Opening of the Panama Canal

in 2016Its Anticipated

Impact on Global Soy and Grain

Transportation

Ken EriksenSenior Vice President

@keriksenSeptember 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

0

20

40

60

80

100

120

140

160

198

7/8

81

988

/89

198

9/9

01

990

/91

199

1/9

21

992

/93

199

3/9

41

994

/95

199

5/9

61

996

/97

199

7/9

81

998

/99

199

9/0

02

000

/01

200

1/0

22

002

/03

200

3/0

42

004

/05

200

5/0

62

006

/07

200

7/0

82

008

/09

200

9/1

02

010

/11

201

1/1

22

012

/13

201

3/1

42

014

/15

201

5/1

6

Mil

lion

Met

ric

Ton

s

Crop Year (Sep/Aug)

Total Grain and Soybean Exports by Port

Interior

Atlantic

Lakes

Texas Gulf

Puget Sound

Columbia River

Center Gulf

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

7

0%

10%

20%

30%

40%

50%

60%

70%

80%

Lakes Atlantic Center Gulf Texas Gulf Pacific Total

Sh

are

of

Exp

ort

sShare of U.S. Grain and Soybean Exports Transiting Panama Canal by Port Range

Wheat Corn Soybeans Total

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 Progressas of July 31, 2015

Project

Pacific Access Channel

Pacific Entrance Dredging

Gatun Lake and Culebra Cut Dredging

Atlantic Entrance Dredging

Design and Construction of the Third Set of Locks

Raising Gatun Lake's Maximum Operating Level

0% 20%

40%

60%

80%

100%

93.0%

93.8%

100.0%

94.0%

100.0%

91.0%

95.0%

10

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 CanalToll Structure Released: Parameters

Timeline

◊ Approved by Panama Canal Authority Board December 24, 2014

◊ Released January 5, 2015 for Public Review and CommentComments due by February 9, 2015Public 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 LoadedUse 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 CanalToll Structure Impacts

14

$37.80

$27.66 $27.73

$30.95 $31.74

$21.30

$0

$5

$10

$15

$20

$25

$30

$35

$40

56700 CenterGulf Base Rate

84000 + no tollincrease

84000 + 50% tollincrease

70000 + no tollincrease

70000 + 50% tollincrease

65000 PNW BaseRate

Oce

an F

reig

ht

Rat

e ($

per

Met

ric

Ton

)

Cargo Size and Toll Consideration

Panama Canal Toll Scenario Impacts on Ocean Freight Rates to Japan

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

50,000

52,000

54,000

56,000

58,000

60,000

62,000

64,000

66,000

68,000

Jan

-90

Ju

l-90

Jan

-91

Ju

l-91

Jan

-92

Ju

l-92

Jan

-93

Ju

l-93

Jan

-94

Ju

l-94

Jan

-95

Ju

l-95

Jan

-96

Ju

l-96

Jan

-97

Ju

l-97

Jan

-98

Ju

l-98

Jan

-99

Ju

l-99

Jan

-00

Ju

l-00

Jan

-01

Ju

l-01

Jan

-02

Ju

l-02

Jan

-03

Ju

l-03

Jan

-04

Ju

l-04

Jan

-05

Ju

l-05

Jan

-06

Ju

l-06

Jan

-07

Ju

l-07

Jan

-08

Ju

l-08

Jan

-09

Ju

l-09

Jan

-10

Ju

l-10

Jan

-11

Ju

l-11

Jan

-12

Ju

l-12

Jan

-13

Ju

l-13

Jan

-14

Ju

l-14

Jan

-15

Met

ric

Ton

s

Month

Columbia River Grain and SoybeanLoadings per Vessel

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

$0.00

$1.50

$3.00

$4.50

$6.00

$7.50

$9.00

$10.50

$12.00

39,000

41,500

44,000

46,500

49,000

51,500

54,000

56,500

59,000

39.

5

39.

0

38.

5

38.

0

37.

5

37.

0

36.

5

36.

0

35.

5

35.

0

34.

5

34.

0

33.

5

33.

0

32.

5

32.

0

31.

5

31.

0

30.

5

30.

0

Ch

ang

e in

Fre

igh

t R

ate

fro

m 3

9.5

feet

($

per

met

ric

ton

)

Gra

in V

olu

me

Lo

aded

(met

ric

ton

s)

Draft Level in Feet

Impact of Panama Canal Draft on Volume Loaded and Change in Freight Rate

Tonnage (metric tons) Change in Rate to 39.5'

Questions?

Opening of the Panama Canal

in 2016Its Anticipated

Impact on Global Soy and Grain

Transportation

Ken EriksenSenior Vice President

@keriksenSeptember 10, 2015