Wht & Durum prices, Bottineau and Berthold

[Braveheart]

Tom, I don't know much about how pulses are bought. I expect milling wheat to be bought like milling oats.

When oats "went free" elevator companies and railroads came up with a competitive bid to send oats to Minneapolis. The price had to be competitive with what a truck could do. Elevation tariffs and rail freight could be bypassed. So, elevation came down and rail freight was more competitive. The companies made some money merchandising so some of their revenues just came from a different source. The same would happen for wheat.

But I do believe it will happen immediately. There will be an impetus to prove to farmers that this is a simple and effective transition. There are still some cement heads who just can't understand how they will sell their wheat. They just can't see it will be just like turning their canola, flax, oats or pulses into cash.

[charliep]

Actually Japan does pay a premium over US spring wheat (about $25/tonne) but I suspect has more to do with their supply agreement/delivery commitments than quality.

Before the CWB supports get too smug, Canada only supplies 900,000 to a 1 million tonnes out of total Japanese wheat demand (5 mln tonnes).

Most of the rest is provided by the US (Aussie if I remember right sells just slightly more than we do) - US sells way more wheat to Japan than we do.

Other markets in S.E. Asia pay the same for US and Canadian - buy for the best price.

I would also highlight what a US farmer can lock in for fall delivery today versus what a CWB fixed price contract will allow.

From the links, Bottineau can off a September delivery price of $9.90/bu (basis 40 under at the elevator). Cdn $9.50/bu.

An fpc today for similar quality 1 CWRS which some would say is higher quality will only provide a western Canadian farmer about $8.50/bu.

For old crop, a flexpro would provide a price of just over $9/bu whereas a US farmer is being offered $10.50/bu (slightly less in Cdn $).

[URL="http://www.bottineaufarmers.com/index.cfm?show=11&mid=6"]Bottineau price[/URL]

[wmoebis]

Thanks for clearing this up Charlie!

I read the statement as all to do with the care of the grain handlers and quality not the CWB.

How do you think a bigger share of supply agreements will be moved to us?

How will our delivery system have to change to accomodate these future demands?

I'm not sticking up for or against the CWB I'm just trying to see what will need to change in our system and what we as producers might expect and have to change to be ready for this change.

[charliep]

The long term relationship with the Japanese is supply chain effort that has involve
everyone - the CWB, grain companies, Canadian Grain Commission, farmers.

Can Canada expand this business? Not a trader but the Japanese have a different
attitude toward business in that they are not 100 % price but rather relationship
buyers where things like supply agreements are very important. This will remain true
after whatever decisions are made Aug. 2012. Will likely still be the role of the
renewed CWB (whatever form it takes).

What will it take from the supply chain in a new world? Suggest it will take better
intelligence about what is in the grain storage system starting at the farmers bin.
Identifying Japanese quality and maintaining its integrety prairie farm to Japanese
port will be a needed feature of the new system. Perhaps malt barley selection as it
works today will be a model for the future. Likely will be hit by lightning but farmers
who supply this market/meet quality specifications should be the ones who receive
the premium - more risk/effort the farmers need to rewarded for. Note this is a
whole supply chain effort - not an individual link.

Just talked about Japan. Your question may have been broader. My bigger picture
questions would be what type of contingency fund and how much in it? Different
types of contracts including shorter pooling periods. For feed wheat and smaller
classes, 100 % daily cash pricing to be matched with sales via guaranteed delivery
contracts similar to what is done with feed barley today. Cash plus program (match
pricing against actual sales) for durum where an effective hedging/risk management
system does not exist. Lastly, not trying to have the CWB be everything to
everybody. They only have to meet the needs of farmers who use their services.

[TOM4CWB]

Dear Charlie,

As you have stated the folks in Japan are RELATIONSHIP based.

Columbia Grain is directly connected to Japan. All indications I have found... is that they obtain as good or better prices to the grower... than the CWB... historically. Just as some pulse buyers can and do consistantly pay growers more... so the same is clear for US grain purchersers of high quality milling wheat.

We on our farm have fought long and hard ... to build a relationship with the good folks at Columbia Grain. I will be very excited the day we can start loading rail cars locally for their account!!!

[charliep]

The difference is perhaps comparing an individual sale and customer to
an average price or producer payment option that is locked to the
pooled price. Columbia grain prices reflect sales activities in a given
period. The CWB is an average price over all customers, ports, classes,
grades, proteins and a 15 to 18 month time period.

Perhaps the question that is being asked. Can a pooled price exist
along a system where prices reflect daily sales activities? Can a system
that can't provide daily price signals attract deliveries from farmers? I
think the CWB can exist in an open market (and provide benefit to
farmers) but it requires a whole new way of thinking. Their current
supporters will be the CWB's worst enemy in this process of change.