One 9 minute video has had more world impact on the CWB than anything I've seen during my tenure on the planet.
Traders around the world have stepped up to defend western Canadian farmers.
You can spend all the time you like trying to figure out the new feed wheat program. I concluded long ago that the pricing options are just derivatives of the pool.
Derivatives of an entity that cannot be defined or valued makes it no better than mortgage backed securities.
For the naysayers, what hard evidence do you have to share. A benchmarking excercise that is 10 years old and had limits put on it?
Those without blind faith will read this and weep. To me it is pretty revealing when your competetion feels sorry for you.
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Larry:
Thanks, I had seen that circulated (video) in the last week or so. But the real reason that it is both funny and sad is that it is essentially accurate and true.
I fully agree with the extra input and analysis from Singapore. Just a quick clarification on that, I meant that the actual operating costs of a US export elevator just to re-elevate the grain from an already sitting in-store position in the bins to a FOB ex-spout position would be a relative pittance in the entire equation.
I was inferring that you could generously take $1 off the US FOB values to arrive at an US in-store equivalent to the CWB in-store price basis.
The comments on the currently high elevation margins are also right on - and do make a difference in the calculations of prices back to producers.
We have market driven elevation margins which are captured by exporters in the US vs. a command economy in Canada where the FOBing charges paid by the CWB to the elevator operators are fixed by tariff/agreement.
And those are high in comparison to normal (i.e. historical average) US elevation margins allowed by the US market. Those Can handling charges (both at export and interior points) are posted by their Can Grain Commission - http://www.grainscanada.gc.ca/statistics-statistiques/tariff-tarif/tt/Terminal10-11-01.pdf - and the CWB pays in the neighborhood of $10 for basic FOBing charges at export elevators.
Historical US margins have been just a couple of $'s (or less...even negative on some somber occasions!) depending upon the market situation.
This arrangement disadvantaged the Canadian farmer when the CWB put-through costs at $10 were far above US market rates of $2 - but should now give them a huge price advantage when US FOB margins greatly exceed what the CWB must pay.
But this point made in today's market environment is even more incriminating to the CWB.
IF they were really trying to maximize returns to growers, their "in-store" (almost FOB) price would reflect very closely the US FOB price as that is the price the CWB must compete with (i.e. "undercut" - as in their normal marketing practice) to sell their spring wheat to any market where there is head to head competition with the US...Japan, EU, Saudi plus many other Asian and L. American markets.
They wouldn't be keeping $100/MT off the table for the farmer.
The CWB purports to provide better returns to growers by virtue of their single desk monopoly - and claims to protect growers from the unscrupulous practices of those predator grain export companies who would surely "bid down" the price of wheat if the Canadian market were opened to competition.
If all of that were true, here now is the perfect opportunity for the CWB to say "See, we told you.
Those US exporters are gouging the US farmer by now taking {between 25c and 50c/bu ($9-18/mt) - as observed from Singapore - maybe even higher in some cases} for track/FOB handling margins - where we, the CWB, are not charging that and are returning that entire price overage to the Canadian farmer."
In fact they are doing no such thing.
The CWB has kept the lid on farmer price returns despite a world (and spring wheat specific) market place that is returning far better values.
Just for fun...and some historical perspective...I pulled out the comparable new crop 2009 price graph covering the immediate pre-planting (Mar 2009) to post harvest (Oct 2009) period - back when US fobbing margins may have been a bit more "normal". NS/DNS 2/14 FOB Portland vs. CWRS 1/13.5 in-store Vancouver (PRO -pool return outlook; FPC - daily fixed price; and initial pool payment) - and - 2009 Mpls Dec futures (all in US$'s).
If you just sight across the upper blue (HRS) and the purple CWRS daily fixed prices - you can see that even during that time CWB's CWRS price was running consistently near $75/MT BELOW HRS market prices.
One of these days the Canadians will dump the monopoly - but only after a huge political battle.
You have to feel the pain of that prospective Sask. wheat farmer!
All the best.
Traders around the world have stepped up to defend western Canadian farmers.
You can spend all the time you like trying to figure out the new feed wheat program. I concluded long ago that the pricing options are just derivatives of the pool.
Derivatives of an entity that cannot be defined or valued makes it no better than mortgage backed securities.
For the naysayers, what hard evidence do you have to share. A benchmarking excercise that is 10 years old and had limits put on it?
Those without blind faith will read this and weep. To me it is pretty revealing when your competetion feels sorry for you.
_______________________________________
Larry:
Thanks, I had seen that circulated (video) in the last week or so. But the real reason that it is both funny and sad is that it is essentially accurate and true.
I fully agree with the extra input and analysis from Singapore. Just a quick clarification on that, I meant that the actual operating costs of a US export elevator just to re-elevate the grain from an already sitting in-store position in the bins to a FOB ex-spout position would be a relative pittance in the entire equation.
I was inferring that you could generously take $1 off the US FOB values to arrive at an US in-store equivalent to the CWB in-store price basis.
The comments on the currently high elevation margins are also right on - and do make a difference in the calculations of prices back to producers.
We have market driven elevation margins which are captured by exporters in the US vs. a command economy in Canada where the FOBing charges paid by the CWB to the elevator operators are fixed by tariff/agreement.
And those are high in comparison to normal (i.e. historical average) US elevation margins allowed by the US market. Those Can handling charges (both at export and interior points) are posted by their Can Grain Commission - http://www.grainscanada.gc.ca/statistics-statistiques/tariff-tarif/tt/Terminal10-11-01.pdf - and the CWB pays in the neighborhood of $10 for basic FOBing charges at export elevators.
Historical US margins have been just a couple of $'s (or less...even negative on some somber occasions!) depending upon the market situation.
This arrangement disadvantaged the Canadian farmer when the CWB put-through costs at $10 were far above US market rates of $2 - but should now give them a huge price advantage when US FOB margins greatly exceed what the CWB must pay.
But this point made in today's market environment is even more incriminating to the CWB.
IF they were really trying to maximize returns to growers, their "in-store" (almost FOB) price would reflect very closely the US FOB price as that is the price the CWB must compete with (i.e. "undercut" - as in their normal marketing practice) to sell their spring wheat to any market where there is head to head competition with the US...Japan, EU, Saudi plus many other Asian and L. American markets.
They wouldn't be keeping $100/MT off the table for the farmer.
The CWB purports to provide better returns to growers by virtue of their single desk monopoly - and claims to protect growers from the unscrupulous practices of those predator grain export companies who would surely "bid down" the price of wheat if the Canadian market were opened to competition.
If all of that were true, here now is the perfect opportunity for the CWB to say "See, we told you.
Those US exporters are gouging the US farmer by now taking {between 25c and 50c/bu ($9-18/mt) - as observed from Singapore - maybe even higher in some cases} for track/FOB handling margins - where we, the CWB, are not charging that and are returning that entire price overage to the Canadian farmer."
In fact they are doing no such thing.
The CWB has kept the lid on farmer price returns despite a world (and spring wheat specific) market place that is returning far better values.
Just for fun...and some historical perspective...I pulled out the comparable new crop 2009 price graph covering the immediate pre-planting (Mar 2009) to post harvest (Oct 2009) period - back when US fobbing margins may have been a bit more "normal". NS/DNS 2/14 FOB Portland vs. CWRS 1/13.5 in-store Vancouver (PRO -pool return outlook; FPC - daily fixed price; and initial pool payment) - and - 2009 Mpls Dec futures (all in US$'s).
If you just sight across the upper blue (HRS) and the purple CWRS daily fixed prices - you can see that even during that time CWB's CWRS price was running consistently near $75/MT BELOW HRS market prices.
One of these days the Canadians will dump the monopoly - but only after a huge political battle.
You have to feel the pain of that prospective Sask. wheat farmer!
All the best.
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