Salesmen and boys

[agriman]

AGRIWEEK Dec. 14:

Salesmen & boys
U.S. exporters have little trouble selling durum

The Canadian Wheat Board has had nothing but bad news for western durum growers for months. There is a record Canadian supply for 2009-10, mainly because the Board’s projected prices published monthly last winter and spring encouraged farmers to seed more acres than they should have. There was a large carry-in from 2008-09 and a surprisingly good crop in 2009. For the current crop year there are 7.24 million tonnes of durum wheat to dispose of, compared to 6.34 in 2008-09. Canadian exports in the crop year to Nov. 29 reached 981,000 tonnes, 4% behind the year-ago rate.
The U.S. durum harvest for 2009 was 109 million bushels (2.97 million tonnes), up from last season’s 84 million (2.28). Since the start of the U.S. crop year June 1, American exports are 880,000 tonnes, 136% higher than 372,000 to the same point a year ago. Six months into the crop year they are 70% of the agriculture department’s projection for the full year.
American (and possibly other) private exporters are making sales into some of the Wheat Board’s most important markets. Italy, which had a short domestic crop, has bought 299,000 tonnes of U.S. durum in the last six months compared to 186,000 from the Wheat Board in the last four months. U.S. marketers have sold 167,000 tonnes to Algeria, up from 20,000 for the same period last year, while the Wheat Board has shipped 29,000 tonnes compared to 198,000. Morocco has taken 73,000 tonnes of U.S. durum compared to none a year ago, and 112,000 from the Wheat Board compared to 69,000 a year ago. U.S. sales to North African countries, which represent the biggest single export region, in the year to date total 389,000 tonnes compared to the Board’s 141,000. The latest USDA weekly export sales report shows 23,000 tonnes of American durum wheat sold to Canada.
Meanwhile the Wheat Board has sold 99,000 tonnes of durum to U.S. buyers compared to 69,500 a year ago. If U.S. exports maintain the pace for the rest of their crop year total use will be about 15 million bushels higher than predicted, cutting carryover to just above 30 million bushels, compared to 25 million at the end of 2008-09. If American exporters do at all better, they will have to buy durum from the Wheat Board to fill their orders. Possibly they are already doing it, because American durum growers have been reluctant sellers.
It might even be cheaper for Amer-ican durum exporters to get their export inventory from the Board than from North Dakota farmers. The average farm-gate price in North Dakota last week was $5.66 a bushel, or $219 a tonne Canadian. The Board’s latest pool return price for the 2009-10 crop year in Saskatchewan, after elevator and freight deductions, is $166. With $53 a tonne to work with, the Board could sell in the U.S. at the farmer price and still beat the price it said it would pay to western producers.
The durum situation is a scandal of incompetence at the Board. The Commons agriculture committee should be investigating it, in the name of holding the Harper government to account. However to the Liberal, NDP and Bloc majority on the committee the Board cannot possibly do any wrong.

[Fransisco]

Boy, isn't that the truth. The opposition parties love to gang up on the Harper Conservatives every chance they get. Any little thing goes wrong it's Harper's fault. Except on the wheat board file, no matter how bad the board screws up or how much money it costs farmers the opposition won't touch it.

[bucket]

And the really sad part of the story is - those american farmers were contracting 7-8 dollar durum last february while the board could not offer any kind of pricing for durum other than the pro. And by the time it was ready to go to the elevator the cwb pricing predictions were down 3 bucks a bushel.

Absolute incompetence.

Oh by the way did anyone go to the growerlink meetings on durum?

[cityguy]

no question the US farmer had the opportunity to sell the higher markets but have to figure that by and large they didn't. They started piling on once they started harvesting with the result being that between August 1 and today the US has sold a record amount of durum, by a lot. Dorash makes the point that it's the US that's been doing all the selling recently. The question is why has the US farmer been so willing to sell durum into the hole? Just as an aside, there has been more durum LDP'd in North Dakota this year then was produced. When the market gets below loan levels in the US, then it doesn't matter where the price goes.
Not to defent the board but have to take a step back from the Monday morning quarterback and ask yourself, what would most farmers have done given the lateness of the crop. In August you had to be figuring we were going to have a 3 CWAD crop - at best. The CWB probably held off cuz of the grade risk and by the time they figured things out the US had already trashed the market. Like Dorash says, the CWB hasn't been selling. (also - it's just plain wrong to say there's a record amount of Canadian supply this year. There was more in '05, more in '00. Not tough to check some basic facts)

[Fransisco]

When I look at what Canadian farmers do with crops like Canola there is no doubt in my mind that they can do a much better job themselves than the board will ever do for them.

[gregpet]

Why would the CWB hold off on sales? From what I hear they do not accept delivery on all production and there was 2/3 to 1/2 of the durum crop left in the buns from 08/09 crop year.

[Fransisco]

If I can't sell my grain to whomever I want based on the premise that the Board can somehow do it better, then it's not unreasonable to expect them to actually do it better. Not the same, not worse (which is the case here and most of the time) but actually better.

You can apologize for them, and make excuses for them all you want but a one armed blind monkey with a dart board could outsell the Board. They've got a 50% market share in Durum for heavens sake! And they still screw it up! If they can't do it with that kind of market share, they can't do it period. Wake up, and smell the incompetence already!

[cityguy]

gregpet - there was 750,000 tonnes left on farm at the end of the 08/09 crop year out of a production of about 5.5 million mt. so about 15% was left on the farm. Both are stats canada numbers for what it's worth

[Fransisco]

Looks like your numbers are a bit off. The 08-09 crop came in at 5.519 million tonnes and the ending stocks were 1.897 million tonnes. With beginning stocks of 800,000 tonnes.

http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/sdd5326

Also interesting to note that world trade generally runs around 7 million tonnes a year which is pretty much what we've got in Canada alone this fall. With the board normally only doing 50% of that trade and off to a slow start this year it looks like we're going to have a major carryover... again.

It would have made sense to sweep the bins clean while the prices were at record highs. But oh no, the board thought it knew better. It's a rookie mistake, someone whose been in the buisness 70 years should not be making these kind of rookie mistakes but the Board makes them all the time.

[farmboy4]

rookie mistake... or enough brains to realize forcing an additional million or two tonnes into a total market of about 7 million might have an impact on the overall durum price structure?

Everyone with a bit of sense knew the durum market was due for a price collapse. Are you suggesting that the board should have been the price leader on the way down?

[cityguy]

Fran's right on the numbers. was just looking at the farm stocks as what the CWB left behind this past summer. they left behind 735,000 of the 5.5 crop. Just wanted to point out that they didn't leave behind half the crop.the other 1.2 carried over was in the commercial system so no idea how much of that was sold but given the late crop development have to figure that a couple of months of exports/crush was already sold. Given where prices are right now, should the CWB look to increase or decrease the carry out, and by how much?

[Fransisco]

Funny, how we broke all of the canola records in the same time frame without the price collapsing.

Selling all of the durum would have cost what, maybe a nickel or a dime at the time? It might not have cost anything, the world was hungry for all kinds of wheat. Remember the $20 bids. Waiting cost a minimum $4 a bushel on the stuff you can move this year and a whole lot more on the stuff you're going to be holding for two or more years.

Yes, it's a rookie mistake.

When the prices are at record levels you take the price, you don't sit back and wait for the rest of the world to grow more of it, which you know they're going to do because of the record prices.

The wheat board can not control the price of durum, it has never had that ability. It is more obvious now than ever before with this disaster. They are a price taker who doesn't know when to take a good price.

You don't need a legislated monopoly to hold on to your grain through the good prices till they turn into lousy ones. You're perfectly capable of doing that yourself if that's what you want to do. I don't, and I shouldn't be forced to join you in your marketing delusions.

[bucket]

The cwb has to start looking forward and telling farmers they only need 3mmt of durum grown next year. Then go tell the buyers they better get in to buy or there will be no durum or the price will be quite a bit higher. Sales strategy that works for fertilizer.

I also find it interesting that grainco can find a home for durum but the cwb can't. With the graincos in the market for off board durum will that not have an effect on what the board markets.

[Fransisco]

"Given where prices are right now, should the CWB look to increase or decrease the carry out, and by how much?"

Given that after 70 years the Board still doesn't know what its doing, and will invariably get it wrong again, it should be giving farmers no buyback export licenses so they can take care of things themselves.

[cityguy]

Big price year was 07/08 when there was only 50,000 left on farm at the end of the year, not last summer. In fact, fair to say that the durum market basically took off and divorced itself from even the wheat market starting in May 07 when the Italian crop got drenched, and then in June when the Syrians bailed on their sales commitements. Market went straight up all through the balance of '07, destroying a lot of "normal" demand along the way and by Jan '08 peaked and then slid. It's still trying to buy back some of that demand. If everyone were to be given a free pass at today's US prices, do you think the bins would be emptied? No question that Canada has to cut acres by at least 1 million, if not 2 million this spring. What signals other than what we have right now does the board need to send to get that job done?