General Market Situation

Soybeans

There are five tangible options available to soybean growers: Forward Contract, IP Contract, Soybean Pool, direct purchase, and storage for future sale (subject to availability of space). GEC will quote a forward price for GMO beans. At the time of writing, GEC is not in a position to purchase IP non GMO soybeans due to segregation issues. However, assistance with logistics may be an option. Growers should consider the agronomic aspects associated with delivering a quality product to the market. Normally a poor quality product will be rejected or discounted by the buyer.

GEC managers can advise on the quality parameters involved in meeting export standards.

Alternatively, GEC will purchase a quantity of beans out right for cash to service the local livestock industry as roasted or extruded full fat soy bean meal for local export sales. Fall 2011 delivery contracts are trading in the area of net $360 - $370 per metric tonne to the grower. A fourth option is an IP contract; an example of a closed loop system where the seed source is controlled, there is a management program in place, and export specifications are to be met at the time of delivery. The specialized management program guarantees a grower premium if all the specifications are met. Growers are encouraged to discuss this opportunity with those in the IP business. Lastly, should the grower decide to speculate, thus making a decision on when to market their own beans, the GEC; depending on space available, may condition, store, and market on a fee for service basis. GEC will expect to market around 19,500 metric tonnes of soybeans in 2010 - 2011.

Milling Wheat and Feed Wheat

Recent experience has shown that year over year success in growing a high quality milling wheat crop is becoming more difficult to achieve. There are a number of reasons for this but the major problem to be overcome appears to be related to growing conditions. Some agronomists are suggesting that the answer may be found in new winter wheat varieties. Crop Insurance has been the salvation of the industry so far, but it cannot be counted on as a mechanism to overcome serious agronomic challenges. From the GEC point of view, reduced volume of marketable wheat has an adverse affect on GEC's revenues.

In 2011, GEC expects to market 5000 metric tonne as milling wheat when carryover is included. Sales are expected to resume in March 2011, in the $330.00 per metric tonne dollar range.

Approximately 5000 metric tonne of feed wheat will be sold from the GEC wheat pool; farm to farm, the feed company, or the fish industry. GEC was major buyer of feed wheat despite being held to a strict quality standard again this year. To date, sales of new crop feed wheat have been brisk. The January 2011, selling price for feed wheat is $225.00 FOB our plant. The fish market and livestock feed sectors are competing for tighter local supplies. Alternatively, low quality wheat has found a home in the renewable energy market albeit at reduced prices of $60.00 per metric tonne.

Barley/Oats

For the both the buyer and seller, the manner in which barley or oats tracks corn is in part a function of the Chicago futures, and the local basis. GEC will offer the market around 11,000 metric tonne of barley in 2010 /11. This past year the local livestock feed market stabilized somewhat from the previous year. This has resulted in brisker demand for higher quality barley than expected. There are two reasons for this. Firstly, an export sale opportunity was developed which GEC was able capture. This resulted in a sale of vessel quantities just after harvest. Second, the diverting of acreage away from barley and into soybeans resulted in the production of several thousand less tonnes of local barley. These factors coupled with rising international corn prices and international demand for feed barley drove up the initial barley price. The January 2011, current barley selling price is roughly $60.00 per metric tonne higher than was contemplated last year at harvest time. Barley is currently trading in the $200.00 range FOB the local elevator.

One cautionary note for growers is that the buyer is much more aware of the quality of barley than in the past. Two important indicators of quality include bushel weight and fiber levels. Another is related to resistance to fusarium. Growers are encouraged to select two row or high quality six row varieties when making their varietal selections that consider all important quality parameters.

Corn

Non-ensilage corn is generally available as high moisture or dry corn. GEC bought several hundred metric tonnes of wet corn again this year. Wet harvest conditions made both harvesting and drying of corn difficult.

Drying corn is an expensive proposition if the variety matures late in the year, as it becomes expensive to dry in cold weather and the GEC equipment is not designed to handle it. Island Corn at the time of writing is currently trading in the $250.00 per metric tonne range f.o.b. our elevator provided it is graded as a Canada #1 grade.

The production per acre is high with above average yields reported. However, when fertilizer and drying costs are factored in, it may be an expensive crop to grow. The key is to have a secure market and forward plan for marketing. High moisture may well be cheapest way to harvest and store, providing the toxin levels are low and there is access to oxygen limiting storage. GEC has established a pool price of $190.00 last fall for corn but has strict harvest dates after which time they will be reluctant to handle the product. Roughly 300 mt remain available for sale.

Crambe/Canola

The P.E.I. Grain Elevators Corporation continues to pursue an agenda which includes the ability to deal in a wider diversity of crops. For example, developing a market for specialty oilseeds and products may require additional investments in specific types of processing, drying and handling infrastructure as commercial production targets are achieved. Agronomic challenges remain in terms of harvesting and handling of these crops. Nevertheless with establishment of new crushing and refining capacity both within the province and the region, there are opportunities available to farmers who can achieve acceptable yield and quality standards.

Outlook

PEI prices tend to follow the futures prices. PEI is not immune to the market forces that operate locally and internationally. Hence any attempt to forecast must be taken as an estimate at best. GEC does complete an annual analysis of the futures markets (Chicago & Minneapolis) when developing hedging plans for next years crops of oats, soybeans, corn, barley and wheat. The following information is provided as a guide, this forecast should not be taken to be a predictor as to what may actually transpire in any market now or into the future. Prices are affected by events that occur on a daily or even hourly basis both locally and around the globe.