1. Flax Market Outlook 2011 and Beyond Flax Market Outlook 2011 and Beyond Jan 2011 Presented by: Chuck Penner

2. Canadian Situation Setting the stage Remainder of 2010/11 2011/12 Outlook Acreage/Production Price Ideas Beyond 2011/12 1

3. 2 Lowest production since 1992

4. 3 Carry-in decent size, but quality is a question

5. 4 Exports forced lower this year because of tight supplies

6. 5

7. 6 China saved our bacon last year

8. 7 Exports on par with 09/10 but will fall behind

9. 8 Deliveries limited by supplies

10. 9 Very low ending stocks happen every 6-8 years

11. 10 Still off the 2008 highs

12. 11 Can we hit $20/bu again?

13. 12 Oil is a cheaper substitute now

14. Bullish factors Extremely tight supplies Decent demand is continuing from Europe (Triffid protocol working) Solid price-inelastic demand from Omega-3 feeders Feed prices in Europe still rallying to help linseed meal values Bearish factors Larger crop in USA China mostly priced out of the market Substitution occurring at higher prices Oil users and feed compounders in Europe Fearless prediction Prices mostly steady through Jan/Feb Modest upside potential to fill spring vessels, but dont expect a big surge unless petroleum markets take off 13

15. 14 Limited by seed supplies?

16. 15 Small carry-in

17. 16 Low supplies will support prices

18. Bullish factors Low supplies expected to continue Seeded area in Canada possibly limited by seed supplies Bearish factors Some recovery of acres (if everything gets planted) Gross margins (with $12 NC bids) look good against other crops Acres also expected up in USA and UK Competition in EU from Russia and Ukraine? Fearless prediction Tight supplies will support prices $12.00-14.00 if acres get planted, but no room for weather problems 17

19. 18 Some small shifts in production

20. 19 Is this the start of a longer term move?

21. Ride the environmental wave In 2009, bamboo had 5% of $1.6 billion wood flooring market in US As of Dec 2009, ~ $80 million, growing at 5% per year Resilient flooring market in US is $2.5 billion We grow flax/sunflowers/soybeans Ship the seed to US and bring back the oil Whats wrong with this picture? Need a push for North American market Crush and manufacture here? 20

22. 21 Equivalent of 350-400,000 tonnes of seed

23. 22 Linseed meal worth more in Europe

24. 23 Linseed oil worth more in US

25. Production from other countries Ukraine & Russia Downside of high prices Demand isnt completely price inelastic / petroleum substitution Could cause permanent erosion of demand (Japan) Environmental benefit Need a continued push in North America for flooring and other uses Health benefit of seed Human consumption and as livestock feed More potential with inelastic demand Understand and promote value of meal to increase crush value 24

26. www.leftfieldcr.com