Why the Process Around Adjustment Payments

[charliep]

I read the following in today's CWB bulletin.

The CWB has sent a recommendation to the federal government for additional increases to the 2010-11 initial payments for wheat. If approved by government, this recommendation would further increase the payment for the base grade of wheat (1 CWRS 12.5) by approximately $27 per tonne, with a range of increases for other grades. Timing of payments cannot be confirmed until government approval is received, according to a process set out by the CWB Act.

I also see 90 % Early payment option 1CWRS 12.5 premiums of 25 cents/tonne.

[URL="http://www.cwb.ca/db/contracts/ppo/ppo_prices.nsf/epo/epo-wheat-2010-mhrs-20110516.html"]May 16[/URL]

If the cost of managing risk around EPO values is this low, why wouldn't the CWB take on responsibility for managing risk around the pooling system and provide all farmers access to 90 % initial payments if they want it? What is the cost of the federal government evalution of initial payment recommendations and from there, all the CWB calculations/adminstration costs that goes into mailing adjustment payments?

[charliep]

For what it is worth, your pooling system (the CWB) is 80 % priced to the end of April. that leaves 20 % to be priced may, june, july and remaining inventory into the fall.

[URL="http://www.cwb.ca/public/en/farmers/producer/pace/calculator.jsp"]scroll bottom page[/URL]

[charliep]

Sorry for too many postings but in a numbers mood.

Current PRO 1CWRS 12.5 - $7.16/bu.

Initial payment for above - $5.60/bu or 78 % of the PRO.

Initial payment after cent/bu adjustment - $6.35/bu or 89 % of the PRO.

90 % EPO - Was going to do the calculation but the spreads get weird because of the fact the EPO is based on 1CWRS 13.5 and the adjustment is 1CWRS 12.5.

NOTE: BE CAUTIOUS ON YOUR CONTRACTS WITH THE ABOVE. SPREADS ARE LIKELY TO CHANGE AGAIN (READ WIDEN) AND THIS IMPACTS YOUR UNDELIVERED/UNPRICED FIXED PRICE CONTRACTS.

[charliep]

The above is Alberta by the way.

[charliep]

Checked out your 90 % EPO (had the phone CWB to remind myself how to do it). Deliver 1CWRS 12.5 and get an initial payment of $5.60/bu. CWB sends you your top up of 91 cents/bu (90 % EPO value of $8.39/bu minus initial 1CWRS 13.5 payment of $7.47/bu minus 1 cent/bu premium) or a payment of $6.51/bu. Changes in initial payment spreads in 6 weeks will change this.

You are actually up to 91 % of the most recent PRO.

[btjadenlepp]

Nice! Cam, Rolf you both provided an
excellent perspective. I especially
loved the wet blanket/security blanket
analogy!

My sense is that it's the averaging of
prices many producers like. It gives the
impression of the guesswork being taken
out.

But for the record, I have to make the
point that ANALYSIS WORKS. There's no
crystal ball of course, but you don't
have to take an average just in order to
not totally screw it up. People exist
that understand this stuff and do a not
bad job of interpreting and responding
to market info and price signals, for
all crops.

www.farmlinksolutions.ca

[oldjim]

Back in the Mulroney years the pool accounts had a fair sized loss which the government guarantee had to cover. I believe Esmond Jarvis got shipped off to New Zealand over that. Ever since the initial payments are set stupidly low at the start of the crop year, then they dribble out these adjustment payments every couple of months - each time going through the whole merry-go-round with the government (who have final say due to the guarantee). They used to shoot for 75% of expected total price when setting the initial payments at the start of the crop year which would give us some cash at harvest. Now the opening initials are an insult and probably enflame the anti-board crown even more.

[agstar77]

Cam dahl ignorant of the past and Rolf ignorant of the present.

[sumdumguy]

Proof positive , no flour mills, no pasta plants,
how can this society be so blind?

[sawfly]

now its the boards fault, i thought getting rid of the crow , would assure
all kinds of processing here.
what ever happened to that one.

seem to recall the wheat growers saying that,big freight advantage
and all

you guys could be
right everything will be great with board gone. i will live with what ever


and speaking of crow , ,if surpluses reappear and Americans say we don't want your wheat , and the border closes.
How would you like it done
BBQ ed , fried ?

your in the driver seat now,so when things go wrong its your fault.
at least know who to bitch to

[stubblejumper]

The pasta plant in North Dakota is now owned by Viterra.

[dmlfarmer]

All winter we have been told of the high wheat prices that US producers were getting. $12 plus wheat at the farm gate. That it was the CWB standing in the way of those prices for western Canadian growers.

But my question is, why is the average US farm gate price for wheat in 2010-11 only $5.65 according to the May 11, 2011 WASDE. US growers have never been saddled with a wheat board, they have years of experience in the free marketing of wheat, and oddles of analysts and advisors. Yet last year the average US farm gate price is no better than the CWB average in spite of record high world wheat prices. WHY?

It takes a lot of $3.00 and $4.00 wheat to average and $12.00 wheat down to $5.65.

"I really hope that the "people exist who understand this stuff" can do better in Canada than they did last year in the US.

[charliep]

Numbers to go with the above comments.

[URL="http://www.ers.usda.gov/data/wheat/YBtable18.asp"]US average wheat prices[/URL]

US prices are for a June to July crop year. CWB for a August to July with the pooling year more like October to September.

If you look at 2009/10 (last final report), the weighted average price for Canadian farmers was about $4.65/bu versus $4.87/bu for all wheat US and $5.16/bu for spring wheat.

Weighted average durum price for Canadian farmers - $4/bu versus US farmer - $5.47/bu.

[highwayman]

Add in the cost of storing durum from years past because of no sales opportunities in Canada and the weighted average price becomes a hell of a lot less then $4 last year. But I'm sure the board lovers here will have a rebuttal for the pathetic performance of their sacred cow.

[sumdumguy]

Who says the u.s. Is the only market?

Special crop marketers seem to find markets all
over the world.

I believe wheat and barley and all value-added
products will fit in perfectly.