Mid Month PRO

[charliep]

Just a note to highlight the CWB released a mid month PRO today.

http://www.cwb.ca/payments/pro/2002-03/080902.shtml

Assuming a risk factor of $3/t, today's 1CWRS 13.5 PRO of $142 and the converted MGE futures price of $229/t, today's CWB basis would have been about $10/t.

[jgstuart]

Does anyone know the process that AFSC uses in determing their price projections as far as the "variable price option" is concerned. Do the CWB PRO's have any part to play. As I'm sure you already know, wheat prices were not raised because apparently they did climb more than the 10% required. However, these new PRO's would put wheat prices well above that threshold. Does this mean that anyone who chose that option missed out on the higher prices by 9 days?

[TOM4CWB]

Charlie,

Now it has become even clearer, the Producer Pricing Options have damaged the credibility of the CWB's PRO forcasts...

Will the CWB finally admit that the Producer Pricing Options never should have been priced off the PRO???

Interesting though, the insight we were given into CWB marketing mistakes... through the connection...

It would be much easier to forgive the CWB if they actually admitted they made a mistake, and corrected the process by making CWB pricing activity transparent...

In Late May early June it was obvious the CWB had paniced into firesale prices... and that domestic millers were really pleasantly surprised with the results...

The Ontario experience with the millers asking for the return of the monopoly, accountability with the CWB election, has all really put the CWB in a corner... now damage control...

Isn't it amazing what can be done with $185 billion line of Credit!!!

[charliep]

jgstuart.

The short answer is yes - the group that establish the variable crop insurance values did use the July PRO.

In terms of impact, the mid August PRO would have generated an increase in CPS wheat values used in the variable pricing option but not necessaritly normal/high protein CWRS wheat (analysts would have had to add on an extra $3 to $5 to get above the 10 % increase thresthold). Even current values would not have generated an increase in durum (unless we were willing to add on $10 to $15/t onto the Aug. PRO).

I don't have all the information at home but the values used in the winter crop insurance price forecasts/prices were pretty much spot on with the July PRO.

Tom4cwb.

I leave discussion on PPO to others except to comment there is director election this fall and a winter to work with the CWB to improve their contracts. My focus with people will now be on the early pricing options.

[charliep]

I did some more checking and durum variable pricing would have been in the same category as spring wheat - would have had to be $1 to $5 above PRO to generate an increase in variable pricing option.

[TOM4CWB]

Charlie,

I just wonder,

Is it coincidence, just maybe, that the last PRO kicked out CPS from triggering an upward crop insurance coverage movement, now, so as to not cause resentment, CWRS/Durum PRO's are just below the trigger levels... I wonder...

[charliep]

I forget the exact protein on both the high protein (at the office) and normal CWRS but here is the mechanics for the two alternatives. I am assuming a $43/t CWB deductions - the level used in the PRO examples.

2CWRS 12 % protein
Winter crop insurance - $168/t ($4.56/bu)
July PRO - $170/t (Didn't generate an increase in variable price).
August PRO - $185/t (Would have been $2/t short - would have to show judgement)

2 CPSR - 1CPSR minus $1/t
Winter crop insurance - $148/t (about $4/bu)
July PRO - $155/t (no increase)
August PRO - $172/t (would have generated an increase).

Hope this helps explain. Keeping in mind the process involves forecasts on a given day (the numbers on some of the other prices might have changed if done today), the prices should have logic behind them.

[charliep]

Similar numbers for high protein CWRS option.

2CWRS 13 % protein ($3/t under the 2CWRS PRO based on initial payment spreads - this may be narrow as protein premiums are lower this year).
Winter crop insurance - $176/t ($4.56/bu)
July PRO - $176/t (Didn't generate an increase in variable price).
August PRO - $190/t (Would have been $4/t short - would have to use judgement).

Somewhat relevent to this thread but an issue - in a world of tight wheat supplies, average protein for both the US hard red winter and likely the North American spring wheat crops will be high. Trying to sell high protein wheat to customers when their needs are for mid protein creates a new set of challenges.

[charliep]

2CWAD ($5/t under 2CWAD 11.5)
Winter crop insurance - $172/t ($4.56/bu)
July PRO - $171/t (Didn't generate an increase in variable price).
August PRO - $196/t (Would have generated an increase in variable price option).

[charliep]

An morning of embarassment. I should have used $157 for 2CWRS wheat (equivalent to a less than 11 % protein). Because protein spreads are narrowing, this would have generated an increase on its own if the August PRO had been used.

If you read the thread, I obviously didn't read the durum PRO carefully enough. Needless to say, a bit of a surprise. I guess the CWB is working off their 4.1 MMT production number.