybean initiative Canadian acreage is known C II 05 – Articulate how Community locations are C processors add value to understood Existing soybeans through the Capacity ALIGN 05 - Identify key production process Alignment with linkages with Manitoba’s livestock and AMM plays a lead Provincial and poultry market Acres required to role in Protein Strategy The competitive Federal priorities sizes are support a communicating Communities are soybean plant The Region has advantages and is achieved confirmed requirements ready to Overall are understood declared disadvantages of Manitoba’s Assess and link broadly to communicate their community ALIGN 04 - II 01 - Deliver bio-diesel support for the competing intensive Manitoba’s intensive The full communities advantages to willingness to market assessment investment locations are livestock livestock support soybean potential processor provide D II 07 - Articulate how the report understood policies and mechanisms to soybean D value chain investors incentives is hog sector can support regulations are investment attraction is identified The Manitoba and benefit from a understood process understood Protein soybean facility The role of hog Community Strategy is Bio-diesel Assess and producers & pork information to understood ALIGN 03 - market link Federal & Provincial processors is support the Competitor opportunities priorities for soybean, understood in the Model Plant is Provincial and are livestock and bio-diesel Investment available Assessment Federal priorities Industry understood growth to the soybean Attraction process related to Communities Alignment with investment attraction E Information soybeans, pork E most able to and bio-diesel are process support the Government II 08 - Confirm understood Regional Government’s approach investment are identified Policies and infrastructure is and support to grow the The strategy to improved hog sector expand the hog The message Government production industry Strategies ALIGN 02 - Identify and All dimensions Additional value about the competitive economic assess government economic in Manitoba is Infrastructure of the soybean added advantages of development development supports & understood planning is markets are opportunities are Manitoba locations strategies are strategies for overall attraction improved understood identified versus competing understood initiative F All soybean F locations (e.g. There is related dimensions of Attraction The best Community increased the Western Canadian Saskatchewan, North efforts are The efforts by community capacity and efforts demand for and North Dakota & Dakota) is aligned with II 09 - Gather and others to expand information is are aligned with infrastructure Montana livestock and developed integrate growth plans of the pork processing available for Government Provincial industry in Manitoba poultry markets are strategies and economic local pork processors inclusion in the ALIGN 01 - Gather and are understood understood development business case priorities confirm that community Municipal Independent strategies data are in line with infrastructure is expert validation provincial initiatives improved G of the business G opportunity is People move Manitoba obtained There is an to or near rural expanded centres in business Impacts Manitoba sector

Private sector H soybean seed A H RD 01 – Communicate developers / nutrition requirements of The Manitoba Interested livestock sector to seed providers deliver soybean R&D The complete major soybean Manitoba’s varieties with Diverse developers capacity and A compelling Value added Business Case is processors are employment New wealth is optimal nutrition willingness to Business Case businesses processing growth occurs created in competitive content presented to establish and collaborate are for investment is followed up with throughout rural Manitoba thrive understood for developed prospective investor and assisted with facility has been Manitoba position is inclusion in the processors Communities I Business Case apply this multi- I their decision attracted to stakeholder, enhanced Federal and regional model Provincial capacity Manitoba to other opportunities New In Manitoba to Community opportunities support soybean Research and economic are created RD 02 – Summarize R&D is understood development current Manitoba Development capacity is research to improve increased local soybean varietals A soybean J based J Federal and Jobs are created innovation hub Provincial in the hog is established willingness to production & pork support soybean processing sectors RD 03 – Confirm and R&D in Manitoba Soy oil helps articulate government is understood establish a support for soybean Soybean processor Hog nutritional biodiesel sector researchIn Manitoba needs are needs are understood and integrated into K included in the soybean varietal K business case development Value added Manitoba’s agriculture The future of the competitive Specific expands advantages are follow up and hog production, Marketing to pork processing known and negotiations with and other livestock soybean Soybean available for interested industries are The educational varietals are inclusion in the processors is companies is enhanced and training improved Business Case coordinated coordinated Education & elements are L L Training available for Industry inclusion in the developments Research & and news, development Business Case International Specific Long term particularly from efforts have Current industry processor Manitoba processor the soybean resulted in players are potential is Community incentive training needs processors, are Manitoba soybeans understood (size, understood outreach to packages are The transport are articulated understood having optimal location, switch prospective Specific available cost of livestock and prepared for nutrition content Government capability) investors is Community feed is reduced Role of support is coordinated through incentive M secured and a single point of packages are M Government articulated contact avilable Locally produced ED 01 – Identify Manitoba International soy meal supports processor training needs soybean livestock sectors information is PI 01 – Track and share and develop programs processors are A single point provided to relevant information to deliver Manitoba Hydro informed of of contact with support decision about developments in is integrated Manitoba potential government is A single point CF 01 – Candidate CF 02 – Manitoba making the Soybean industry North American into decision identified of contact communities develop government develops processor with WOLG is GV 01 – Identify and process potential is specific packages for specific packages for identified Sustainable hog provide appropriate understood Future role of interested processors interested processors N producers support N Manitoba specific Design Group Local pork the soy and hog information and WOLG is processors have a value chains understood larger and more Manitoba Hydro Coordinated Federal Processor secure supply of provides geographic government CIO 01 – Manitoba hogs overview of capacity Follow-through support for an Information Candidate Government designates that may be suitable Coordinated investment international a single point of contact GV 02 – Identify specific to service the Model Provincial attraction program processors are locations with capacity Plant government support Industry is outlined identified and to meet processor for an investment Existing North CIO 03 - A process to determine communicated needs attraction program American soybean Outreach an acceptable single point of O with O is outlined processors are contact with WOLG is designed identified and The WOLG Board and and executed Manitoba Hydro CIO 02 – LEGEND communicated with Design Team determine future articulates data roles for all participants requirements to GV 03 – Provide support infrastructure Strategic Outcome provision in time for information about Identify and plant decision and PI 03 – requirements to enable communicate with all start up Key Enabling Outcome sufficient planning time International Soybean PI 02 – Identify and Outline Federal processors P GV 05 – communicate with all P Government support for North American Outcome the attraction of the Soybean processors investment GV 04 – Outline Provincial Action Government support for the attraction of the investment Definition of Community: Impact A city, town or rural municipality possessing corporate existence and its own local government, Q or a group of a number of these entities working Causal Link Q together. Capability Area

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Strategy Roadmap – Soybean Processing Facility for Manitoba – Final, March 23, 2018

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 06 SOYBEAN ACREAGE GROWTH

Soybean production is predicted to continue to projected soybean acreage . Actual growth has exceeded increase at a good pace over the next decade. World Departmental expectations . In 2017 Manitoba’s acreage production is expected to grow by 33%+ in that swelled to 2 .2 million, a 34 6%. increase from 2016 levels . In period. Genetic development programs are underway the same period Saskatchewan’s soybean acreage more than in western Canada; companies have set aggressive tripled from 240,000 to 730,000 acres . In combination, 2017 crop establishment targets for the next decade, saw approximately 3 0. million acres planted in Manitoba/ which is expected to advance establishment out of Saskatchewan4 . The 3 0. million acre base well exceeds the 2 0. traditional areas into the black and brown soil zones million acre threshold that has been identified as necessary to of western Manitoba and eastern Saskatchewan. By support a world scale processing facility—this does not include 2024 Western Canada is expected to produce 28% of US acreage within the market reach of a facility . Canada’s soybeans. It is expected that the number of acres planted will vary each Recent growth supports such projections . The attached year . 2018 crop areas may well be lower than 2017 . But, long graphs, provided by Manitoba Agriculture, outlines term acreage growth is expected in Manitoba and Saskatchewan .

Harvested Acres - Harvested Acres - Manitoba 10 year Soybean Production Soybeans (2011) Soybeans (2016)

2,000,000 45 1,800,000 40 1,600,000 35 1,400,000 30 1,200,000 25 1,000,000 800,000 20 15 Production MT Production 600,000 Yield (bu/acre) 400,000 10 200,000 5 0 0 06 07 08 09 10 11 12 13 14 15 16 Year

Crystal ball projections for 3M acres Saskatchewan Soybean Harvested of soybeans in Manitoba Acres & Yields (2012–2017)

3,000,000 900,000 35 800,000 2,500,000 30 700,000 655,000 acres 25 2,000,000 increase in 2017 600,000 500,000 20 1,500,000 400,000 15 1,000,000 300,000 Seeded Acres Seeded Harvested Acres 10 Yield (bu/acre) 200,000 500,000 100,000 5 0 0 0 2013 2014 2015 2016 2017 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 Year Year

Based on 200,000 acre per year growth Source: Stats Canada Harvested Acres *Estimate yield and harvested acres

4 http://www .producer .com/2017/04/canola-soybean-acres-surge-in-statscan- seeding-estimate/ 06 SOYBEAN ACREAGE GROWTH

Soy Canada confirms that soybeans are the fastest Western Canada Acreage Trend growing crop in western Canada, with acreage increasing 506% since 2010. Today soybeans represent 4 5. 4 roughly 5% of the principal field crops. 3 5. 3 Soybeans are forecast to be the 3rd largest export crop from 2 5. Canada, expected to be 6 0. million tonnes in 2017 . 2 1 .5 1 Key factors influencing national and global (millions) Acres 0 5. production include: 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year • The world supply of soybeans is estimated to rise to 34 4. West East Source: Statistics Canada CANSIM Tables billion bushels .

• Top export markets include China, USA, Japan, Europe, Asia . Soy Canada Goals & Targets

• A modest increase in Chinese soybean imports is expected Double production in the next decade given domestic agricultural reforms 2016 2027 Total Seeded Area (Acres) 5,467,100 10,000,000 • Chinese efforts to encourage the use of mixed feeds with a Eastern Canada 3,592,100 4,000,000 soy component may positively impact demand . Western Canada 1,875,000 6,000,000 Yield (Bushels/Acre) 44.1 48.2 • Prices are expected to soften if the CDN dollar rises and Eastern Canada 46 1. 53 there is a continued increase in crude oil prices . Western Canada 40 1. 45 Total Production (Tonnes) 6,462,700 13,000,000 Nationally, works is underway to: Eastern Canada 4,491,200 5,750,000 Western Canada 1,971,500 7,250,000 • Increase soybean protein levels, as higher % commands a price premium . Increase world-leading high-quality of food-grade production by 25% • Increase yield, maturity and protein characteristics overall . 2016 2027 Food-grade production (tonnes) 1,250,000 1,800,000 • Improve time to maturity and other factors to support Seeded Acres 1,000,000 1,250,000 continued migration of the crop to the north and west .

Based on Canadian soybeans’ contribution to natural capital

• Canada’s soybean sector will work to improve the natural environment that supports our industry

• Be recognized in Canada and around the world as a global leader in sustainable production of high-quality soybeans

Increase competitiveness, exports and processing of commodity soybeans 2016 2027 Protein Content Dry matter back (13% moisture) — Eastern Canada 40 .6 (35 .3) 41 .1 (36) — Western Canada 38 .7 (33 .7) 40 .2 (35) Whole Soybean Exports (tonnes) 4,500,000 10,500,000 Processing Capacity (tonnes) 1,878,000 2,500,000

Manitoba’s Soybean Processing Opportunity Summary Document 13 07 THE CENTRE OF SOYBEAN PRODUCTION IS MOVING NW

The midpoint of soybean production is migrating north and west . The migration is positioning communities in western Manitoba very well for future investment .

Mid-point Soy 2020 Production Manitoba & Saskatchewan 08 LIVESTOCK SECTOR IMPACT

The hog industry in Manitoba is logically a major average cost of ~$2M this would generate industry investment of consumer of locally produced soybean meal. Soymeal approximately $250M, and produce approximately 420 Full Time has the highest protein content and digestibility Equivalent (FTEs) positions . Local nutrient production also would amongst all plant based protein sources, and delivers an increase, with an estimated 6,500 and 3,000 tonnes of Nitrogen optimal mix of amino acids. When combined with other and Phosphorous produced, respectively . locally produced feed grains it provides most of the essential nutrients that hogs require. Moreover, it is expected that an improved sector outlook would prompt re-investment in existing barns and ancillary production Recent work by Mercantile Consulting Ventures Inc . confirmed infrastructure . There is approximately $2B invested into existing that a Manitoba-based soybean processing facility would hog barn infrastructure in Manitoba . Barn life is estimated at have a total cost advantage of $47 .58/tonne over American approximately 20 years, with many facilities now reaching the competition5, a portion of which would be transferred through end of their economic life . A rebuild is necessary to modernize the supply chain to the hog sector . Discussions with Manitoba and to support future growth . An estimate of investment for the Pork confirmed that a reduction in input costs of 7%-9% would next 3 years, along with addressing pent up lack of investment, double the profit margin on a per hog basis . (The June 2017 would require upwards of $600M for the period . price for soymeal is $440/tonne CDN) . In total, growing confidence in the hog sector, arising from a Manitoba has western Canada’s highest concentration of hogs . number of sources including increased profitability linked to Further growth is anticipated . A combination of existing barns local soymeal production, could generate investment of upwards needing re-development and expanded production points to of $850M over 3 years and result in approximately 420 FTEs further growth . In October 2016 HyLife Foods announced a created specific to the hog sector and additive to benefits tied to $125M expansion for their Neepawa processing complex to the soybean facility . better compete into the Asian (Japanese) market . This will deliver two-shift processing capacity for 1 9. million hogs per year, new Other Animal Feed Opportunities hog barns and a feed mill . Barns are expected to be located in SW Manitoba given the construction moratorium in SE Manitoba, In addition to hogs, the livestock complex in Western Canada and in Saskatchewan . (In November 2016 SaskPork set a growth could benefit from a local supply of soybean meal . Soybean target of 100,000 more finishing spaces, which equates to an meal is equally popular in poultry production as hog production . additional 250,000-300,000 hogs/year production increase, It provides similar dietary advantages and provides most of the largely in eastern Saskatchewan ). essential nutrients with only minimal addition of supplements .

Maple Leaf Foods, the Province’s largest hog processor, is located in Brandon . In 2015 the Company confirmed that a significant number of new barns are needed to operate at full capacity . The Brandon facility can process up to 90,000 hogs/ week, but is operating at about 70,000/week .

Preliminary estimates are that the combined impact of reaching production capacity at the Maple Leaf plant and the Hylife expansion could require upwards of 1 .5M additional hogs/ year . Applying an average barn size of 4,000 head, this would prompt additional investment in approximately 125 barns . At an

5 Mercantile Consulting Venture (2015) Manitoba Crush Feasibility Study, conducted for Soy20/20, Guelph Ontario, by Mercantile Consulting Ventures Inc ., Winnipeg, March 2015, p . 4 .

Manitoba’s Soybean Processing Opportunity Summary Document 15 09 SOYBEAN PROCESSING PLANT—ECONOMIC IMPACT

SJ Research Services Inc. output includes double counting unincorporated business profits, and was contracted to perform a because it includes the value of inputs other operating surplus (corporate profits, detailed input-output analysis used in production rather than net interest income, inventory valuation of the economic impacts of a value added alone . adjustments, and capital consumption new soybean processing plant allowances) . Gross domestic product in Manitoba. The expansion Gross Domestic Product (GDP) excludes the value of intermediate goods of soybean production acres measures net economic activity and services used in production . Labour in Central Manitoba, Western within a prescribed geographic area . income includes wages, salaries, and Manitoba and SE Saskatchewan, It represents the payments made to employer contributions to pensions and combined with a hypothetical final factors of production: labour, benefit packages . expansion of hog production in the Central and Westman regions, positions Manitoba as an advantageous location for a Construction Impacts soybean processing plant. Construction Impacts are cumulative over the course of the construction An economic model was developed phase. Operations impacts are for a single year of production. to estimate economic impacts to the province of Manitoba, Brandon and region, and the rest of the province of Summary of Impacts—Soybean Project in Manitoba Manitoba . Results below are the sum of annual direct, indirect, and induced Provincial Impacts— Gross Gross Labour impacts . Direct impact is the total initial Soybean Project Output Domestic Employment Income expenditure, usually construction or ($M) Product ($M) (Positions) ($M) operating outlays . Indirect impact is Plant Construction ONE TIME 542 .7 259 4. 2934 .6 143 0. the secondary impact that includes inter-industry transactions; purchases Plant Operations PER YEAR 564 71 834 37 of inputs from supporting industries . Expanded Hog Production PER YEAR 277 7. 113 .9 850 26 3. Induced impact is the additional impact from changes in household spending as industries modify labour input requirements in response to altered Summary of Impacts—Soybean Project in Southwest Manitoba levels of demand for output . Regional Impacts— Gross Gross Labour Gross Output measures total economic Soybean Project Output Domestic Employment Income activity in the production of new goods ($M) Product ($M) (Positions) ($M) and services in an accounting period Plant Construction ONE TIME 265 3. 112 .6 1249 4. 69 8. and includes total expenditures on local Plant Operations PER YEAR 475 17 195 10 goods and services as well as payments to labour and business profits . Gross Expanded Hog Production PER YEAR 217 3. 79 3. 482 .7 10 .7 09 SOYBEAN PROCESSING PLANT—ECONOMIC IMPACT

Operation Impacts Plant Operations Impact—Province

Plant output was estimated at $455M per annum Gross Output ($M) based on 1964 tonnes per day of meal at the current spot price, 500 tonnes per day of soy oil also at the Direct 455 0. current spot price. Bean inputs were estimated at Indirect 77 6. 2500 tonnes per day at the current spot price. Utility Induced 31 3. purchases consists of natural gas, electricity and Total Gross Output ($M) 564.0 water at estimated volume and current prices. Direct employment is estimated at 80 positions based on a Gross Domestic Product ($M) similarly sized plant in Quebec. Labour income was Direct 6 .1 estimated at positions times the average provincial Indirect 45 5. manufacturing industry annual earnings. Induced 19 3.

The remainder of inputs were estimated using the input structure Total Gross Domestic Product 70.9 from the detailed Manitoba input output tables for the industry Employment (Positions) “Animal food manufacturing” . Meal that is not used as hog feed Direct 80 is assumed to be exported along with soy oil . Because soybean Indirect 529 inputs are a redirection of existing exports, no additional agricultural output is assumed . Finally, inputs were adjusted for Induced 225 import leakages using the default model local supply ratios . Total Employment 834 Labour Income ($M) Significant economic impacts of operating a large-scale Direct 4 .6 soybean processing plant were calculated by the model, including impacts on the Brandon area itself as well as on Indirect 24 the province of Manitoba . Induced 8 3. Total Labour Income 36.8 The annual provincial impacts of operating a soybean processing plant are detailed in the accompanying chart:

Manitoba’s Soybean Processing Opportunity Summary Document 17 09 SOYBEAN PROCESSING PLANT—ECONOMIC IMPACT

Operation Impacts Plant Operations Impact—Region

The Brandon and region annual impacts of operating a soybean Gross Output ($M) processing plant are detailed in the accompanying chart: Direct 455 0. Indirect 18 .7 Induced 0 8. Total Gross Output ($M) 474.6 Gross Domestic Product ($M) Direct 6 .1 Indirect 10 3. Induced 0 5. Total Gross Domestic Product 16.9 Employment (Positions) Direct 80 Indirect 110 Induced 5 Total Employment 195 Labour Income ($M) Direct 4 .6 Indirect 6 Induced 0 3. Total Labour Income 10.4 10 APPENDIX—REFERENCES & ACKNOWLEDGEMENTS

Depending on the plant, soybean hulls (basically fibre) may be sold as a distinct product or they may be mixed back into the soybean meal . Soybean meal typically is specified as 48% protein (no hulls) or 44% protein (with hulls) .

2 https://www google. ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUK. Ewiilu-nzMDTAhVG0YMKHRD6BJ0QFggiMAA&url= http%3A%2F%2Fwww .nescaum . org%2Fdocuments%2Fstakeholder-comments-on-the-low-carbon-fuels-standard%2Fcomments- from-national-biodiesel-board%2Fsoybean-processing-documentation1-26-09-nopa-board- revision- 030409 .pdf%2F&usg=AFQjCNFFQZeDvPpBDmX2MZ1rUm__t-I7-w

Data sources for infrastructure give highly variable metrics; a range is provided . NOPA data sources generally report higher demand than EU sources, perhaps due to more stringent environmental standards in the EU . These discrepancies confirm the need for development of a “Manitoba- specific” model facility—this is identified in the WOLG work plan as a key action . These preliminary specifications do not attempt to define peak load requirements .

4 http://www producer. com/2017/04/canola-soybean-acres-surge-in-statscan-seeding-estimate/.

Mercantile Consulting Venture (2015) Manitoba Crush Feasibility Study, conducted for Soy20/20, Guelph Ontario, by Mercantile Consulting Ventures Inc ,. Winnipeg, March 2015, p . 4 .

Funding for the soybean investment attraction initiative has been provided through community and sector groups interested in seeing a facility establish in Manitoba. In addition, Manitoba Municipal Relations provided significant funding to develop the strategy roadmap, which is centred in this document.

The Westman Opportunities Leadership Group would like to thank the Government of Manitoba, Department of Agriculture for their contribution of data and materials to this report. They also would like to thank Soy Canada for materials provided that help to describe the emerging soybean development opportunity.

Manitoba’s Soybean Processing Opportunity Summary Document 19