http://www.uswheat.org/newsEvents/wheatLetter/doc/D38D2792C75215E9852576880076A775?OpenDocument#
USW President Alan Tracy recently responded to an open letter from Canadian Wheat Board (CWB) president and CEO Ian White about CWB wheat sales to Saudi Arabia. The text of Tracy’s letter follows:
December 4, 2009
Ian White
President and CEO
The Canadian Wheat Board
Dear Mr. White:
I would like to thank you for your open-forum letter,1 which provides me with the opportunity to respond more broadly to some of your concerns.
I accept and agree with your sentiment that, despite the competitive nature of our respective industries, honest, fair and, respectful dialogue should be the norm in all of our personal and commercial discussions. With that said, I would like you to know that, while critical of your action, our public reactions to the <b>CWB's offering of obviously low-priced Canadian wheat on the most recent wheat tender in Saudi Arabia</b> were not intended with disrespect.
<b>You have characterized our observations of recent CWB price discounts on the Saudi tender as 'groundless', 'false accusations,' and 'damaging.’ To the contrary, they are simply facts reported by the trade in various countries that participated in the tender and discussed in various trade and analytical media around the world. </b>
As publicly reported in various industry sources, the Oct. 9, 2009, Saudi tender was for 550,000 metric tons (MT) of 'hard wheat,’ 14% protein (dry basis), with shipment through February 2010. The Saudi authority only solicited offers from limited export origins. Of those in competition, Argentina was effectively excluded due to its own dire wheat supply situation. Germany, possessing the only quality-qualifying wheat in Western Europe, was also virtually excluded.2 That placed the main competition between three traditional origins: the United States, Canada, and Australia. <b>Reports indicate CWB FOB-backed exporters sold all 10 Panamax cargos of Canadian wheat at an average price just below $254 C&F Saudi Arabia. Reports indicate that United States offers ranged from $279 to $292 per MT [metric ton] and Australian offers ranged from $270 to $280 per MT C&F Saudi Arabia3.
The net result was that 550,000 MT of Canadian wheat sales closed at price discounts between $16 and $25 per MT below even the next cheapest Australian and United States offers. Taking an average of just the two lowest alternative prices, this means that the sale left in excess of $11 million on the table.</b>
On the day that tender was conducted, the CWB offered Basis Contract for its flagship #1 CWRS/13.5 wheat at approximately $18 per MT over the Minneapolis December futures contract in-store Vancouver, BC. By contrast, the basis bid by U.S. exporters for our approximately equivalent flagship of #1 NS/DNS/14.0 was $55 per MT over Minneapolis December, rail, delivered Portland, OR. The CWRS Fixed Price Contact on Oct. 9 was approximately $211 per MT compared to the DNS flat price bid on that day of $240 per MT. Considering the additional discounts applied for handling costs at Vancouver, you must agree with me that <b>the disparity (exceeding $30 to $40 per MT) between these two cross-border price returns for similar wheat is absolutely glaring.</b>
We have said publicly that this overt price discounting of Canadian wheat is unnecessary. Your letter says that you base marketing decisions on "factors such as price, quality, availability and marketability.” In recognizing the expertise and abilities of Canadian farmers and the overall good quality of the wheat they produce, we cannot understand which element it was -- quality, availability, or marketability -- that the CWB believed it should discount in order to arrive at sales prices so far below the competitive prices determined transparently in open markets.
Recently, a UK-based news service reporting on the Saudi situation quoted CWB spokesperson John Lyons saying "... [CWB’s] goal is always to get the best returns possible for farmers, so we have no incentive to discount in the way they are talking about." 4 We fully agree and this is precisely our point. <b>The example above is evidence that CWB is not in fact maximizing returns for western Canadian producers, in spite of the organization’s repeated assertions to the contrary.</b>
Frankly, we have a shared interest in this business on that point. While both countries are major export suppliers, neither country can supply anywhere near the world’s wheat import demand. We will each win some business and lose some business during the year. Therefore, the more successful Canadian wheat producers become in actually achieving their goal of attaining the best possible return from the marketplace, the better chance we have of doing the same for U.S. producers. I agree with you that western Canadian farmers should be choosing the methods they believe best maximize their returns. It is clear that most of them believe they should have choices other than just the CWB.
I would close by, again, echoing your sentiments that it is our mutual desire to work together, but also to compete fairly in an environment free from trade-distorting practices and export subsidies.
Sincerely,
Alan T. Tracy
President
U.S. Wheat Associates
USW President Alan Tracy recently responded to an open letter from Canadian Wheat Board (CWB) president and CEO Ian White about CWB wheat sales to Saudi Arabia. The text of Tracy’s letter follows:
December 4, 2009
Ian White
President and CEO
The Canadian Wheat Board
Dear Mr. White:
I would like to thank you for your open-forum letter,1 which provides me with the opportunity to respond more broadly to some of your concerns.
I accept and agree with your sentiment that, despite the competitive nature of our respective industries, honest, fair and, respectful dialogue should be the norm in all of our personal and commercial discussions. With that said, I would like you to know that, while critical of your action, our public reactions to the <b>CWB's offering of obviously low-priced Canadian wheat on the most recent wheat tender in Saudi Arabia</b> were not intended with disrespect.
<b>You have characterized our observations of recent CWB price discounts on the Saudi tender as 'groundless', 'false accusations,' and 'damaging.’ To the contrary, they are simply facts reported by the trade in various countries that participated in the tender and discussed in various trade and analytical media around the world. </b>
As publicly reported in various industry sources, the Oct. 9, 2009, Saudi tender was for 550,000 metric tons (MT) of 'hard wheat,’ 14% protein (dry basis), with shipment through February 2010. The Saudi authority only solicited offers from limited export origins. Of those in competition, Argentina was effectively excluded due to its own dire wheat supply situation. Germany, possessing the only quality-qualifying wheat in Western Europe, was also virtually excluded.2 That placed the main competition between three traditional origins: the United States, Canada, and Australia. <b>Reports indicate CWB FOB-backed exporters sold all 10 Panamax cargos of Canadian wheat at an average price just below $254 C&F Saudi Arabia. Reports indicate that United States offers ranged from $279 to $292 per MT [metric ton] and Australian offers ranged from $270 to $280 per MT C&F Saudi Arabia3.
The net result was that 550,000 MT of Canadian wheat sales closed at price discounts between $16 and $25 per MT below even the next cheapest Australian and United States offers. Taking an average of just the two lowest alternative prices, this means that the sale left in excess of $11 million on the table.</b>
On the day that tender was conducted, the CWB offered Basis Contract for its flagship #1 CWRS/13.5 wheat at approximately $18 per MT over the Minneapolis December futures contract in-store Vancouver, BC. By contrast, the basis bid by U.S. exporters for our approximately equivalent flagship of #1 NS/DNS/14.0 was $55 per MT over Minneapolis December, rail, delivered Portland, OR. The CWRS Fixed Price Contact on Oct. 9 was approximately $211 per MT compared to the DNS flat price bid on that day of $240 per MT. Considering the additional discounts applied for handling costs at Vancouver, you must agree with me that <b>the disparity (exceeding $30 to $40 per MT) between these two cross-border price returns for similar wheat is absolutely glaring.</b>
We have said publicly that this overt price discounting of Canadian wheat is unnecessary. Your letter says that you base marketing decisions on "factors such as price, quality, availability and marketability.” In recognizing the expertise and abilities of Canadian farmers and the overall good quality of the wheat they produce, we cannot understand which element it was -- quality, availability, or marketability -- that the CWB believed it should discount in order to arrive at sales prices so far below the competitive prices determined transparently in open markets.
Recently, a UK-based news service reporting on the Saudi situation quoted CWB spokesperson John Lyons saying "... [CWB’s] goal is always to get the best returns possible for farmers, so we have no incentive to discount in the way they are talking about." 4 We fully agree and this is precisely our point. <b>The example above is evidence that CWB is not in fact maximizing returns for western Canadian producers, in spite of the organization’s repeated assertions to the contrary.</b>
Frankly, we have a shared interest in this business on that point. While both countries are major export suppliers, neither country can supply anywhere near the world’s wheat import demand. We will each win some business and lose some business during the year. Therefore, the more successful Canadian wheat producers become in actually achieving their goal of attaining the best possible return from the marketplace, the better chance we have of doing the same for U.S. producers. I agree with you that western Canadian farmers should be choosing the methods they believe best maximize their returns. It is clear that most of them believe they should have choices other than just the CWB.
I would close by, again, echoing your sentiments that it is our mutual desire to work together, but also to compete fairly in an environment free from trade-distorting practices and export subsidies.
Sincerely,
Alan T. Tracy
President
U.S. Wheat Associates
Comment