CWB options

[brian99]

I was wondering what people thought of the proposed options by the CWB. I personally dont think a whole lot of them because theres no way to capture a premium from the market, so theres no point to use them. I'd like to hear other comments.

[charliep]

Your question comes down to the heart of the pooled prices versus daily cash ones. That is, how price signals/market information is transfered to farm managers and how they are allowed to handle risk. I like to think of the grain pricing the same way I do my investment portfolio. I invest in interest bearing cash products (GICs, etc.), mutual funds, stocks and (heavan forbid) leveraged investments like futures. I compare grain priced out to money in the bank - you can complain that you didn't get the best price but nobody is going to take that money away from you (zero risk except for your ego). I would compare the current CWB pooling system to a mutual fund. I have mutual funds in my portfolio because I don't have the time/expertise/discipline to participate fully in the stock market but I want to higher returns from this market. I am willing to give up control/responsibility for some of my investments to allow this to happen. The logic would apply to why I would want a CWB pooling system for at least some of my grain marketing activities. Given timeing is everything, participating in a pooled price/mutual fund is no guarantee of a higher return than simple cash sales/GICs - I'll let the Canadian mutual fund portion of your RRSP speak for that). The third area is the stock market (non leveraged/cash purchase). I make money when stocks go up and lose when they go down. The equivalent here is grain stored in the bin unpriced. Whatever happens to the price of that grain impacts your total returns right to the day you sell it. I'll leave the discussion around futures trading to another day. I'll let you read my comments on the pooling proposals in previous forums in this commodity marketing area. My reason for going this route is to get everyone thinking about why we have CWB price pooling and how it fits into your overall risk management strategy. Would you like to have 100 % of your grains at the vagrancies of the market (cash sales are money in the bank and grain stored unpriced is at risk/opportunity of price changes) or does price pooling have a place for at least some grains or as an alternative in the case of wheat/barley? Given every farm manager in western Canada is different in how they will handle their marketing program, is there a way that would allow farm managers to handle their grain marketing portfolio in the same way I do my investment one? Sell some cash to minimize risk/generate more cashflow, price pooling to use the services of someone else to manage the marketing of a portion of their crops and finally storage for improved returns down the road (accepting the risk they may not be there). Is there a way pooling alternatives can be set up to allow farm managers to make decisions in each one of these categories and still leave the pooling system in tact for at least some of their sales?