CWB Initials for 01-02 change!

[TOM4CWB]

Thankyou CWB,

The new intials effective Jan 4 2002 change the basis levels.

#1CWRS 13.4 up $4.00
#1CWRS 12.0 up $7.70 narrowing 3.70
#2CWRS 13.5 up $4.55 narrowing .55
#1CWES up $18.20 narrowing 14.20
#1CPS Rd. up $17.70 narrowing 13.70
#1CPS Wt. up $23.20 narrowing 19.20

#1 Fd Bly up $20.00

High protein #1CWRS especially widened as 15.5 had no adjustment.

Somehow the CWB MUST do a better job of adjusting these basis levels for the PPO pricing options to become serious and normal marketing options for CWB customers!

thalpenny, what solution do you have to correct these problems?

[TOM4CWB]

Sorry,

The #1CWRS 13.5 protein was up $4.00/t.

This is important as this initial price adjustment is the base of all PPO spring wheat payments, and affects the basis levels on the PPO fixed pricing contracts for spring wheat.

[charliep]

Just a note to highlight that spreads on initial payments are still different to those used in the pool return outlooks. As an example, the spread between 1CWRS 13.5 and 1 CPS red is $27/t under the PRO and $35/t using initial payments. The spread prior to the adjustment was $48.70/t.

My thoughts are that the producer pricing options are a valuable tool - particularly for farmers who have significant cash flow needs and from a business are not able to wait for the adjustment/final payment process. The basis and spread risk currently is more than price risk for anything other than higher protein CWRS. Implication - western Canada can't go back to 100 % to the old system of the only alternative being deliver for initial payment and wait for the rest of your money.

What changes could be made to the current CWB contracting program to make it a more effective hedging tool and allow farm managers who need cash early to get paid close to delivery?

Charlie P.

[TOM4CWB]

Charlie,

The BIG question on the initial price changes is;

Why were the spreads between CWRS and Non-CWRS wheats not brought into line with the Dec PRO's for these various classes of wheat?

The CWB expects we "designated area" grain producers to believe PRO numbers, but obviously they themselves do not believe their own numbers...

OR,

The recent initial price spreads themselves would have been different if the PRO's were dependable, one would have thought!

So Charlie,

Is it reasonable to even think about growing CPS White or Soft White Wheat with the lack of concrete CWB pricing signals?

The lack of an alternative domestic feed market for these non-CWRS white wheats really increases marketing risk, doesn't it?

[charliep]

Tom4cwb

I should let others get in this discussion but I don't think the issue is around the PRO confidence. Rather, I think the CWB is having to think around processes to put out what amounts to a daily price. Either changes in initial payments have to occur more quickly (still likely have to go to the feds for permission/another process), allow the PRO class/grade spread to be used in the PPO alternative or go to a cash price not related to the PRO at all.

With regards to white wheat, I will let others comment on spreads. The only thing I will highlight is soft red winter wheat is the hottest wheat market now price wise reflecting a smaller 2001 crop and less acres planted this fall. Not likely to change this spring. From the demand side, white wheat needs are likely to grow more rapidly red. Noodle customers want a nice white product - difficult with red wheats. More health consious customers want nice white loafs of bread but are wanting to shy away from bleached flour - white wheat (particularly a hard white spring) will have a nice fit here.

Charlie P.

[TOM4CWB]

Charlie,

I believe the failure of the CWB to adjust #4CWRS and Canada FD wheat initial prices shows a total lack of commitment to the PPO pricing system.

Further, if a person has high quality HRS unregistered wheat, that automatically is downgraded to Canada Feed, the buyback frankly stops production of this wheat even if the economic reality in the world market dictates that it should be grown.

With the USITC report proving that CWRS and US Hard Red Spring are interchangable in the milling process with very little difficulty, it is clear the CWB is abusing "designated area" farmers.

Much has been said about genetic diversity, and the CWB clearly is the worst offender in signaling, by price offered, a monoculture CWRS production system!

The diversity in our environment can be counteracted many times by diversifying the genetics in the seeds we grow.

The CWB system as presently does not recognise this important issue.

CWB management must come to grips with these important issues.

I wonder, are these even subjects in the upcoming CWB strategic planning sessions?

Or will the CWB continue to worry about politics and further fail in leading the wheat and barley sector of Canadian Agriculture?