Operating Costs  Government Regulations and Foreign Trade Policies  Lantic uses large quantities of energy, principally natural gas, in its operations. Moreover, the Company’s beet plant in Taber,  Alberta uses larger quantities of energy in its operations than the cane facilities in Vancouver and Montreal, principally as  a result of the need to heat the cossettes (slices of sugar beets) to evaporate water from juices containing sugar, and to dry  the wet beet pulp. Changes in the costs and sources of energy may affect the financial results of the Company’s operations.  In addition, all natural gas purchased is priced in U.S. dollars.Therefore, fluctuations in the Canadian/U.S. dollar exchange  rate will also impact the cost of energy. Lantic hedges a portion of its natural gas price exposure through the use of natural  gas contracts to lessen the impact of fluctuations in the price of natural gas.  In July 1995, Revenue Canada made a preliminary determination that there was dumping of refined sugar from the United  States, Denmark, Germany, the United Kingdom, the Netherlands and the Republic of Korea into Canada, and that  subsidized refined sugar was being imported into Canada from the United States and European Union (“EU”). The Canadian  International Trade Tribunal (“CITT”) conducted an enquiry and on November 6, 1995 ruled that the dumping of refined  sugar from the United States, Denmark, Germany, the United Kingdom and the Netherlands as well as the subsidizing from  the EU was threatening material injury to the Canadian sugar industry. The ruling resulted in the imposition of duties by  Revenue Canada. Under Canadian laws, these duties must be reviewed every five years. On November 3, 2000, on November 2, 2005, and  on November 1, 2010, the CITT continued for a further five years the anti-dumping duties imposed on imports of refined  sugar from the United States but, in November 2010, removed the anti-dumping and countervailing duties on refined sugar  imports from the EU. As a result of this decision, on December 1, 2010, the Canadian Sugar Institute (“CSI”) filed an application with the  Federal Court of Appeal for judicial review of the EU decision requesting that the matter be referred back to the CITT to  reconsider the evidence. On May 30, 2012, the Federal Court of Appeal allowed the application for judicial review, set aside the November 1, 2010 order with respect to the EU and returned the matter to the CITT for reconsideration. On  June 18, 2012, the CITT recommenced the expiry review and after a reconsideration of the evidence, issued a new order on  September 28, 2012, reinstating the anti-dumping and countervailing duties on imports of EU refined sugar.  The duties on imports of U.S. and EU refined sugar are important to Lantic and to the Canadian refined sugar industry in  general because they protect the market from the adverse effect of unfairly traded imports from these sources. The price  support and trade-distorting attributes of the U.S. and EU sugar regimes have not materially changed the factors that  originally led to the original CITT decision and the importance of continuing these duties. However, there is no assurance  that in 2015 these duties will be continued for a further five years.  The Canadian Government continues to be engaged in a number of bilateral free trade agreement (“FTA”) negotiations. One  of the first FTAs to have a significant impact on the Canadian sugar industry was the FTA negotiated with Costa Rica, which  included the phase-out of Canada’s $31 per tonne duty on imports of refined sugar to Canada. Since January 1, 2011, Costa  Rica has had duty-free access to Canada for refined sugar while Lantic and the other major Canadian refiner did not receive  meaningful access to the Costa Rican market. Given the impacts of this agreement and strong objection of Canada’s sugar  industry, the Government of Canada continues to take the specific concerns of the industry into account to ensure that this  agreement does not serve as a model for future negotiations. Rogers Sugar Inc. 32 ManageMent’s Discussion anD analysis