Durum comments

[Fransisco]

the Calgary Herald last september.

"Tight world inventories favour Canadian grain producers who are dominant sellers of durum wheat and barley, said Maureen Fitzhenry, spokeswoman for the Canadian Wheat Board… As Western Canada's sole wheat marketer, the Canadian Wheat Board is in a position to maximize the situation for producers, she said. "When you only have one seller, you can really get your buyers over a barrel, not to be too rude about it," Fitzhenry said"

[Fransisco]

From this weeks AGRIWEEK

The world durum market has collapsed. The price is half of what it was two years ago and the typical premium for
durum over milling types has disappeared. Last week the Canadian Wheat Board’s published asking price for topgrade durum wheat with 13% protein out of St. Lawrence positions was $274.57 a tonne, on the same day that No. 1 CWRS at 13.5% was quoted at $279.70, a discount of almost 2%. Over the last five years durum prices to western growers from the Wheat Board itself averaged 19% higher than non-durum. Since durum wheat yields on average about 14% less, at least a proportionate premium is needed to make growing it worthwhile.

The Wheat Board is fond of saying that it is the world’s biggest durum exporter, which it surely is. However the Board is largely responsible for the worldwide meltdown of the durum market. Because of the dominant position of western Canadian production in the world supply, changes in Canadian output have a huge impact on world prices, and also on the relationship of durum and other wheat prices. There is no futures market, or any other open, visible
pricing system for durum wheat. It is normal for different wheat types to carry different prices, and price relationships are not fixed or constant. However nowhere has there ever been the kind of disconnection between wheat prices by type as has occurred between prairie durum and non-durum wheat in the last four marketing seasons.

Canadian durum growers have no other price or market guidance except the Board’s pool return forecasts. Since the 2006 growing season they have been misled by the Board’s predictions in both directions. When the Board predicted high prices, acreage understandably rose, and vice versa. Corresponding changes in Canadian supply drove world prices up and down over a staggering range. Based mainly on the Board’s price outlooks, durum acreage in western Canada jumped from 3.8 million acres in 2006 to 4.8 million the following year. However low yields due to drought reduced the crop from 4.26 million tonnes in 2006 to 3.68 million in 2007. The general world shortage of wheat in 2007-08 drove milling wheat prices from $219 a tonne in 2006-07 to $370 in 2007-08, when all-time price records were set for wheat. In the case of durum the
price returned by the Board doubled from $228 a tonne in 2006-07 to $506.
Spurred by this windfall and by rosy predictions from the Board about 2008-09 prospects, durum acreage for 2008
rose to a record 6.03 million acres and production jumped also to a record of 5.52 million tonnes. This swamped not just the Board but the whole global market. Export and domestic use in the 2008-09 crop year increased only to 3.99 million tonnes from 3.86 million the previous year. High prices unilaterally set by the Board priced domestic millers out of the market, with the result that domestic use dropped from 733,000 tonnes in 2007-08 to 413,000 in the crop year that ended last July 31. The Wheat Board accepted delivery of only 74% of the durum that farmers offered through the obligatory delivery contracts. To sustain even that proportion the Board had to literally stuff commercial storage with durum: visible stocks last July 31 jumped from 781,000 tonnes at the end of 2007-08 to 1.23 million a year later.

Many growers and some in the trade believe that the Board deliberately limited sales, at least during the early part of the 2008-09 crop year, in order to achieve higher prices. The pool return for 2008-09 was last estimated at $369 a tonne (before elevator and freight deductions), compared to $304 for non-durum spring wheat. That may have helped to maintain the 2008-09 pool price a few dollars above what would have been realized by aggressively pricing the durum, but it has vastly worsened the oversupply problem. Still encouraged by promising Wheat Board price predictions in the early spring of 2009, durum acreage declined only to 5.58 million acres from 6.03 million the previous year.

Even with yields reduced sharply from the records of 2008, this year’s durum crop should be over 4.5 million tonnes.
Combined with carry-in of 1.9 million, supply for the 2009-10 crop year will be an unprecedented, completely unmanageable 6.4 million tonnes.
Though the Board long ago stopped making suggestions about how much of each Board grain farmers should seed,
it amounts to the same thing. <b>This is the same result that can be expected from every instance of central planning. The Board’s misleading price signals and then its incomprehensible decision to restrain sales led to this disaster. The durum market has been ruined for the next several years. The Board has created a multi-year buyer’s market for durum and it will not be surprising if the bizarre durum discount widens further. Buyers the world over know all about the Canadian glut of durum and the feebleness of the Board as a bargainer.</b>

[Fransisco]

So who is it exactly that's over a barrel again?

[lakenheath]

The PRO is, was and will always be a joke. The CWB has dropped the ball again.

[SASKFARMER3]

Fransisco Your right they can never get it right, because its not their product they handle it and have to sell it. If its a private company their buying it and trying to sell it for a profit. Incentive is bonuses real money.

[wmoebis]

I wonder what it would have been like if AD was on the open market last couple of years.

If we would have dumped all production when prices were rising where would have they gone?

At what price would have we started dumping?

Would we have seen the high prices?

If we dumped all production how much more would have been growen and what would the markets look like now?

[dave4441]

The PRO is a complete joke, but the real problem, as touched on the article, is that it really influences seeding intentions but is not based on what they can forward sell at the time. It is what is holding agriculture back. The wheat PRO should have some correlation to US markets but does not even come close.

[parsley]

The srongest rebuke the Wheat Board has been slapped with a pen from farmwriters, but not any punishment from farmers, themselves.

What does this say to the Board?

They'll just buy more barrels to put farmers over. Pars

[bucket]

Consider this people. Does the cwb actually know how much durum is available. I can almost guarantee most large durum producers overcontract tonnage because the damages are less than carry. Do the math. If the cwb only accepts 65% you can overcontract to deliver 100%. If they catch your trick, pay 6 bucks a tonne. Its cheaper than the 100 bucks a tonne for the carry into 09/10.

On a side note just got off the phone with some arrogant cwb rep that said grainflo was like getting concert tickets. Now that is a competent way of marketing grain for a farmer's livelihood. I lost it and am still mad. I told them - why didn't you take Ian White's letter to all producers and throw it in a draw drum them and let producers drawn decide if they wanted to use the program.

[LWeber]

http://www.ticketmaster.ca/

[Fransisco]

A local elevator manager had a better analogy. It's like phoning a radio station for one of their giveaways.

"And now we'll be taking... caller 9..."

Everyone other than caller 9 is SOL.

[furrowtickler]

Just watch, "cwb anounces 'the grainflow program will not contiue in 2010 due to lack of farmer interest.'"

[cropduster]

Maybe they had Maureen `over the barrel` and forgot about the marketing!!

[SASKFARMER3]

This BS program is awful. Had a easier time getting AC/DC tickets and way less stress. Come on white get your crap organized or go home! Your 15 months of fame is almost up.

[stubblejumper]

small % of farmers read agriweek