U.S. likely to re-open border to beef: Cellucci

[TOM4CWB]

RationAL;

I will be a fruit judge... this is my job.

Provide premium farmgate prices... and show us the money we can put in our bank accounts.

This is the standard the CWB MUST live by if I am involved in manageing sales.

Excuses don't cut it with the customers who buy my products and services.

Why exactly should the CWB expect any different treatment?

[ValueChainFX]

Rusty give us an update as to what is happening in the south with your plant?

[Ration-Al]

Tom

Premium prices. Tell me what price you are getting for your wheat today. What price would you want to get? By how much would you say the CWB is missing the mark? Is it pennies, nickels, dimes or dollars? Are you suggesting that the CWB is leaving money on the table or do they just sell too much wheat? Are there customers that should be paying more? Or are there customers that we just shouldn't be selling to?

Then tell me how you would do it better? Would you pick an arbitrary price level and not sell below that? How much crop are you prepared to leave unsold in farmers bins? How much market share are you prepared to lose for Canada?

[chaffmeister]

I think what Tom is talking about is best illustrated with an example - let's use Oct 29 prices for Rycroft, AB:

CWB Fd Bly FPC = $108.20/t
NET TO FARMER after deductions = abt $68.70/t

CWB Fed Bly PRO = $112.00
NET TO FARMER after deductions = abt $72.50/t

non-CWB feed barley = abt $74.37/t

1. CWB prices from CWB website
2. Deductions were my guess (used the low end of the range)
3. Non-CWB price from Alberta Grain Commission website.
4. Chose Rycroft because the CWB says this is an area where the comparison makes sense (see latest Grain Matters)

Ration-Al - based on the above, how is the CWB is getting and providing value? If these were prices from just another grain company, it would tell me either the company wasn't interested in the business or wasn't very good at it.

[bombay_43]

We attended a Rancher Own meeting last week. This is the farmer owned packing plant which is being built by Edmonton. This is the co-op which is asking farmers for $5000.00 for a share, as well as 15 culls per year at market prices.


Ranchers Own has now combined forces with Rancher Meats in order to get this plant off the ground.

They are hoping to have the plant up and running by November of next year. Still a long way off, but at least they are still working on it.

An interesting statement made by the fellow conducting the meeting, was: If I had my way, I would not let another animal walk across the border!

Every time we allow a "live" animal into the US, we are allowing them to take jobs away from Canadians. Slaughtering, processing, value added items such as pharmecuticals and leather.

Ranchers Own has already found markets for the hides! I am very optimistic about this venture. Any one else have thoughts on this one?

[Ration-Al]

This is an example of a dual market. The non-CWB price would represent the domestic market which generally trades at a premium. In fact two years ago the Lethbridge barley price was the highest in the world and only 50,000 tonnes of barley was offered to the CWB.

The CWB price reflects the export market. When the domestic market drops and the export market becomes more attractive as it did last year then significant volumes of barley are offered to the CWB. Last year producers offered almost 2 million tonnes to the CWB.

The price signals when producers should deliver to the domestic feed market or the CWB for export.

This makes perfect sense. When the domestic price is higher than the CWB price then that is probably your best marketing choice. A perfectly functioning DUAL Market.

[TOM4CWB]

RationAL;

1. CWB Basis cost... No COmpetition... 55 cents per bu. less now than March 22... $.55/bu added to the CWB's account. NOT the farmers.

2. CWB PRO keeps dropping... the CWB will not inform farmers what risk management has occured. So as the PRO drops... so do our profits. I am not allowed to use PPO's as directors conflict of interest prohibits use of PPO's.

3. IP programs that give farmer a set price, on all production from a contracted acre. We have been involved for years in these type of Canola contracts... about time the CWB starts these on IP contracts, wouldn't you say?

4. Planned Wheat/Barley Feed contracts ... that use CBOT Wheat and Corn to hedge good prices that are profitable... into the export market.

5. Cash prices that offer a good basis all year long, pool prices from cash, drop the pool sales that the CWB hides behind. When the CWB has a true cost of sales, the CWB must not sell too low. When prices are too low... just like Canola... farmers stop selling... this should mean the CWB stops too.

Proper Sales timing, and a good basis insure my farm a profit. Other farms need these services from the CWB. About time we provide them, isn't it?

[cakadu]

I am more encouraged by the fact that the two groups are talking about working together to get one success story as a start to working our way to rarely, if ever, sending a live animal across the border or anywhere for that matter.

People buy into success a lot easier than ideas. Now, for those working from the outset, it's hard to see people come on board when there is something in it for them, but if that is what it takes, then let's do it.

[chaffmeister]

Ration-Al:

I don't think you missed my point - you simply avoided it.

The point is this - in the Rycroft example, what value did the CWB bring to the market? As Tom has asked, where is the premium? This doesn't apply to just Rycroft, it applies everywhere.

You say that the CWB price reflects the export market. But it doesn't. The year the feed barley pool was 54,373 tonnes the pool price was not reflective of export markets at all. It was a function of two things:

1. Interest earnings became way out of whack due to the small barlet pool. The PRO therefore became the CWB's best guess as to where to put the price so that it didn't attract too much or too little feed barley.

Evidence: According to the CWB, "the directors decided that the fairest and most fiscally responsible solution was to maintain the 2001-02 Pool Return Outlook (PRO) for feed barley at a level that reflected earlier pool return indicators and did not distort the domestic barley market." This does not say the PRO was reflective of the export market.

Further, according to the CWB website, "Publishing a higher PRO based on additional (interest) earnings would have encouraged additional barley deliveries and in the end, eroded the PRO, taking it under the $180 per tonne mark." One of the worst things the CWB could do is to publish a PRO of $180 only to have the final much lower, say $140 or less.

2. According to the CWB website, of the 54,000 tonnes delivered to the CWB that year, 30,000 tonnes were sold within western Canada. Of course that's where it should have been sold. The domestic market was $195 - nothing should have gone offshore at all.

So the PRO that year was a function of domestic prices and internal CWB manipulations of the price. So explain again how the PRO is a reflection of the export market.

By the way, in 01/02, $179.59/t basis instore Vancouver was above the export market that year. Be careful - could be seen as an export subsidy.

[chaffmeister]

Just a couple more points:

1. The 01/02 feed barley pool was 54,373 tonnes that generated $9.505 million in revenue. If we assume that 30,000 tonnes went domestically (as the CWB indicated) and we assume the price to be $190 (against a $195 market indication), that means domestic sales generated $5.7 million, leaving $3.805 million for exports. This would mean the average offshore sale price was $156.12 per tonne.

Compare that to the PRO of $179.59/t. Also begs the question - why did the CWB sell anything offshore that year - the domestic market was never that low that year. It should have sold everything domestically, which then begs the question, why should the CWB be in barley at all?

2. Just to get us back on track - how is it that the CWB can justify such poor performance when it is using the same tools as the rest of the market - WCE feed barley futures?

[cowman]

Starting to hear more rumors that the border will open in 2005. Probably around June?
Hopefully we will get things back to a normal trading pattern by then.
When that border opens we will see cattle head south in a big way...just like before. Economics of the packing industry will dictate where those cattle will be slaughtered? And whether that means in the American owned Canadian plants or the American plants or "maybe built" Canadian owned plants, I don't know? Maybe this high Canadian dollar will throw a monkey wrench into things returning to normal, or maybe not? I think the Canadian dollar was around 89 cents when Mulrooney signed the free trade deal?

[TOM4CWB]

Chaffmeister;

VERY good points!

Care to comment on #1/2CWRS wheat over 13.5px... which is gaining over a dollar a bu. premium... in the US?

Where are these premiums in the CWB system?

The CWB says they can match US prices any day... any time.

RationAL; where are our no-cost export licenses? Must you funnel all grain thru CDN elevators, railways, ships going east... is this the real purpose of the CWB legislation!

Hold down prices...

Force Ag. produce into the CDN AG/Industrial economy at a cost to them of less than the cost of production... the majority of the time...

Control Western grain Farmers by limiting income, whenever needed.

If I am elected... certainly these above issues will be dealt with.

What about you RationAL... where are you at? DO you agree that $1.60/bu 58lb and above feed wheat is a fair farm gate price?

[grassfarmer]

Bombay_43, could you perhaps clarify about Ranchers Own combining with Ranchers Meats? I have the share prospectus for Ranchers Own NGC and it shows that producers will own shares in this New Gen Coop who will in turn invest money in Ranchers Meats who will build and run the actual plant. Ranchers Meats is owned by the trio of guys setting up the NGC. Reading the prospectus frightens me a bit when you look at all the investment warnings in it - also if the majority shareholders in Ranchers Meats can override decisions made by the NGC there is a possibility of running into troubles down the road. I want to invest in this plant - right now the prospectus frightens me.
I heard that Ranchers Own were going to combine resources with a new plant in Beaver County - what is it called?

[bombay_43]

Grassfarmer, I wish I could give you all the right answers, but I can’t. Here is my rendition of what’s happening.

You are correct, that Ranchers Meats consists of 3 individuals. Stan Schellenberger, Ian McIntyre, and Brent Gitzel, all from Spruce Grove, AB.

Ranchers Own was not able to borrow money to build a packing plant, as financial institutions do not wish to lend to “co-ops”. Therefore these 3 individuals, set up a corporation, investing their own money, to develop and own the packing plant. As shares are sold to Ranchers Own, the money will go firstly to pay out these three member of Ranchers Meats. Assuming the maximum offering is achieved, Ranchers Own will become the majority and controlling shareholder of Ranchers Meats.

AFSC has guaranteed credit, to any members signing up for a share, with a $500.00 deposit. The remainder owing,($4,500.00) can be paid using culls, when the plant is up and running. It will cost 1% interest per month (12% per annum) and this type of producer share, is limited to 2,000. There is a limit of 6,000 membership shares, and 2,000 investment shares, being offered by Ranchers Own.

Farmers, seemed reluctant to buy into these 6,000 shares, but I know many did sign up in our area the night we attended the meeting.

They did tell us about the investment warnings. I believe a study was done by the government, and the result was: “High Risk” investment. That is actually what sold me on it! If government had advocated this investment, it probably wouldn't be a good idea! (small joke there) Show me who’s farm wasn’t a “High Risk” investment when they started!?

I had one farmer tell me that my $5000.00 would be better invested in Cargill, as we all
knew that Cargill was making money, and any investment would pay off there! I said that Cargill was not willing to take my culls, and ultimately, that is why we chose to invest in Ranchers Own. If you are looking for a sure return on money invested, maybe RRSP’s would suite one better.

Hindsight is 100%! In 5 years, I will tell you if we did the right or wrong thing!

Here’s contact info:

Ranchers Own Meat Processors Inc.
#201, 93 McLeod Avenue
Spruce Grove, Alberta
T7X 2Z9

Tel: 780-962-2787
Fax: 780-962-1803
Email: info@ranchersown.ca

[grassfarmer]

Bombay_43, I'm still with you on investing in this project - I sent my $500 cheque in back in June. I suppose that as time gets close to invest more I'm slightly jittery with this change of possible ownership deal. I realise it's risky - but selling cows at current market isn't risky - it's a guaranteed loser! I still don't think $5000 is a big risk given that it is creating a new market for cows that I know are worth a lot more money. There has been lots of talk around the area sparked by ABP meetings this last week regarding new beef plants. Lot's of people who should know better are taking solace in talking down any proposal - they reckon there is something wrong with each of them. I think we need to take a risk now or we will be in the same mess we are in now next year or five years hence.