CWRS

[charliep]

Just to highlight the timing component you mention chaffmeister, the current US wheat futures are flat over the winter turning into an inverse next summer in anticipation of a bigger 2003/04 crop. The normal signal from this type of market would be to sell earlier rather than later.

CWB total payments are an average price for the year. They are also at the mercy of farmer delivery patterns as well as trying to provide customer needs over a 12 month period until new crop appears. I would be very interested in the approach the CWB sales plan uses this year in addressing all these issues.

[charliep]

Just as a note (will deal with more fully after harvest), the early pricing option provides a good tool to provide early delivery to the CWB/have effectively ownership of put option 10 % below the CWB PRO.

As an example, the 1CWRS 13.5 PRO (Aug. 22) was $259/t (port), the early pricing initial is $230/t after deducting $3/t discount. Implication - you can effectively own a put on CWB total payments $26/t out of the money for $3.25/t. This is a good investment from my standpoint both as a risk manager and a mechanism for improving cash flow.

[charliep]

A day for thinking about CWB issues as I work on other things. What would happen if the CWB is a net long now? Maybe the CWB was hedged going into the July PRO for a higher percentage of the crop than they would like (keeping in mind that no farmer had made delivery commitment). Late July/early August, they lifted their hedges and replaced forward contracts with long futures positions. Using their PRO forecasts and relationship with the converted MGE futures price, I still have trouble reconciling moving from $25 over on May basis (CWRS) to $2 over in July and back to $24 over in August. Something strange happened in Mudville.

[TOM4CWB]

Charlie,

I would really hope the CWB took the input farmers gave them in late June when they put out the very low PRO.

THey certainly were raked over the coals, when the June PRO was released... and they had no excuse not to have bought back any short positions they had at the end of June for the 2002 harvest.

I really believe that August was a major second blow to production, (early frost)and rain that is knocking down quality especially the grain that could have gone for export.

The point that must be emphasised is that the CWB has no business prepricing the any poolled grain, before it actually has pool grain delivered or contracted to price.

How has the CWB done on these points, and the proof is now obvious that the CWB knows nothing more about weather markets than the farmers they serve, infact they are not as close to the land as we are, therefore don't have the preminitions that many farmers have when the weather is really turning ugly.

Isn't it only fair that farmers should make the decision about CWB timing of sales, as it is our farms on the cutting block?

[AdamSmith]

Word on the street is that on Wed Sept. 4 the CWB was heavily buying back short positions on the Minniapolis exchange.
Sources in Minniapolis say that the CWB trader showed his hand early and the entire floor quickly saw the CWB was vulnerable and so they slaughtered the poor guy. (one of the resons for innie gains) Problem is he was losing farmers money here. My info suggests that the CWB took it on the chin for between a dollar and a dollar and a half US per bushel which would suggest that these short positions were put on in late June or early July. All this fits your theroy Tom. When confermation comes I will let you all know.

[TOM4CWB]

AdamSmith;

Word has it that someone went on a month long "cruise" or Holiday, and got back about Wednesday... What a deal...

Someone sure is extracting a premium out of someone else!!!

Somehow, I have a nagging feeling that my farm is not going to come out of this "smelling like a rose"...

Astounding about covers off this week on Agriville...

THe Topic on CWB importing Black Sea grain.......being removed.......now really looks ... ........

But I guess it must.. have been ....just a ... computer..... glitch.......

Isn't it kind of suspicious that noone from Agri-ville even said anything about what happened?????

[rodbradshaw]

Tom4cwb
I am amazed that it was only a month that someone went on holidays considering that there is 6-7 people in the trading department at the CWB. Obviously we only need one as only one seems to be able to make a decision (right or wrong)from what we are being told.
This is the reason that we need to get the CWB out of a monoply position and let their agents go to work for their commission.

The next question to ask is,"Will their be staff laid off to control costs or is the total costs of operating the CWB to charged over the much smaller crop drastically reducing the final payment?"

[TOM4CWB]

Charlie;

I don't understand how you think the Pooling account can go up much further than the Sept PRO?

Since it is obvious the CWB has dropped the marketing ball this year...(by pricing most of the crop early) the only advatage the 90% pricing option could have is that if prices start diving, a floor price has been locked in that is above the initial price...

but if in fact the CWB has priced...

the down side is quite limited as well....


WOuldn't it be better to buy a call option that can actually rise next late winter/early spring when prices hitorically can be quite volitile again?

[TOM4CWB]

Rodbradshaw;

You wrote;

"The next question to ask is,"Will their be staff laid off to control costs or is the total costs of operating the CWB to charged over the much smaller crop drastically reducing the final payment?"

With the government of Canada's credit, and the Auditor General gone for good, what could the CWB do;

1. The CWB is builds the Contingency funds with terrible basis levels, and then covers off the Pool marketing blunders...

2. THe CWB extracts large sums of money from "designated area" grain producers who can't fill unpriced basis contracts... Like my neighbour who is being charged $20,000.00 on 1000t of basis he never even priced last year...

3. The CWB can excuse itself because of the Churning interest revenue.. and therefore feels no reason to be concerned about staffing costs of marketing blunders...

WITH all these reasons, won't the CWB just sail through these choppy waters, and not skip a beat?

[parsley]

AdamSmith,

Your story could be as true as warbles on yearlings. Years ago, the Saskatchewan Wheat Pool tried some fancy speculating on the exchange and they lost so badly, they had to come home and beg the Federal Government to bail them out. You don't learn a lesson when you get bailed out. The transactions will be traceable if they took place.

If they did..... The boys in the Twin City would smell blood when the CWB "trader" waltzed in, obviously out of his league, but mainly because he had nothing to lose. Farmer dollars would be hanging green from his ears, and he could care less if he took a beating. It wasn't his money and there's nobody accountable. The boys in Minneapolis will appreciate when the Wheat Board boys get up on the table and announce they're buying a US$1.50/bushel round for the entire trading house.

Parsley