CWB Thoughts

[Burbert]

The MANIACS have spoken, cheap toothpaste,
no help fer those who need it. I want
what is mine, and to hell with everyone
else, that's capitalism yup, yup fer sure.
That is until I get old, sick and tired
and can't fram anymore, then me wants all
that I kin get from gobermonts. Short
sighted maniac thoughts'll dominate each
and every time here on Angriville........

[wilagro]

I would say that "BlueCollarMan" writes much in the style of John dePape. It would seem that we are to accept this value-judgement of the CWB of old as gospel. Seventy years of NO VALUE to producers...we are just supposed to agree and go on from there.

These "logic bombs" are used to diminish and de-value the single-desk concept and the power of collective effort by western farmers to correct some of the inequities the old marketing system imposed.

It`s a well written posting though...in fact it is quite professional.

[parsley]

He couldn't understand the common thread
between single desk CWB marketing and single
desk milk marketing.

The similarity is legislated force. Jail. Fines.
Property rights' loss. Parsley

[wilagro]

Most of legislation is FORCE along with fines/and/or jail time. How many laws do you find that suggest or plead for the public to obey them?

Where have you been parsley?

One could argue as to what is necessary to be incorporated into statutory law...that is another kettle of fish.

Like it or not we are living in a regimented society...every year brings more restrictions. If one doesn't like it then a deserted island in the Pacific ocean might be the best bet.

[parsley]

Co-ops practice pooling, but they don't force
wilagro to belong to them or sell to them.

Don't try to defend the indefensible, wilagro.
You,ve alays been uncomfortable with the jailing
of farmers aspect, anyhow, and it's time to quit
pining look it in the eyes for what it is! Just as
not allowing a native to enter a beer parlour was
wrong, so was jailing farmers There are some
things that are plain wrong. You are basically a
reasonable person, wil, but you had your heart in
this one, so its taking you longer to move on.
Pars

[TOM4CWB]

Blue Collar Man,

"competition creates lower prices"

Competition creates HIGHER prices... just as often. That is the essence of the 'Free' Market... such as it exists.

The CWB had neither the market power, nor the knowledge to manipulate the market... to the benefit of 'designated area' grain growers.

ALL the wishfull thinking at 423 Main (CWB World Headquarters) simply proved that a group of folks... with NO 'personal commercial interest' in the grain growing industry: Did not have the wisdom nor motivation to do what was best for our families farm.

Here is a great marketing article by one of my favorite DTN writers...

"Jerry Gulke DTN Columnist
Tue Aug 28, 2012 08:56 AM CDT

A simplistic way to describe price movements is up (bullish), sideways (distribution or basing), and down (bearish).

Up markets occur when prices increase, reflecting supply reductions or demand increases, or some of both.

After the price increase, a sideways market -- or distribution as some refer to it -- buys time to gather information on whether prices have been high enough to curb demand sufficiently to balance demand with known supply.

The downward price movement results in the expectations that demand has been curbed too much and there is a chance an oversupply will result, relative to the revised demand situation.

Then as the down market ensues, prices head lower to discover a new level under a new supply/demand situation created by demand destruction or a significant increase in new supply.

After prices have gone down sufficiently, a basing (sideways) action or accumulation as some refer to it occurs during which demand increases due to lower prices or increased supply, necessitating the buying back of demand lost during higher prices. Increases in demand need to occur to offset increases in supply due to a larger crop, in the macro process again of balancing demand with new supply.

The cycle starts all over again once demand begins to exceed supply and prices begin to rally after exceeding the price range of the sideways bottoming action, referred to a "breakout" to the upside.

This simplistic description, better known as the "price-discovery process," can be short or long term and as complex as one wants to make it. How we react and manage price risk can also be as complex or as simple as one wants it to be.

The larger the arena in which all this happens and under what kind of political situation has a big effect on the volatility and timeframe of how the cycle(s) play out. Certainly the global situation we find ourselves competing in has made the various elements more complex and difficult to understand and manage. Managing price risk during our new geopolitical environment is way different than in my father's time and even much different than when I first began my career in production agriculture. A lot has changed.

Gone are the days in the U.S. and Canada when governments instituted programs to manipulate or influence supply through acreage set-aside -- very short year-to-year or longer-term 10- to 20-year programs that began with the Soil Bank Program of 60 years ago to the Conservation Reserve Program of 20 to 30 years ago.

It took a long time, through the dismantling of the Berlin Wall to the economic growth in China, to get to where profit was no longer a four letter word. We were ready to unleash global' agriculture's ability to feed the world -- influenced by the market place rather than government programs. The last of the government influence in North America perhaps was seen with the abolishment of the Canadian Wheat Board and the elimination of subsidized ethanol.

A free market economy is often not a fair market. Price discovery is no respecter of persons. Some end-users may go without in a demand reduction situation where the high cost, less efficient users are eliminated. Some producers may not be able to compete in a situation of low prices that eliminates the less efficient and rewards the lower cost producer.

Basically, how we react to the price-discovery cycles is a personal matter and may be local or in the global arena involve turning on production in competing nations. Once that expanded production is realized, it does not disappear easily, even in periods of reduced prices. Bull markets used to end quickly when there was not the global situation with the base-building demand phase taking much longer. However in the last six years we have seen two such boom-bust situations that in the whole scheme of things are very short, quick responsive cycles.

After the 1988 drought that curbed demand, it took eight years before a global reduction in supply took corn prices to new highs. Once that 1995/96 year was behind us, it took eleven years and the advent of a massive biofuels (ethanol) program to get prices to new highs again. While the 2008 price surge can be blamed on demand for corn and high energy prices, the 1988, 1996 and our current price explosion to new highs were basically supply-driven and not a massive increase in demand, although China has been a driving force in soybeans. Had Argentina/Brazil had two or three timely rains and the U.S. saw an average production year, the price situation we now find ourselves would be totally different.

If you have not noticed, we appear to be in a sideways trading range such as described above in all grains. Corn and wheat have stayed within a dollar range from $7.45 to $8.49 for the past 30 days, suggesting the market is buying time to find answers. Soybeans have yet to trade sideways for any length of time, but have been in an uptrend. While it may take months if not a few quarters to determine the price effect on corn and wheat, it may not take that long in soybeans to peak and revert to a downtrend as we produce a big crop every six months, unlike wheat where we are planting or harvesting someplace nearly every month of the year and corn where price has incentivized more countries to expand production and thus price is more affected -- up or down -- by production in more countries than just the U.S.. However due to rising demand for protein worldwide, a quick look at a weekly soybean price chart reveals that prices stayed within a well-defined price range for nearly a year before falling precipitously from September 2010 to December 2011. Only a crop problem in South America last year created the violent movement higher that was exacerbated by the drought in the U.S.

I suspect given the variability of the corn yields not only between states and counties but within a field, it may take until the January Supply & Demand and Quarterly Stocks reports before we really know. End users of all varieties seemingly are covered, either previously through a better job of locking in needs, or have worked to cut back use slightly or find substitutes (huge silage cutting and importing needs) to hold on without the massive cuts needed according to the USDA to balance demand with supply.

Soybeans need to know how South America's crop gets started and that begins soon. In the meantime, the choppy, often irrational markets can drive you and me nuts unless a broader understanding of the price discovery system is gained. Not an easy task especially with computer-driven trading that is mindless and indiscriminate at times.

Buying put options to "put in a floor" is often a simple way to protect a catastrophic collapse in prices, but at what cost? If you'd like a copy of my recent assessment of the rest of the story of the real cost behind buying and rolling up puts that sucks up equity, email info@gulkegroup.com and request a copy. Or call (707)-365-0601 or (480)-285-4745 for more information.

(AG)

© Copyright 2012 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved."

Soooo why didn't/doesn't the CWB just sell us puts... if we want them?

This article clearly shows why a 'Single Selling' agency can't control prices. Just as the 3 prairie pools proved in the early 1930's and almost BROKE western Canada. Speculation on a grand scale...(CWB 'Monopsony') involving millions of people... is a disaster waiting to happen. AND it did... FAR too often. NOW the CWB has an opportunity to arbirage UP markets to growers. The CWB I need to better serve consumers...

Without a profitable price for our grain... will end up short of food.

I agree Supply Management is TOTALLY different... because it has a realistic opportunity to control the above market issues.

Good Discussion. Welcome to Agriville!

Cheers!

[jdepape]

I wasn't going to post as I'm late to the game but I can't resist after I read wilagro's post.

To say the first post here was "much in the style" of mine and then to say it's a well written posting - actually quite professional - well, I must say! A compliment from wilagro! Indeed a red letter day!

But, alas, I didn't write it. I am not BlueCollarMan, nor do I know him. If I did, we certainly would have much to talk about. Like....

- It's not the fault of the CWB that it didn't bring in more money? Yes, it is. Higher "marketing" costs than necessary, a dysfunctional system with higher costs, poor farm cash flow, limited sales and movement. All this lowered the amount of money the CWB "brought in".

- Agreed; pooling is not a bad idea. Just COMPULSORY pooling is.

- Disagree - reducing the NUMBER of sellers will not necessarily raise the price. Just look at barley - the AWB and CWB for years dominated the barley market into China, arguing that the other was undercutting the market, driving the price down. Having two dominant sellers in that market didn't keep prices up (even though both would have liked to).

- Disagree - competition in commodity markets does NOT (just) create lower prices. Competition reduces COSTS between the buyer and the seller. That's why processors like Rahr Malting and like Alliance Grain can say that in an open market, they will be paying LESS for grain. The other side of that card (that the media has so far failed to see) is that at the same time, the farmer will get HIGHER prices.

I like your approach BlueCollarMan - just don't agree with some of the nuances in your argument.

[Hopperbin]

Could it be blue collar man and jdpape first and last posts, connected? Connection? no no could not be.