Adding Value Through Targeted Marketing - Northwest

Consolidated Beef Producers Presented by Will Lowe

Marketing Representative – NWCBP June 13, 2010

Who is NWCBP Ltd.Non-profit Private Company, Incorporated Sept.2006 Initiated by 13 feedlot owners and cow/calf producers

in Saskatchewan & AlbertaCurrently directed by a 9 member board with a 5

member executive boardManaged by Marketing team (Vern Lonsberry, Will

Lowe, Wade Pearson) Office Manager (Teresa Kooistra) and General Manager (Terry Schetzsle)

Who is NWCBP Ltd.Membership based company funded by per

head marketing feesModeled on CBP-USA based out of Canyon,

Texas.NWCBP has an office based out of

Strathmore, AlbertaWe represent feeders and cow/calf producers

ranging in size from as few as 200 head to 25,000

Membership Levels A Membership – full voting privileges $4,000 one time investment $4.50/Hd marketing fee

B Membership – full voting privileges $1,500 one time investment $6/Hd marketing fee

C Membership – Cow/Bull Member – no voting privileges $1,000 one time investment $10/Hd

NWCBP Team Vern Lonsberry – 25 yrs with Western Feedlots.

Previous to WFL worked at Poundmaker and Lakeside. Has been involved in the industry over 30 years.

Wade Pearson – 15 years with WFL – HRWill Lowe – graduated from the U of S College of

Agriculture in 1999 and then worked 7 years as a Cattle Buyer with Cargill Foods in Alberta and Saskatchewan

NWCBP Team Teresa Kooistra has been with NWCBP

since the summer of 2008 and manages the day to administration of our company

Terry Schetzsle is from Veteran, Alberta and is the former market owner of Dryland Trading Corporation. Terry coordinates the sale of our cows

Why NWCBP ExistsCanadian feeders are continuing to see fewer cash

sales Lack of bargaining power with packers due to

consolidation of packing industryCaptive supply numbers/percentages have grown due

to reduced kills at Canadian plants. Higher percentage of kill consists of cows since 2008

More market access (domestic and US) until COOL

Why NWCBP ExistsBetter market information for our membersCombat wide basis levels between Canada & USNegotiate the best price and conditions for the sale

and delivery of customers cattle Increase feedlot marginsTry to address packer and retail marginsCollaborate with our US counterparts to make

informed US marketing decisions

What does NWCBP Do?We are a marketing group dedicated to promoting,

selling and informing our customers in the volatile cattle markets

Our core business is the marketing of fat cattle for Western Canadian feedlot customers but

We also market cull cows and bulls domestically and for export. $10/Hd regardless of Membership level

We visit our customers on a weekly basis to view the cattle and describe and advise the customer on the right time to market their cattle and the options available for each group of cattle

What does NWCBP Do?We represent 137 customers with a one time

finishing/backgrounding capacity of 390,000 & 40,000 cows (85 Alberta, 45 Saskatchewan, 7 Manitoba)

We see ourselves “as an alternative to legislation, one that reduces captive supplies by packers, while increasing the bargaining power and marketing options of sellers”

We access the cattle markets domestically and in the US every day in order to sell our customers cattle to the right packer at the right time for the right price

Sales Results 2007-2009 NWCBP vs. Canfax2007 Sales 119,000 2008 Sales 127,000 / 4,000 Cows (+10%)2009 Sales 137,000 / 3,600 Cows (+7.3%)Profit Analysis 2007 - +$15/Hd on SteersProfit Analysis 2007 - +$20/Hd on Heifers Profit Analysis 2008 - +$19/Hd on SteersProfit Analysis 2008 - +$18/Hd on HeifersProfit Analysis 2009 - +$11.75/Hd on SteersProfit Analysis 2009 - +$11.90/Hd on Heifers

Sales Results 2007-2009 NWCBP vs. CanfaxThe method of comparison was to take the Canfax’s

weighted average price for the week and compared that to the weighted average price of NWCBP weekly sales

Not necessarily the most scientific method but it is the best comparison we can make

Success has been that membership continues to grow but results in 2009 have slipped

Due to COOL, lack of competitive domestic bidding (2 western Canadian packers), closure of XL – MJ plant and continued cow kills

Bid / Ask Trading MethodNWCBP does not trade cattle using the

traditional sealed bid systemWe do not set parameters on time when

we trade our members cattle.We evaluate market conditions to set an

ask price that we begin negotiationsWe also set parameters of the specs of

ask in regards to weight breaks, delivery time etc.

Bid / Ask Trading MethodThis is a model that is used right through the

US.Allows you to adjust to changing market

conditionsDoesn’t box you in to the whims of the market

for the certain hour and day that you decide to sell

Puts a certain amount of power back into your hands but the ask has to be realistic and reflect current market conditions

Bid / Ask Trading MethodAllows you to keep information away

from the packersAfter cattle are sold in sealed bid format

you usually let all bidders know what was bid

This gives the packing plants the tools to lead the market in whatever direction they want to and allows them to count competitors inventory

Bid / Ask Trading MethodUnder our system the packers are on a

need to know basis There is no obligation to tell them

anything more than the cattle are sold or not

If cattle are priced at a certain level and a packer matches the price asked then we must follow through and sell them the cattle

Cattle FinancingOffered in partnership with Stockman’s

assistance Corporation (SAC) out of Saskatoon, SK.

SAC is a alliance partner of FCC that administers the financing of cattle in Canada on FCC’s behalf

SAC is a stand alone non affiliated partner. No association with particular markets, dealers, packing plants etc.

Cattle Financing10% equity requirementSAC finance brand must be applied to cattle20% equity requirement if you decide to retain

ownership and feed your cattle. Value determined from average sales price (ie. Canfax) for a particular weight class of feeder cattle

Cattle FinancingFeed component up to $1/day on feeder

cattleThey will finance all classes of cattle

including breeding cowsInterest rates are posted CIBC prime

rates +1/2%.All private information is handled by

SAC and FCC. NWCBP Ltd. is not privy to any private financial information

Pharmaceutical DealJust new in the MarchBulk pricing on a complete list of veterinary

pharmaceutical productsUpfront discount in addition to competitive pricingQuick delivery to your home or closest townPotential saving of hundreds or even thousands of

dollars

SummeryMarketing services that helps producers to

collaborate and work together to combat the consolidation seen in the packing industry

Informative services that keep producers in the “loop” even if they don’t market cattle every week

Non-profit private company that works for their customers and whose sole goal is to represent the interests of the members

SummeryOffer services for marketing fed cattle,

cows/bulls and maybe some opportunities on feeder cattle as we grow

Financing that is very competitive in the marketplace

Pharmaceutical Partnership’sWeekly market reports and a marketing staff

that has many years of experience

149A Orchard Park Rd.Strathmore, Alb.T1P 1R8403-901-1986 Office306-375-7379 Will’s Cell403-601-4090 Vern’s Cell403-901-4876 Wade’s Cellwill@nwcbp.comwww.nwcbp.org

$Can has been very volatile again this year moving from a low of $77 in March 2009 to par with the US dollar last Tuesday

The dramatic moves come as a result of:Higher inflationRecovery of economy in Canada, especially

ManufacturingRecovery in commodities specifically OilManageable government deficitsProblems in Rest of the world ie. Portugal, Italy,

Ireland, Greece and SpainMassive US deficit spending

Market Update$CanadianBeef Demand / PricingFeeder / Cow Prices / BasisCanadian Cattle Inventories / COFUS COF

• Canada – US Currency Exchange

Beef Demand / PricingHas been on the rise since the start of the

yearCut-out values for trim & grinding products

have increased significantly since JanuaryConsumers are starting to come out of

recession mode and spending more on beef products again. Good retail demand has continued with increasing food service (restaurant) demand

Beef Demand vs. Retail PricingThe problem facing the cattle industry is the

ability of the producer to share in the retail price of beef

Retail prices have gone up while beef prices paid to producers has either gone down or stayed the same

Market power determines whether or not added costs can be passed on to consumers

Feeder / Fat / Cow Prices 2010Feeder prices the last three years haven’t been

particularly profitable. CAD and now COOL have impacted prices significantly in 2009-10.

The same factors have also influenced fat prices along with increased cow kills which have tied up more kill space in the packing plants

Cow prices stood up fairly well in spite of large cow kills in 2009 and the outlook for 2010 is better due to heavy cow kills the last 2 years. Access for younger cows in the US has definitely helped. Age verifying cows if you were able to was a definite benefit at times through 2009. $50-100/head more

Going forward the large number of cows killed will be a positive thing for the industry

We are coming back to a more sustainable number of cattle and will help to put supply/demand back into equilibrium

This will have positive influence on prices of all classes of cattle for the next few years

US cattle numbers are also coming in smaller and will help to stimulate pricing as long as we don’t slip back into recession

Canadian Cattle InventoriesTotal cattle numbers are down 1.25% on Jan.1/10 vs.

Jan.1/09 to 13.015 million but this follows a 5.15% drop from 1/09 to 1/08

3.9% less beef cows than Jan.1/09 (4.47 million)15.4% fewer beef cows than peak 2005 inventoryBeef herd is now equal to the herd size of 2000Sask. Cow herd sits at 1.38 million down .7% vs 2009

but down 11.5% since 2005. Alberta at 1.73 million beef cows down 6.5% vs 2009 and 17.25% since 2005. Due to drier conditions in Alberta and closure of XL – MJ?

Saskatchewan / Alberta COFCOF numbers are up 5% March/10 vs. 2009 due to

lower feed costs in Canada, COOL, $Can and narrower feeder basis compared to 2009 and is 13% higher than 2008

Placement numbers have been larger YTD 2010 compared to 2009 due to smaller placements in the fall

More COF in Canada but fewer in the US combined with lower carcass weight in US should keep numbers manageable for the next couple of months

US COF3.2% lower April COF vs. 2009 at 10.81

millionPlacements in Mar. 2010, up 5.6% over 2009. Marketing's were also 5% higher than last

year.US cow herd is pegged at 31.5 million the

smallest since 1963