Depape and durum

[bucket]

Current Durum Situation

Did you know?
The CWB is scrambling for high quality durum right now. Partly because of the late fall and partly because of the poor quality crop. In addition, there may be less of last year’s higher quality crop available than the CWB was counting on as much of it was sold into the domestic feed market to satisfy cash flow needs.

Terms on sales to Japan include a high protein content, something the CWB is struggling to satisfy right now. I’m told that the terms will be adjusted for the new crop but the new terms won’t kick in until Jan 1, 2011. This is just one more problem for the CWB this fall.

These struggles are showing up in Vancouver. On a vessel that the CWB shared with Cargill, the CWB load 10,800 tonnes of durum and Cargill loaded 14,700 tonnes of canola.

Cargill loaded the canola in about two days and the CWB took another 21 days to load the durum. The CWB (farmers) will pay the demurrage bill on the whole vessel.

Another durum vessel (60,500 tonnes) has been in port since Sept 19 and has yet to finish. I’m told it’ll be another week before it’s loaded. It’s been in port long enough for a hefty demurrage bill. This will be the first time in a very long time that a vessel arrived in September and didn’t leave until November.

There is a rumour that the CWB has shipped high grade durum against a sale of feed wheat to South Korea. The CWB is indeed shipping durum on this sale, but its #4 and #5 durum, which is applicable on most feed wheat sales.

Delivery calls on Nos. 1 and 2 CWAD are now in place and the CWB will terminate the first 25% call effective Nov. 29, 2010. (This is a signal from the CWB to get farmers to deliver; it’s thought that the prospect of losing the delivery opportunity will get guys to deliver.)

In addition, a Guaranteed Delivery Contract (GDC) with 100% acceptance has been announced for Nos. 1 and 2 CWAD.

But there’s another factor. I’m hearing many producers are angry and frustrated with the poor movement and poor prices on durum; many have said that they believe the CWB dropped the ball on the very high prices we say a year or two ago. Whether they did or not is a topic for another debate; in frustration, these growers are saying they refuse to deliver any high quality durum to the CWB until they see a full (and attractive price).

Whereas I understand the frustration, holding grain back will not solve the problem. The CWB will either find the durum somewhere else, or adjust contract terms and possibly pay penalties. In the process they are already paying demurrage. But when I say the CWB will pay, it really means durum farmers will pay. It could also mean the loss of confidence in Canada as a supplier and the loss of future sales to our competitors (remember, the US has a lot of durum right now).

It may be satisfying to hold back to send a message to the CWB, but it will come at a hefty cost to you.

Ironically, it’s your choice.
The CWB recently released a commentary where they say "recent negative commentary has been circulated to farmers painting a highly misleading picture of the realities of international durum marketing and the decisions made by the CWB as Prairie farmers' durum marketer." Obviously I thought they were referring to my commentary "Is this the deal you want?" Reviewing that commentary, I saw that it only spoke of the realities of poor cash flow from durum under the CWB system and what that means to farmers. I guess there must be some other "negative commentary" out there that I'm not aware of.
From a farmer's perspective, the durum situation is definitely in a shambles. But there is good movement available right now and all durum producers should take advantage of it.


The best place right now to send a message is in the director’s election.

[ProFarmer]

I canncelled my A series contract to deliver my # 1 durum and it will stillbe in my bins on air until the CWB and their customers really have the will to pay for it. Maybe it is time they can pay by my rules.

[bucket]

Interesting hey?

All you board supporters - maybe you could explain why the cwb has 2 million tonnes of last years high quality durum available to the world and can't fill a 60,000 tonne boat?????

Maybe also explain why the cwb doesn't have the sense to set the initial price of 1AD at least at the off board price of feed durum? To protect their supply at the minimum.

Oh those evil grain companies that actually pay for a commodity are the problem, right?

I say demurrage should come out of the salaries of those at the cwb that execute these sales. From Ian white down.

Oberg asks " should we give them the despatch as well?"

Well, after this durum boat they will be taking a mortgage on their house to pay the bill and the despatch might give them the incentive to do their job. But it would take alot of boats despatch to pay back this mess.

But the bigger question becomes this: AT the time the cwb knew they needed the durum - were they not issueing "liquidated damages" letters for over delivery?

Maybe they ought to talk to those producers they let out of the durum grainflo program last year for free. The premium in that program was 100 percent delivery.

The better question is how does an organization that brags of the oversupply of durum in Canada, and yet can't fill the boats?

[furrowtickler]

HTF can you sign an exact grade this year?????? Some are saying a different grade at each delivery point and a different grade from the same buyer at times two days later!!!! They get picky this year SWHTF from even their most devoted followers.

[SASKFARMER3]

THey screwed up again and we as farmers have to pay. I agree where are all the CWB supporters. Oh yea hauling in their Canola and lentils and peas.

[FarmRanger]

Last year a lot of durum went into feedlots in southern Alberta. Anything grading a 2AD (or worse) was worth more in a feedlot than the PRO. 2AD high protein was about the same, and 1AD high protein was slightly more than feedlot prices.

I hope the CWB isn't counting on all that durum still being in our bins, because I have a hunch that it doesn't exist anymore.

[Fransisco]

I don't think its just the durum guys who will be paying demurge. My bet is that the board is going to take it out of everyone's returns, wheat, barley and durum.

I agree with bucket, it should come out of CWB salaries starting with the guys at the top. But of course it won't, they'll be getting bonus's like always. And our farmer directors will go around saying oh its nothing just another cup of coffee on a per farmer basis.

[bucket]

And I thought the cwb was accounting for all this happening so they could make sales.

Isn't that what they call "weather and crop surveillence"

Bruce burnett should be out of a job as well as Ian, ward, flaten, steinke, and anyone else associated with durum. Right down to the pee ons at the 800 number that can't think for themselves and realize the cwb screwed this up.

Ah hell, get rid of them all, saves time and money.

[SASKFARMER3]

What did I report in spring, Neighbors liquidating Durum for cash. 70000 bushels one neighbor. feed durum. It was a 2 he kept 2 bins of high quality so 20000 he kept. Rest is long gone. Now they want it. And what cant they figure out farmers seeded Durum last and its really the shits. Early is the shits. So guess what shortage. Oh but yesterday they were spouting 1/3 of new crop will grade in top two grades so countries that depend on us don't worry we will supply you with high quality product. Side note Don't worry you have a cheap supply we just have to wait a while till our farmers are broke and then we can sell it to you for dirt cheap prices. Have a good day.

[Fransisco]

I don't think the board really understands a farmers cash flow needs. As far as they're concerned all a farmer has to do is get a cash advance and they'll be happy to store grain indefinitely. Well it doesn't work that way.

Once again Board theory doesn't match up with reality.

[bucket]

Pretty quiet on the board supporter side?

Its amazing how quiet they become when they find out some facts.

Haven't heard from dogpatch lately as to the asking prices of durum and his initial, maybe he finally woke up.

The cwb steals our grain, there is no risk management required for that, and pays us over two years. If you look at the 08 crop of durum it could be closer to 4 years by the time you get paid for it.

And cwb people do not understand this. They say I have a funny way of doing math.

[checking]

A message to my director.

I need the CWB to finally wake up to the realization that there has to be a better way to procure my durum. It will never get it done for me by continuing to pool this particular grain.

If it is desperate, as its pleadings would indicate for #1 and #2CWAD, then offer me an up front price for my supply, and stop the BS guessing game. I will not participate in your hour of need, nor will nine of my neighbours who among us could send your boat on its way.

Are you listening? Your musings that uncontracted #4, and #5 CWAD might be released from pooling in February 2008, because farmers wouldn't deliver, was also an emergency situation that was not acted upon. Apparently, the Board is prepared to repeat the same history for supplies of #1 and #2CWAD this year

[newguy]

Hog barn bins full of durum and have started to fill a big bin in local elevator.Pigs have been eating up alot of good quality durum over the past year.

[chuckChuck]

FYI. The USDA is reporting the weighted average farmer selling price for Durum in the US for September 2010 is $5.01 per bushel.
http://www.ers.usda.gov/Data/Wheat/YBtable18.asp

The October CWB PRO for #2CWAD 13% protein after deductions in Saskatchewan is $5.55 per bushel.

[jdepape]

So, according to Bucket, Oberg asks "should we give them the despatch as well?"

I doubt Mr. Oberg knows what he's suggesting.

Ocean freight rates are set on the basis of a daily cost. When you say you need 6 days to load, the effective ocean rate you get factors those 6 days into the total costs. The more time you negotiate for, the higher the cost.

SO - when you say you need 6 days to load, guess what? You PAY for six days.

And when you use only 4 days to load, you get despatch for the two days you didn't use (but you still paid for them).

ALSO - despatch is only a PARTIAL REBATE of the charges for those days not used. Typically it's half the rate (or less).

So when you get $1 million in despatch, chances are it cost you over $2 million in freight time you didn't use. The net is a loss of over $1 million.

<b>When you get paid despatch, it has actually cost you.</b>

When the CWB reports despatch payments without considering the expense for the freight time not used, it gives an incomplete picture. <b>SHIPPERS SEE DESPATCH AS A LOSS. NO ONE SETS OUT AHEAD OF TIME TO EARN DESPATCH, BECAUSE ITS SO COSTLY. CERTAINLY NO ONE ELSE SETS OUT EARNING DESPATCH AS A CORPORATE GOAL LIKE THE CWB DOES.</B>

In 2008-09, the CWB paid out $7.6 million in demurrage. On other vessels, the CWB earned despatch of $15 million. They combined the two numbers and reported "net despatch" of $7.4 million.

But to "earn" $15 million in despatch, its safe to estimate that the CWB had negotiated excess loading times with freight costs in excess of $35 million. $35 minus $15 rebate = $20 million net paid out for loading time they didn't need.

For the complete story, you need to take demurrage plus the excess freight costs (the time not used in port but paid for) then deduct the despatch payment. In 08-09, the CWB's actual demurrage/despatch situation was likely over $40 million in losses.

<b>Over the last five years, demurrage and despatch (including the freight cost) combined would likely total more than $250 million in LOSSES. Because the CWB does not report the total despatch situation, just the gross payment, it reported a net demurrage and despatch of $26.7 million gain.</b>

With all due respect to Mr. Oberg, I doubt he understands the true nature of despatch. I wonder if others on the board do either. If they did, why would they set a goal to earn $4.5 million in despatch each year? Clearly they don't know that in reality, what they have set is a goal to lose $10 million a year.

I guess it just looks better than demurrage.