Market Direction/CWB Flexpro

[charliep]

Saw a comment that all is going well in the wheat maret and thought I should put a chart and at least talk some strategy.

In spite of problems in North American milling wheat crops (spring wheat and hard red winter), futures markets have taken a tumble off their lofty highs. Charts below.

[URL="http://farms.com/FarmsPages/Markets/tabid/214/Default.aspx?page=chart&sym=MWZ11"]December MGEX[/URL]

<a href="http://farms.com/FarmsPages/Markets/tabid/214/Default.aspx?page=chart&sym=ZWZ11">Dec ember KCBT</a>

The reported reason is that former soviet union crops and other easter european are looking better this year and they are expected to be aggressive sellers of the combine.

Highlights a couple of things. North America has become a residual supplier of wheat to the world market. Other countries are market makers.

Russia, Ukraine, Kazakhstan, etal are aggressive sellers off the combine. Need the cash/lack infrastructure to store. Suspect will occur again.

Implications. Likely summer price lows but the actual results of N. America spring wheat harvest and Australian will be critical.

If you believe that prices will bottom during the summer, I would look at CWB basis contracts (provided you can get a good one) or Flexpro before Aug.1 to lock in a zero basis.

Flexpro has worked well this last year because of the rising and the fact you don't have to roll futures months or pick a July 2012 basis.

Others comments. Still a year of CWB programs to go. Current programs will provide the foundation for CWB programs in the new world.

[charliep]

Will note Flexpro has not been announced yet. Has worked well this year - particularly on June pricing.

[TOM4CWB]

Charlie,

I don't get it.

Does 'Flexpro' work for feed wheat?

We fought every kernal of the way... for every pound of milling wheat we marketed this year.

October 2010 and every gaded sample said it was ALL FEED WHEAT.

Falling numbers were not a part of the grade... the protein over all was good (Average 13.5). This in turn even made it more objectionable that it was all graded feed.

Canola marketing was HONEST. Grades were fair.

To tell me I must sell milling wheat NOW... as I was told I must have done JULY 2010 on flexpro... is an obsene abuse of my farm.

I OBJECT.

THE CWB stole $40/t off my FPC in Jan 2011.

I OBJECT.

THIS is obsene blackmail. Flexpro sales in June 2011 May have been OK in CWB terms... but they never came close to US Northern farm gate prices.

AND I am SUPPOSED to sign up to these blackmailing extortionists?

A Calgary Oil company just got a fine for $8m for Bribery and corruption of a foreign government official.

What about extortion of western Canadian grain growers? WHY does the CWB get away with this?

[charliep]

None of the CWB programs handle feed wheat very well. Not much more to be said.

What I know.

1) CWB monopoly and programs will be around for another year.

2) Flexpro can work well for holding pricing alternative open to the end of the crop year by taking out the adjustment factor. Wouldn't go more than 25 % of a conservative expected production.

[charliep]

Talking to myself here but I always appreciate the good questions you guys ask (you might not even be aware you doing it) that sends me off to do some research.

On your question on feed wheat tom4cwb, the CWB indicated they offered the oddball 150/200 % EPV values to answer these concerns. The CWB historical price charts provide some evidence as to how effective these programs have been.

[URL="http://www.cwb.ca/public/en/farmers/producer/historical/pdf/2010-11/2010-11epocharts.pdf"]see charts 22 to 24[/URL]

Comments.

1) Prices offered under the programs were flat inspite of all the volatility/price improvement in corn. Didn't respond to market signals.

2) You had to have shipping capacity at an elevator within reasonable distance of farm starting with availability of a company with Guaranted delivery contracts and a rail line that was getting cars to move feed wheat. Not readily available to all farms.

3) How much feed wheat will be carried into the 2011/12 crop year?