EPO no brainer

[TOM4CWB]

Take a serious look at the Early payment option for wheat that gives you 90% of the PRO guaranteed, and you get the upside potential.

For #1CWRS 13.5, this is how you get an 'initial payment' of $5.00/bu. With the PRO at #259/t, you will get 90% of that value, less a discount of $2.50/t. Within 10 days of after you get your regular initial payment, the CWB'll send you a cheque for the rest up to your 90% level.

So again, with $50/t of deductions from port position, your new value in your pocket is $233.10-$50=$183.10/t or $4.98/bu.

If you deliver #3CWRS, you will receive $19.80/t less or 54 cents, which is $4.44/bu.

And you have the upside of any payments over your locked in value. If the market keeps going up and the PRO improves you will benefit. BUt this value is guaranteed to you, you cna receive no less.

If you have 18-24 percent creditors, and need cash flow, this is a no brainer.

Once the harvest quality is known and the lower quality grain gets moving, this will be a huge improvement.

Tom

[rain]

I agree. But I would wait till the next PRO before you do it. You risk wheat prices going south before then but I am not so sure it will.

Any other thoughts.

[charliep]

Agree with both above. I would price after the September PRO but might also carry some deliveries into Oct./Nov - depends on how much higher this market goes/values of upcoming CWB PRO forecasts.

[charliep]

The free market would already supply $7.00 for wheat RIGHT NOW. This would be the way to go Thalpenny, its a no brainer.

[TOM4CWB]

Kernel;

Way to spoil the party... Kernel...

Our Local elevator is at $5/t over Winnipeg Feed wheat cash, right now.

Thalpenny,

Please explain why we are not allowed to cash price after August 1st?

I still don't understand why the CWB would rather turn us into gamblers by pricing before we have the product we will sell you... the basis contract last year is costing my neighbour $20,000 even though it was unpriced.

Thalpenny, please explain why the CWB would take a futures position on an unpriced basis contract? Especially when the farmer told you he did not have the wheat?

[TOM4CWB]

Thalpenny,

How exactly do we deliver this wheat and get paid (pay our bills by Oct 31)... when the CWB has only called 25% of the A series contract???

[TOM4CWB]

Thalpenny;

I see the AWB offers the following cash price;

"Cash at Silo
AWB Cash at Silo offers a convenient marketing option during harvest.

Prices are updated daily and reflect the current cash market.

Specifications
Nominate the AWB Cash Price with the silo operator.
Cash at Silo is non-negotiable.
Protein increments are payable where applicable.
Guaranteed Payment
Nominate the AWB Cash Price at delivery, and receive full payment within 30 days of end of week of delivery.

Managing Risk
The AWB Cash at Silo has price and timing risks as it is non-negotiable and available only during harvest. AWB offers a range of grain marketing products to help manage risk."

Why Can't the CWB offer cash pricing like the OWPMB and AWB does?

It appears that the CWB is the ONLY single desk monopoly in the "free world" that does not offer a cash pricing option at harvest;

WHY??????

Is this because the "designated area" isn't in the free world?

Since the pricing opportunities seen this fall are only usually happening once a decade, it looks like we in the "designated area" miss the big prices once again!!!

The work in 1996-2001 to insure freedom of pricing turned out to be... frustration....

[TOM4CWB]

Oh halpenny where are you. You can run but you can't hide.

[TOM4CWB]

One of the criteria that the Board of Directors set out when they developed the producer payment options was that there had to be no impact to the pool account. Farmers who decide to not use the PPO's must not be affected by those who choose to use them.

The basis and fixed price contracts are based off of the pool return outlook, and the hedges are lifted as the CWB makes sales, on a proportionate basis. The hedges are not lifted as the farmer makes his/her delivery.

Tom

[TOM4CWB]

Thalpenny;

If what you have said is true, then the PPO contract system must affect the Pooling accounts.

THe only way they would not, would be if there was back to back transactions, eliminating the risk created by the flat price offered to the farmer.

You can't have it both ways... no matter how much you wish this problem would disappear.

I had a little talk with OWPMB people, and the objective the CWB has to make PPO contracts not affect the pool isn't possible.

To handle basis risk, the CWB must contract the basis... and the CWB does not risk manage the basis..., cause they don't match PPO sales to actual sales, just like they don't match futures positions to PPO contracts.

If you did match the futures to the PPO contract, wouldn't you live trade these contacts while the markets are trading?