Durum,

[TOM4CWB]

Charlie,

How do we get the CWB to risk manage?

"These developments have all led to the steep drop that we've now seen in durum prices over the last few months. Large North American production, combined with weakened demand, has significantly pressured prices. The CWB's 2009-10 Pool Return Outlook for high quality durum is $216 per tonne, down 41 per cent from the projected final return for the same quality durum last year.

This situation is not unique to Canada. Prices south of the border have fallen to such an extent that farmers there are triggering payments under the Loan Deficiency Program.

Please take the time to look over this document. We hope you will find this information helpful as you make business decisions for the 2009-10 crop year. Most importantly, we want you to know that we are working hard to take advantage of all positive marketing opportunities.

Ward Weisensel,
CWB Chief Operating Officer"

So how much did the CWB hedge or cross hedge to DNS?

Clearly North Africa is not rich... therefore risk management is key to keeping durum profitable for our western Canadian growers!

[charliep]

Not sure I can answer your question.

The CWB would answer they do manage risk already by their
sales program which sells a certain percentage every month
and with holding supplies from the market to prevent
oversupplying/dropping prices. They also manage the risk of
the producer to the pools by using MGE futures in part but
mainly having ridiculously wide discounts to the PRO's and
the unreported cash sales at that the time of sign up.

Actually don't think the CWB can manage price risk. That is
the responsibility of each and every farm manager regardless
of whether a board or open market crop based on their farm
businesses needs. They can manage pricing pooling risk but
that is a different topic/goal.

To help farmers manage their price risk and overall pooling
risk, they would have to do things like offering cash prices
against actual sales, consider shorter pooling periods, etc.

Another issue would be to develop a broader customer and
use as a alternative to move product in larger supply/lower
priced periods. Perhaps one of the real negative things about
restricting access between farmers who would sell at lower
prices during large carryover years and potential new
customers who would try durum is there is no opportunity to
be creative in new markets/alternative uses.

Long answer to your question is managing price risk is an
individual farm managers responsibility as is the decision to
sell or store. The CWB should only be responsible for
managing its price pooling risk and meeting its performance
targets (page 42 annual report).

[charliep]

missed some words in 2nd sentence/2nd paragraph.

They also manage the risk of the producer PAYMENT OPTIONS to the pools by
using MGE futures in part but mainly having ridiculously wide discounts to the
PRO's and the unreported cash sales at that the time of sign up

[TOM4CWB]

Dear Charlie,

The real and positive benefit of a manditory pool... with a monopoly buying system... SHOULD be that a blanket prairie wide pool sale can be made before hand at premium prices (that are higher than cost of production).

If the marketer can or will not do this simple chore... what possible benefit really exists... but to get a below average price?

I can easily market to get a below average price... I do not need the CWB to do this for me!

I note the AU experience is less than stellar this year... with wide basis that may have freight complexity to add vs. 2008 where they had big advantage where rates were high and AWB didn't mess up risk management like CWB did on flat prices.

I read that a large amount of DNS/CWRS is being used/ blended into pasta products... pushing durum demand even lower in 2009!

Can durum be used in bread in the alternative?

[charliep]

Actually google durum semolina bread and you do get lots of
recipes/ideas. Also likely could put some semolina in different types
of noodles.

Will note this is an important role the Grain Research Lab and
Canadian International Grain institute in Winnipeg serve.
Experimenting with new uses for wheat/durum and bringing
customers to Canada with real life (albeit miniature) milling, baking,
noodle making equipment both to show them new ideas but also in
seeing how they use our grain products in a close to real life situation.

A more robust ethanol industry would likely see more mid
quality/protein durum used in this manner.

The other alternative is to restrict acreage/production with acreage
limited to estimated market size. A risk is North Africa market size
moves up and down with their weather/production. We also can't dial
in Canadian production/quality. Finally, too high prices will bring in
more competitors assuming Canada can manipulate prices short term.
A little tongue in cheek but the last sentence hasn't been the case.
Good prices one year mean more Canadian acreage/production the
next and within a year or two, we over the produce the market on our
own without any other countries help.

[wmoebis]

Just a thought!!

With all the hype about value added and such! Why don't we have more mills for wheat and durum at the local level?

The CWB could still market the product. We could sell pure flour, pure semoina or blended product, to buyers specs.

We would profit from not only raw product but also from the value of the manufactering prosess.

I would think that some big company would build mills or we could set them up as smaller local enterprizes.

No buy backs, CWB becomes flour sellers along with being raw product sellers.

Not saying CWB has to stay or go, just thinking of options outside the box of stat quo. If/when the CWB is gone what will really change for the majority of producers. Over all world price will not change but we could be selling flour instead of wheat.

If we are the major suppliers of durum why don't we become the only suppliers of semolina?

[charliep]

That is a good question. Checked my own cupboard and see my pasta supplies (Catelli) are processed in Quebec (at least in the label). Will have to do some label checking when I go to the super market next time.

Ellson mills still has some semolina processing capacity in Lethbridge. Prairie Harvest in Edmonton. There are others as well.

Off topic but I noted the following from foodnavigator USA - Pea flour could create tasty low-GI foods: Study

<a href="http://www.foodnavigator-usa.com/Science-Nutrition/Pea-flour-could-create-tasty-low-GI-foods-Study/?c=jYz%2BwZTNAeUivsBl7kYrlw%3D%3D&utm_source=newsl etter_daily&utm_medium=email&utm_campaign=Newslett er%2BDaily">pea flour</a>

Perhaps one of the things western Canada loses when we don't process locally is the direct feedback to the farm gate level on customer needs. It may also reflect the general "commodity attitude" which to bring back to tom4cwb point is reflected in price pooling.