Opening of the Panama Canal in 2016 Its Anticipated Impact on Global Soy and Grain Transportation Ken Eriksen Senior Vice September 10, 2015

Charting the Course 2 Background Current Construction Potential Opportunities Comment on Current Situation

Background 3

Key Expansion Components 4 New Locks (Third Set of Locks) Pacific Access Channel Improvement of Navigational Channels (Dredging) Improvements to Water Supply Panama Canal expansion effort based extensive research ◊ More than 100 studies on the economic feasibility, market demand, environmental impact and other technical engineering aspects. ◊ Work on the Panama Canal Expansion began on September 2007 at a total cost of US$5.2 billion.

A Monumental Undertaking 5

U.S. Grain and Soybean Exports Firming and Rising – Center Gulf Achieving Records 6

U.S. Grain and Soybeans Transiting the Panama Canal – 3 out of 10 bushels 7

Current Construction

Gates installed Construction far enough along to fill approaches and locks Testing and monitoring ensues Next big test will be testing with live vessels But, there is always a but... Water Filling the Ditches... Locks and Approaches 9

Panama Canal Expansion Progress as of July 31,

Concerns with water leaks emerged last three weeks. A concern but not expected to delay opening. Situation being watched closely. Solutions prepared, month to repair. Question becomes, will ocean vessel owners let their equipment lock through? Water Filling and Water Leaking 11

Potential Opportunities

Proposed Panama Canal Toll Structure Released: Parameters Timeline ◊ Approved by Panama Canal Authority Board December 24, 2014 ◊ Released January 5, 2015 for Public Review and Comment  Comments due by February 9, 2015  Public Hearing February 27, 2015 ◊ New Tolls to be Effective April 1, 2016 Differentiated Toll Structure ◊ Container Vessels on Capacity Utilization of Vessel ◊ Loyalty Program Based on Number TEUs prior Twelve Months ◊ Bulk Vessels Based on:  Commodity Category (grains, coal, iron ore, other dry bulk)  DWT Capacity and Metric Tons of Cargo Loaded  Use of Sliding Scale to Incentivize Utilization of Larger Vessels 13

Compare to base vessel loaded to 39.5 foot draft, about 57,000 metric tons cargo New locks will accommodate 50 foot draft and upwards of 97,000 dwt vessel. Sensitivity on higher loadings for draft, adjusting for loading and unloading time, and higher fuel burn. Toll structure not key determinant as much as heavier loadings. Panama Canal Toll Structure Impacts 14

Panama Canal Expansion: Delayed to Early 2016 Bigger Ships Coming, Being Used 15

Columbia River dredged 3 feet to 43 feet, finished 2011 Loadings greater than 55,000 metric tons Loading stair stepped higher from 60,000 metric tons to nearly 64,000 metric tons New export capacity, mono-loadings of crops and dedicated market sustain higher loadings Why Infrastructure Matters: the Case of the Columbia River 16

Comment on Current Situation

Shallower draft limits volume loaded on a vessel Vessel costs redistributed over less volume With less volume the ocean freight rate rises commensurately As rates rise alternative routes such as through the PNW become attractive, shifting inland grain flows El Nino Impacting Panama Canal Water Levels and Availability to Locks 18

Questions?

Opening of the Panama Canal in 2016 Its Anticipated Impact on Global Soy and Grain Transportation Ken Eriksen Senior Vice September 10, 2015