Minneapolis Cash and Mar. 02 Spring Wht.

[TOM4CWB]

Charlie,

Why is the Minneapolis cash $.60 above the March 02 Spring Wheat contract?

http://exchanges.barchart.com/intra/mgex/mgemwdp.htm

[jensco]

Tom4cwb: Did you go to the CWB meeting in Red Deer or did anyone else go, that could tell us what Shirley McLellan had to say about dual marketing.

The Kernel (from your one member marketing club)

[TOM4CWB]

Kernel,

Yes I went to Red Deer, but Shirley didn't make it because of bad weather.

Chairman Ritter took much heat there, it is unfortunate the CWB didn't send sales staff to answer operational questions on sales.

I must now question how the CWB sells the grain pool, now it appears that they may sell much of it in advance before it is delivered.

I believe this would put farmers at risk, especially in a drought year!

Unless we can see how the CWB manages this risk, it is hard to believe the "Superstar" "we don't make mistakes, and have the best market intelegence in the world" scenario.

My experence is that market forces are "caotic" and so are weather fundementals, making marketing a matter of chance unless a clear plan with targets is in place!

It is a real pitty, the CWB won't share this plan with us, or do they have a specific plan with targets?

If the PRO is the plan, then lower PRO numbers on average mean they are planning to sell for less?

[TOM4CWB]

Charlie,

On http://www.ams.usda.gov/mnreports/MS_GR110.txt,

the spot markets are reported as:

Minneapolis Daily Grain Prices: Spot No. 1 Dark Northern Spring Wheat 13 to 15
Pct Protein. Cash prices were mixed, 1 cent lower to 4 cents higher from
3.45 1/4-3.60 1/4. The Spring Wheat Basis was steady to 5 cents higher.

NOTE: The 14.5 pct protein category will be added on days when it can more
clearly represent the value of the 14's.

Prices Reflect No. 1 Milling Quality Only. Milling Quality is defined as
300 Or better Falling Numbers; 60 lbs or better; 13.5 pct or less Moisture;
1.5 Pct or less Damage; 1.5 Pct or less Dockage and 2.0 ppm or less
vomitoxin.

RAIL - Spot TRUCK
Mpls/Dul Change Bid To Arrive

US 1 Milling DNS/NS Wheat Mpls
13 Pct 3.45 1/4
14 Pct 3.50 1/4-3.55 1/4
14.5 Pct, Combined with 14's
15 Pct 3.60 1/4 up 4- dwn 1


Now Charlie, why are the futures so different from the Cash?

[TOM4CWB]

Mr. Gray would not tell us how he developed his benchmark for wheat prices either Tom.

The CWB does not allow a dual market because if they gave up the premium North American market to every Tom, Dick and Harry they would not beable to a capture a premium above the world price for us dump farmers.

I think it is clearly apparent that our quality of wheat demands a premium in the North American and the European markets. I don't think that we can hold the CWB solely responsible for a getting us premium price.

Gray must have felt that his formula for benchmarking was beyond the average farmer to comprehend or did secrecy tie his tongue.

The Kernel

[charliep]

The MGE futures contract is only for 13.5 % 2 Dark Northern Spring wheat (I would have to do some checking on specs. for 2 DNS). The cash market includes others specs. (eg. above 300 falling number, commitment on max vomo., etc.)

You are also taking off the March futures. My suspision is that most likely things are going off the May.

You have to look at other things like carry in the market, premiums paid in cash market to attract delivery, etc.

From my recollection (memory gets foggy will age) the premium has varied anywhere from 20 to 25 cents/bu over (normal) to as much as $1.50/bu over (years when there were major vomotoxin/fusarium problems and the market had to pay monster premiums for high spec./low vomo wheat). This premium also is a good indication how the protein market is being valued.

[TOM4CWB]

***kernel,

Did you read page 11 of the CWB's Grain Matters?

The CWB itself says a #2CWRS 13.5 returned from $2.94 to $4.88 in Sept of 01 and $3.91 to $5.10 in Jan. of 02.

Checking PNW port prices averaged in Sept. 01 at a 1.54 CDN exchange they were $6.25 for a 14% DNS equivelent to the #2CWRS 13.5 because of the discrepancy in our grading systems.

January 02 was $6.40 PNW at an exchange of 1.58 CDN to US currency.

What farmer can believe the CWB is trying to "maximize" our wheat returns when they are willing to sell #2CWRS milling wheat at $2.00/bu less than it is worth!

The basis calculation is so complicated that the CWB doesn't think farmers can figure out what is happening, and I guess Mr. Grey thinks we won't check his numbers either!

It appears to me from the reported CWB sales values that we are guilty as charged for destroying and undercutting world values for high quality milling wheat!

How else can a person evaluate this type of information, when the CWB sells high quality milling wheat at less than feed wheat prices domestically?

[charliep]

I should know better than to move into this debate but here goes.

The CWB asking price to mills within North America (for spring wheat at least) is Minneapolis price adjusted for freight back to the prairies. A mill in western Canada will get a lower price than a US mill by the cost of freight to get it there.

Prices off the US west coast (spring wheat in Portland) is Minneapolis plus cost of getting it to port. The price of high quality wheat off the west coast to S.E. Asian customers like Tawain, some Korea business use Portland prices for both Canadian and US sales. Others, like Japan, that have higher quality specifications obtain a premium over and above this price.

A point of discussion is the CWB ability to act as sole representitive of western Canadian farmers and price differentiate between different markets. This is the issue with our trading partners. This is the issue you question as to its effectivess in terms of producer returns.

[TOM4CWB]

Charlie,

Why should the CWB sell #2CWRS 13.5 for a Prairie producer price of $2.94/bu?

Who, if they knew the CWB was selling for $2.94, would ever sell it to them?

This price is significantly below the August 1st 2001 initial payment the CWB paid for this wheat, if it came from 2000-01, $40/t below, how can anyone justify selling this low on a short crop drought year?

What private marketer could ever do this and survive, and just why wouldn't this blowout price lower world values?

[charliep]

Based on the information provided I can't argue with your thoughts. I would look to Tom H. to provide some insight into what these prices represent and how they should be interpretted.

[charliep]

tom4cwb - take a close look at the grain matters article, and you will se that the price estimates are farmgate returns with freight and handling charges deducted. And they are figures representative of recent trades, not dirtectly representing ALl trades.

[TOM4CWB]

thalpenny,

Glad you are back!

Maybe you can fill us in on the blank spots then?

What basis was used on these reported sales; what were the sales ranges of the 1CWRS 13.5, since this is 60% of this years crop?

Is the reported US sales value difference between #1 and #2CWRS only $3.00/t as the buyback and USITC report indicate?

Why didn't the CWB report feed wheat & barley sales range values?

If the CWB has so little feed wheat and barley avaliable to it, why shouldn't your organisation be able to seek out the highest premium market for this product and bring up the prices on the bottom end quality?

[TOM4CWB]

CWB,

Is thalpenny so tied up he can't answer questions?

You are spending millions on P.R., why not spend a little to fix the obvious problems on the PPO contracts?


Please explain why a cash price with optional call option is not avaliable during the crop year when we actually know what grain we have to sell?

Shouldn't the CWB be the first to offer the best marketing services, not the last and at that only kicking and screaming every inch of the way to maximize our returns?

Why is the CWB refusing to offer cash pricing during the Crop Year when our grain is produced?

This option should be the lowest cost, most efficient, and least risky.

An option for cash pricing should therefore return the most to farmers shouldn't it?

[TOM4CWB]

To the CWB,

I am unsure about how the CWB hedges its risk on the flat pricing options.

For instance if I did a fixed price contract in March of 2001 for this crop year did the CWB go short against the futures to specifically cover the risk my fixed price contract created?

Now, assuming you did cover the risk, if I do not have the grain to deliver, and the futures has dropped, why if the CWB has profited from this futures position would you charge me to cancel this contract?

My understanding is that if I do just the basis contract, that because the PPO contracts are not to affect the pooling accounts, that the CWB will not sell the basis contract to anyone else but simply returns the PPO contracted grain to the pooling account grain and sells all the grain normally as if the PPO contract did not exist, therefore preventing any affect PPO contacts might have if they were sold outside the pooling system, is this correct?

Is it possible that at this point today in the 2001-02 crop year that the CWB has sold all our wheat and now has locked in the total pool price for 2001-02?

How does the CWB decide to sell what percentage of the pool, when?