Is the Video Working! You bet your ASS it is!

[charliep]

chuckChuck.

you do know you are quoting a port price for the fpc. You still have to knock off an additional $1.50/bu CWB deductions. As well a average of all grades - not necessarily a 1CWAD 13 protein equivalent. suspect the US durum price would be the equivalent of a 2CWAD. You would have to knock off at least another 50 cents to make the grades equivalent.

[charliep]

the location of the numbers chuckChuck is using plus an extra to provide a daily cash price.

[URL="http://www.cwb.ca/db/contracts/ppo/ppo_prices.nsf/fixed_price/2010_index.html"]durum fpc[/URL]

<a href="http://www.ers.usda.gov/data/wheat/YBtable18.asp">usda average wheat prices</a>

<a href="http://www.ams.usda.gov/mnreports/bl_gr110.txt">montana grain prices</a>

[jdepape]

chuckChuck:

KFT was badly flawed. They “concluded” that the CWB’s system of risk management had a lower cost than the “open market” of canola. This supposedly contributed to the better returns or “premiums”. They made two very basic mistakes due to a lack of understanding how the market really works:

1. They asserted (incorrectly) that the canola basis is the amount grain companies charge for the service they provide.

2. They asserted that the grain company handling and cleaning tariffs that the CGC publishes are the actual cost of handling grain.

Then they compared them: $40 basis vs $15 costs ($10 handling and $5 cleaning, roughly).

They concluded that the grain companies were overcharging by $25/tonne - and compare that to CWB tariffs and its easy to come to the <b>erroneous</b> conclusion that the CWB provided better returns than the open market.


Richard Gray’s benchmarking was also flawed. When comparing the US system to the Canadian system (as instructed to do so by the CWB), Gray did not include storage paid by the CWB as a cost because he didn’t see storage being paid in the US so he felt it would be better to not include it in Canada. This of course, made the Canadian single desk system look cheaper than it was. He failed to realize that US storage "costs" show up in basis levels, and elevators in the US earn storage through basis appreciation (improving basis on held inventory) and carrying charges in the futures market.

Also, I asked him why his methodology included an “adjustment” to the US prices; in the absence of the single desk, the model assumed the US price would be lower (I can’t recall by how much). This would help make the Canadian price without the single desk look worse. His reason for including the adjustment: the CWB told him to.
You see the CWB has a theory that, by holding grain off the market, it actually supports US prices as well as Canadian. Gray had nothing to go on except the CWB's insistence; not what I would call academic integrity.

Can you tell us why the CWB used Gray’s benchmarking system only once?


The CWB Board of Directors regularly see sales data that shows premiums over competitors on actual sales – but we never hear about the differences in terms, both real and imagined. For example, if you’re a buyer and you have two offers in front of you (one from the CWB) and you know that the CWB will defer shipment with no cost, or put higher grade or higher protein on the vessel, you’ll probably pay a little more. So – at what cost are these “premiums”?

Also, many times the CWB will offer grain in a period, to a location, or of a quality, where there is no other seller offering. To make sure that they can still provide a comparison, the CWB sales staff “estimate” what the competition would offer. You see, they need to have these comparisons since <b>their bonuses are, at least partly, based on them</b>. Something to think about.

I won’t even venture a guess as to why Flaman and Ritter flipped their position – but don’t even begin to bore me by saying that “they saw the benefits of the CWB” is the only possible reason. Tell me, if the evidence available to directors is so compelling why did Jim Chatenay keep to his position? Why have Jeff Nielsen and Henry Vos kept to theirs?

Since you asked - I focus on REAL problems with the CWB because the CWB doesn’t.

You say “we need more information and analysis to truly evaluate the performance of the CWB. Unless you can provide that level of information, your claim that the CWB does not earn premiums is inadequate.”

Go back to my simple analysis:
Premium in wheat......6.65 (CWB annual report)
CWB cost...........10.14 (submitted by the CWB to the Grain Monitor)
Net..........3.49 loss

<b>These are CWB figures! How can you read this and still say “your claim that the CWB does not earn premiums is inadequate”?! What part of this are you missing? Please explain.</b>

You say you have a problem: “you are ascribing costs which are outside of the control of the CWB. The CWB does not set freight rates or other handling costs.”

The CWB costs shown above are just CWB costs – not handling costs, not freight. Just CWB. Provided by the CWB.

[gregpet]

Gregpet. KFT used actual sales contracts and prices for their study.

Again, verified by what independent third party? Take their word for it and, as John has explained, do it this way because the CWB told us to do it this way. Who knows how the CWB manipulated the data? Again, no way to check that their findings were correct. Kinda like the climategate scandal, just take the IPCC's word for it.

[jdepape]

I think I need to clarify my comments about the KFT study.

1. They asserted (incorrectly) that the canola basis is the amount that grain companies charge for the service they provide.

Basis is a reflection of local supply and demand – not a “charge”. And in this case in their analysis they didn’t include the instore Vancouver basis (the price at which the canola is sold) which was likely around $25 under at the time. So, buying at $40 under and selling at $25 under means a margin of $15 to cover handling and cleaning, etc.

2. They asserted that the grain company handling and cleaning tariffs that the CGC publishes are the actual cost of handling grain.

They failed to recognize that grain handling is a high-fixed cost business. The incremental cost to handle the next tonne of grain at an elevator is practically zero. The costs to run the elevator are already sunk, or fixed costs. So to say that the tariffs represent the “cost” is absurd.

Also – no grain company actually uses the tariffs on canola – they submit them to the CGC because they have to by law. But they are essentially meaningless.

So the basis is not the “charge” and the tariffs are not the “cost”. An absurd approach all the way around.

[TOM4CWB]

Chuckchuck,

"The Dec 3 FPC was nearly $7.00. You quoted $6.33. I am not sure I understood your price offerings/comparison."

Did you actually read the post above?

US Wheat Associates Great Lakes price: Dec/10 $9.25US average. We should be looking at April delivery for time value... so I gave the CWB a benefit of $.25/bu carry I did not count.

CWB Great Lakes price:$6.33 plus ($25/t stat CWB charge) $.67/bu to get the durum to St Lawrence = $7/bu.

We have a missing $3/bu for high quality durum... any way that you want to figure it Chuckchuck.

Why do you think 'designated area' growers will not ship the durum to fill the boats?

Because THE CWB is expecting to steal that durum... at a 50 percent discount!!!




Background:

"Dec3/10 Durum;

"Durum: a range of prices are available depending upon various quality attributes.
Offers from the Lakes range from $8.98 to $9.53/bu ($330 to $350/MT) for December and $9.25 to $9.80/bu ($340 to $360/MT) in April. Gulf ports range from $10.07 to $11.16/bu ($370 to $410/MT)."

US WHEAT Associates: Dec3/10 price report.

The PRO port position... $25/t more off the 'designated area' growers freight than the greatlakes:

Dec3/10 CWB price; $278/tPRO, FPC $257.23/t.

Take off the extra transport cost and US$

Our growers are offered $6.33 for higher quality higher px durum.

Again $3/bu is missing.

Where does all this money go... CHUCKchuck?"

[chuckChuck]

Jdepape, KFT and Richard Gray would undoubtledy disagree with some or all your points. Who's right? In my opinion, KFT and Gray provided a more objective point of view. Many of your points are from a more political point of view which is fine. But what we need is objective analysis and facts with less politics.

By the way, you never answered my question about the value of the larger domestic usage in the US vs Canada? What impact does this have on US prices for US producers as they are not as dependent on export markets as we are which probably leaves us with a basket of market prices which are lower overall.

I also find it hard to believe that a wide open market into the US wouldn't have a negative impact on US prices in the absence of CWB disciplined marketing approach.

Didn't Premier Wall put up quite a fuss when BHP said they would sell potash outside of Canpotex? Originally BHP was intereted in maximizing volume and gross sales not maximizing price with more limited strategic sales in Canpotex.

[charliep]

For what its worth, the US exports 40 to 60 % of the wheat it produces.

Canada is closer to 70 %.

In 2010/11, the US will export a higher percentage of its wheat than Canada.

[URL="http://www.ers.usda.gov/data/wheat/YBtable06.asp"]US wheat exports[/URL]

[jdepape]

My comments in bold:

chuckChuck: KFT and Richard Gray would undoubtledy disagree with some or all your points. Who's right? In my opinion, KFT and Gray provided a more objective point of view. Many of your points are from a more political point of view which is fine. But what we need is objective analysis and facts with less politics.

<b>Politics? Are you serious? Where in my comments do you find politics?
I show KFT didn’t understand basis – and you say it’s political.
I show KFT didn’t understand grain handling costs – and you say it’s political.
I show Gray didn’t include storage as a CWB cost – and you say it’s political.
I show Gray made adjustments because the CWB told him to - and you say it’s political.

Amazing.

KFT and Gray were paid and “directed” by the CWB; I’m completely independent (not paid or directed by anyone for this) – and you say they provide a more objective point of view. With all due respect, do you even know the meaning of the word?

It’s clear you just don’t like what I’m saying but to say its political and less objective is just nonsensical. Since you don’t trust me, do yourself a favour and ask anyone who has actually worked in the grain handling / trading business (this does not include academics or staff at the CWB).

By the way - I worked with Daryl Kraft on a number of files for the Competition Bureau (Agricore mergers, etc). He agreed with me on the KFT study.

And I’m certain that if you asked Richard Gray, he would agree with my comments. After all, everything I said is in his report.

You think we need objective analysis and facts; please share a description of the analysis you’d like to see and what facts are relevant.</b>


By the way, you never answered my question about the value of the larger domestic usage in the US vs Canada? What impact does this have on US prices for US producers as they are not as dependent on export markets as we are which probably leaves us with a basket of market prices which are lower overall.

<b>You’re right, I didn’t. It makes no sense to go onto another topic while we’re not getting anywhere on this one.</b>


I also find it hard to believe that a wide open market into the US wouldn't have a negative impact on US prices in the absence of CWB disciplined marketing approach.

<b>”Hard to believe” falls in the category of unsubstantiated rhetoric; it does not even come close to satisfying your criteria of “objective analysis and facts with less politics”. Sorry – I have no interest in discussing with someone who’s greatest retorts are “Oh yeah?” and “Is not!” Give us some of that objective analysis you’re looking for. Please.</b>


Didn't Premier Wall put up quite a fuss when BHP said they would sell potash outside of Canpotex? Originally BHP was intereted in maximizing volume and gross sales not maximizing price with more limited strategic sales in Canpotex.

<b>More diversion. Wall and Canpotex has nothing to do with CWB’s failure to get premiums.

Remember this number:

<font color="red">Minus $3.49/tonne</font>

The CWB’s own numbers. No matter how much you argue it, it’s about as objective as you can get and there’s nothing political about it. </b>

[TOM4CWB]

Chuckchuck.

YOU SAID:

"Didn't Premier Wall put up quite a fuss when BHP said they would sell potash outside of Canpotex? Originally BHP was intereted in maximizing volume and gross sales not maximizing price with more limited strategic sales in Canpotex."

Glad you brought that up!

Now... what did/does Premier Brad say about the CWB???

If designated area wheat/barley growers... had a quarter of the market power... Canpotex has... and worked like Canpotex and Potash in marketing power...

We obviously would not be having this debate.