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

[jdepape]

stubble:
Would you rather I didn't post anymore?

<b>Did you know</b> the CWB will defer (delay) shipping on a contract to a customer, at the customer’s request, at no additional cost? (I've heard they will defer shipment by as much as a year - with no cost to the buyer.)

Yet farmers have to pay for the privilege and are fined if in default.

<b>Did you know</b> the CWB will ship to customers higher grades than what the contract specifies, with no increase in price?

Yet the CWB will often not accept lower grades from farmers, even with a lower price. And if a farmer delivers a lower grade than what was contracted, he is often penalized harshly.

<b>Did you know</b> the CWB offers credit to customers at “commercial” rates?

Yet the CWB does not offer credit to farmers (advances are a federal government program - not a CWB program).

EPOs are a form of credit but come at a huge cost. If you consider the payment above the Initial on an EPO as "credit", the additional upfront payment on a 100% EPO on feed wheat costs an estimated 11.0% (the irony is it's your money in the first place.)

Incremental payments for deferred delivery on FPCs are, according to the CWB, reflective of the time value of money. They work out to about 0.3%.

Bottom line - it's better to be a CWB customer than a CWB supplier.

[SASKFARMER3]

Yes Keep it up John. Almost 33000 hits on video.

[bucket]

Here is hoping depape keeps up the good work.

Whether you believe in the board or not its good reading.

For those that are good board supporters, a few questions:

Do you really enjoy living off your savings for years?

Does it make sense to use other commodities to pay the wheat and durum bills?

Does it make sense that you pay for certified personal trainers, day care and other people's kids education rather than your own?

And does it really make sense that western canadian farmers carry the debt of other nations? Don't believe me? We haven't seen an increase in durum for 09 crop since August of 09.

It seems odd that everyone downstream of the farm gets paid before the farmers. The cwb employees get paid even if they make mistakes, I don't have that luxury. The railways have the freight deducted before the grain sees the inside of a railcar.

When my grain is delivered my job is done so why am I the last to be paid whereas others are paid in advance?????

[liberty]

John Depape's points confirm my suspicions that the alleged price premiums for the CWB are just extra costs ultimately billed to farmers:

- Deferred shipping w/o penalty

- Grade giveaways

- Credit at CWB discount rates

Single desk "premiums" are just an accounting fiction created by focusing on only one side of a ledger. The CWB's propaganda department trumpets this as evidence of superior performance when in fact their marketing strategy is no better than that of a common *****.

[TOM4CWB]

ouch... that is blunt.

[chuckChuck]

Jdepape. I was tied up for a day or so.

As far as evidence for premiums what about the work by Kraft, Furtan, Tyrchniewicz (KFT)? Out of date now, but showed a premium.

2.Richard Gray's benchmarking study also showed a premium.

3. The CWB Board of Directors regularly see sales data that shows premiums over competitors on actual sales.

4. Rod Flaman and Ken Ritter changed their position on the single desk after being elected as supporting an open market. Why? Because they saw the benefits of the CWB.

Interestingly on the Alberta Agriculture web site they do not have a link to the KFT study or Richard Gray's Benchmarking study. Now why is that? Do they not have the integrity to present both sides of the argument and let farmers decide? Apparently not.

The CWB system is not perfect. But neither is the open market. Why do you focus so much on perceived or real problems at the CWB when many of the problems in farming are a result of the increasing cost of production and relatively stagnant prices in all commodities?

As I pointed out with my questions in a previous post 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.

Another problem I have is you are ascribing costs which are out side of the control of the CWB. The CWB does not set freight rates or other handling costs.

You have a clear agenda in criticizing the CWB therefore your analysis is biased. That's okay. We all have our biases.

Over the years I have had several farmers tell me it doesn't matter whether the CWB earns premiums or not. They don't like it. Fine. But that is an ideological position not one based on an objective analysis of it's performance.

[TOM4CWB]

Chuckchuck,

Western Canadian rail freight to western port is less than US cost by about 45cents/bu. The CWB is keeping this benefit. Portland DNS14px was 12/bu... 9/bu for CWRS13.5px which is equivelent quality; Dec3/10prices.

We are missing $3/bu... and the CWB is keeping the extra quality and freight advantage.

How can you tell me the CWB is doing an adequate job... let alone extracting a premium?

[TOM4CWB]

Chuckchuck,

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?

[gregpet]

Chuck you make a very valid point but it works both ways.

Your statement:

"As I pointed out with my questions in a previous
post 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."

Then you cannot tell me the CWB does earn a premium since any verifiable information that could support or discredit this claim is suppressed by the secretive CWB. One would think if the premiums were there they would certainly boast about it very loudly.

Time for the CWB to earn the opportunity to market my grain in a competitive market.

[chuckChuck]

Tom. USDA reported that weighted average durum farm sales price in October was $5.54 usd per bushel. The Dec 3 FPC was nearly $7.00. You quoted $6.33. I am not sure I understood your price offerings/comparison. There is a difference in market timing but why is the USDA price lower?

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

[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]

&lt;a href=&quot;http://www.ers.usda.gov/data/wheat/YBtable18.asp&quot;&gt;usda average wheat prices&lt;/a&gt;

&lt;a href=&quot;http://www.ams.usda.gov/mnreports/bl_gr110.txt&quot;&gt;montana grain prices&lt;/a&gt;

[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.