Deductions on feed wheat

[kryger]

Charlie
Can you explain what the extra deduction on feed wheat is for. Yesterday it was .51 cents per bushel.
That is over and above the spread between #1 13.5 protien and feed wheat.
This is on a basis contract.
Talked to my CWB rep yesterday, he just said it had always been there.

[btjadenlepp]

My impression is that there are some
politics involved, in that they don't want
to compete with the domestic livestock
industry. It ain't no market signal that's
for sure.

www.farmlinksolutions.ca

[charliep]

Actually don't know. If I were to make an educated guess, it would have to do with the way the CWB risk with feed wheat (managed against corn futures as the most closely related market) and the human consumption wheat. Should be a better answer that it has always been done this way.

Had a chat with a farmer yesterday and they highlighted the risk on feed wheat fpc. You can't lock in your feed wheat discount till the day of delivery. You also have the spread risk of a change in initial payment - i.e. having 1CWRS 13.5 getting the $70/tonne increase in initial payment and feed wheat $50/tonne.

Still don't understand why the CWB handles feed wheat differently than feed barley. Put a feed wheat price out loosely based on the market with a low cost EPO.

Similarly, don't understand why the CWB still used initial payment spreads in their calculations for fpc values and not market based spreads. Removes the risk of delivering before or after an adjustment payment. They used market based spreads in the long deceased daily price contract.

[charliep]

The feed wheat price if an Alberta farmer could deliver and lock in a payment today using an fixed price contract would be close to $5/bu. No elevator wants feed wheat (plugged to the rafters with higher grade wheat that isn't moving) and no way of locking in this $5/bu.

[kryger]

Thanks Charlie.
Even if I lock in the futures and the basis and the stupid discount, I am still hanging on the spread on initials until I deliver, and who knows when that will be. Nice little program the Board got going. We would not sign a contract like that with a grain company, why would the Board be any different. Are they really working for us? NO NO NO
I think the marketing of wheat will be just as frustrating as the harvest this year.

[charliep]

I like prices.

US corn today at the Portland. $11.50/100 pounds or about $250/tonne. Canadian feed wheat Vancouver should similar in Cdn $. CWB September PRO (port) - $215/tonne. Initial payment (port) - $78/tonne. Adjustment payment indictate to be in the $50 to $70/tonne range or an initial payment of $128 to $148/tonne after the adjustment.