To contract or not?

[parsley]

rosco,

I'll bet you went out and bought a fancy-cut rock that was priced, "95% hype and 5% product", and put it on the little woman'sfinger! A rock! Somebody did some good marketing to make you do that. But you had a choice in that you could have bought her something else "of value". A freezer full of meat. Or a rock-picker. Or a bin full of wheat.

Gets us back to what we think is valuable, doesn't it? If you want something to be valuable, first of all you have to take ownership of it. And then you have to make other people think it is valuable.

Parsley

[rosco]

TOM4CWB;
yes it would be nice if the buyer was worried about the producer and his continued success. But I have noticed that the grain companies are more worried about shareholders and dividends than my return on investment. They want my product as cheap as they can get it, and it is up to me to hold out until I get my price.
You say the CWB is not getting you a good price on barley or feed wheat. The street price for feed barley is $4 and feed wheat is $5 at my bin. How much more do you want? I read that Canada bought feed wheat from russia and malt barley from Denmark. Why? My guess is that the buyers got it cheaper. Loyalty to Canadian suppliers will only last so many cents. If you want the freedom to sell to the world then you have to be prepared for the world to sell in your back yard too.
Parsley;
Yeah, I bought her a rock. The rock picker wouldn't have gone over too well! I expect you bought your wife a rock too. Both taken by the same sales pitch!
Now, I've got a few thousand bushels of produce that I've told my banker is valuable. In a global market-place competing with a few million other producers, how do I convince the buyer that mine is more valuable than Pablo's or Sven's?

[TOM4CWB]

Parsley,

You tricked ole Rosco... you sneeky charmer you!!!

You must know all about those rocks...

The Deburs Diamond Monopoly, is what you were getting at?

Rosco;

Just take one look at what good malt barley is worth in the US, far more than what the CWB is paying now.

You can bet your bottom dollar that the malt barley being imported will cost far more than what the CWB is charging, if present value is included...


THIS is a disaster for the maltsters, no questions asked... ONLY farmers have the right to sell... so pick your time, and SMILE if you have any grain to sell!!!

[TOM4CWB]

Again, this thread gets to the heart of having a single-desk - so you can have the ability to extract more from the marketplace. As tom4cwb points out, everybody has different needs, and somebody would sell try to sell to the higher value markets at prices lower than the CWB.

Could there have been a more powerful message to the marketplace than having the CWB withdraw from the market this fall? Was that message there for canola? If it were, there would be cries of price fixing and collusion.

This debate also highlights that there is no such thing as a dual market. Once there is no single-desk, it is gone and it is an open market, so this should be called what it is - an open market.

One of the things in a year like this that is extremely valuable information is the available supply. SO you may think that you are sending a message to the market by not signing a Series A, but the biggest result will be that you will be diminshing the amount of information available to help the CWB develop a strategy geared to generate the most amount of $$ out of the grain available. The delivery contract stats numbers are not provided to the trade or to buyers for that very reason.


Just as an example - having a feel for where the #1 product is located will be important to coordinate transportation logistics this year. This will be important to try to get as much of this product into position as possible without losing it all to blending. The best strategy will be to maximize the high quality milling wheat sales, and to do that it will be important to know where it is located.

For the CWB to do the best job for you, it will need this type of information. The more accurate the info, the better the results will be.

Tom

[TOM4CWB]

Thalpenny;

Obviously something is wrong with your famous single desk.

1. Commercial farmers generally do not trust it. Why?

2. Commercial farmers are switching away from growing you products as quickly as possible to other crops. Why?

3. Market signals the single desk tell, tell us..., that the "Monopoly" single desk benefits the customers you sell to with risk management and benefits far more than our bottom line returns as farmers. Why?

If the CWB is so good for us, why are farmers willing to go to jail, rather than accept the "profits" your "single desk" "Monopoly" is supposed to create???

Something doesn't add up here Thalpenny, actions and results are what we are waiting for, not more empty shallow words.

Can't you see we have a big problem Thalpenny?

A problem that is going to cost farmers more discounts on price... as, we as farmers, are so upset that we won't even sell to customers when they are offering more than fair prices...

Is this healthy for anyone???

[charliep]

I will agree that the best strategy is to sign the "A" and deliver to take advantage of current high priced markets.

As a comment, I am no so sure what you are saying in comparing the non board to the price pooling system.

1) My observation is that farmers as a whole do a good job of capturing value when they are provided information to make decisions on. They do it everyday for a number of crops.

2) The market (outside of the pooling system) is moving a long way to provide price price signals that tie customer needs into quality characturistics and from there price signals. The CWB is being forced this way this year in terms of tendering at least some 3CWRS contract to grain companies with falling number guarantees a requirement. It will be interesting how the system evolves over the winter to extract higher falling number 3CWRS without providng price signals. I would look for overs on CWB 3CWRS tenders and grain company premiums to attract deliveries.

3) You highlight one of the issues in terms of timing (both because of producer deliveries and the CWB sales program). A cash sale is money in the bank. The CWB pooling system involves price risk right until the time the final cheque is deposited. The issue comes down to accountability in how the sales program is executed and performance measures to judge its effectiveness.

[charliep]

I think in the next three months the Western Canadian farmer is going to be set free of the CWB. Basic human rights should have set them free years ago. Sending farmers to jail for trying to make a legal point before our flawed justice system that doesn't renogonize human rights unless they are in Central Canada is the most discriminating act we have ever witnessed in Canada.

If our justice and political system and above all our board of directors of the CWB can't tell the differents between crime and the need for peoples rights to be recognize then democracy has failed us miserable. An mother nature is by far not our worst problem.

If food security is the front for all this discrimination then let the people of Canada share in the finacial responsible and storage of an adequate supply of food. Do not place the financing and storage of said food on the backs of your Western Canadian Farmer.

Those who want the CWB, please don,t force me to market in the same manner. I'am losing nearly a dollar on 70,000 bushels of wheat every year. That would buy alot of respect from our bankers.

I'am not going to contract on any series because the free market is a coming shortly.

[parsley]

Good Morning thalpenny,

Your pen seems careless.

1. rosco refers to the organic premium that is available to organic farmers, and by now, most farmers know that the organic premium is a real money-in-the-pocket one.

Your comment, "As tom4cwb points out, everybody has different needs, and somebody would sell try to sell to the higher value markets at prices lower than the CWB', isn't accurate because it doesn't tell Agri-villers that the Canadian Wheat Board does NOT market organic grain at all; therefore, organic farmers reach for a premium that is unavailable to either conventional farmers or the Government's CWB . Organic farmers should be able to sell into their premium market that is unavailable to a 'conventional-grain-selling CWB', but the Board's backroom boys have decided that DA organic farmers can only sell wheat and barley to the Board. So organic farmers reach less than premium!

2. Your comment, "This debate also highlights that there is no such thing as a dual market. Once there is no single-desk, it is gone and it is an open market, so this should be called what it is - an open market", does not reflect what is happening in the real world...the farmers' world.

There is a dual market, thalpenny, in many different forms, running, operating, alive and well.

a) The CWB is not a single desk marketer in all of Canada. A dual market exists as we read. Designated Area Farmers(DAF) vs Farmers Outside the Designated Area(FODA) comprise a dual market. In the Board Backrooms, CWB licenses are granted to FODA's and denied to DAF's

b) Conventional Growers in the Designated Area are forced into the monopoly-single-desk that exists only because of Board policy, but Seed Growers in the Designated Area are allowed out of the single desk by way of ...Board policy! There is a dual market here Conventional vs Seed Growers. In the Board Backrooms, CWB licenses are granted to Seedgrowers and denied to conventional DAF's


c)There IS a dual market with regards to feed in the Designated Area. The CWB has chosen not be to be a single desk marketer of the thousands of bushels that go through the Export Manufactured Feed Agreement and bypass the CWB , but they have chosen, by policy, to "single desk market" the individual farmer's feed wheat and barley. Big Corporation's EMFA grain vs Little Farmer's feed grain creates a dual market. In the Board Backrooms, CWB licenses are granted to EMFA Corporations and denied to DAF's, creating that dual market.


d)The Creston Wyndell region was part of the Designated Area, but even before the legislation removed them from the DA, they operated as a dual market within the DA. They bypassed Board marketing and pooling. In the Board Backrooms, CWB licenses are granted to Creston-Wyndel producers and denied to the remaining DAF's. A viable dual market.


There is a dual market co-existing with the single desk as we write, that has been created by backroom policy, thalpenny, and CWB legislation allows it. We can all see it in operation. Your real concern should not be this co-existence, but whether the "single desk", as you crave it to be, can survive, only hanging by a backroom policy thread, and without a legislative lifeline.

Parsley

[chaffmeister]

Thalpenny:

Item #1: On one hand, you suggest that the value of the single desk is to capture premiums (and ensuring farmers don’t compete with each other, driving the market lower). On the other hand, sometimes after an Accredited Exporter (a grain company) has negotiated an offshore sale of Canadian wheat, the CWB has been known to go around the AE and approach the customer directly offering a significantly lower price (by as much as US$5 per tonne – much more than what the AE would get out of the trade). Rather than try to take advantage of a long-standing and trusting relationship between the AE and this customer, the CWB tries to squeeze the AE out – and the farmer pays with a lower sale price. What is the advantage of doing this? What is the value of the single desk in this situation?

Item#2: Your comment: “Could there have been a more powerful message to the marketplace than having the CWB withdraw from the market this fall?”

I think you are suggesting that the CWB’s withdrawal pushed prices higher. The real issue to the grain markets was the REASON WHY the CWB withdrew. The important message was simply confirmation that the Canadian crop was bad, perhaps worse than many thought at the time.

Consider this – the CWB had quietly withdrawn from the market – no fanfare, no news release. Simply notification to customers that, for the time being, until the CWB had a better handle on the crop, it would make no new sales. I would call this prudence on the part of the CWB.

However, before things became public, buyers simply went about their business, covering their nearby needs as best they could from whatever sources they could. In fact, if we consider the full impact of the CWB’s action (or inaction if you prefer), we should include the importation of wheat into North America.

Once the news of the CWB’s withdrawal hit the media, the market took it as confirmation of a poor crop; indeed, many took it as a message that the supply situation was worse than previously thought. You said it yourself: “One of the things in a year like this that is extremely valuable information is the available supply.”

So I’m not sure why the CWB should be congratulated for withdrawing from the market while you suggest to farmers that they shouldn’t withdraw (by refusing to sign Series A contracts). Wouldn’t farmers refusing to sign contracts provide the CWB with some valuable information – such as they aren’t happy with the price the CWB is providing?

Item #3: I think you missed TOM4CWB’s point when he talked about each farmer having different needs. You seem to take this concept to explain why the single desk is superior (because farmers might sell below where the CWB would sell).

The issue of timing of sales is never discussed by the CWB when it talks about the strength of the single desk. If there are premiums the CWB captures (as it argues) they could be totally lost (and then some) if the CWB sells at the wrong time (too early or too late). The open market allows farmers to react to the market based on their individual needs and risk tolerance; the single desk, however, assumes all farmers benefit equally from equitable prices. Unfortunately, what this is saying is that the farmers who could outperform the CWB in terms of timing of sales, don’t get the opportunity. And those that need cash flow need to wait for final payments (instead of all cash up front.)

Item#4: Your comment: “This debate also highlights that there is no such thing as a dual market. Once there is no single-desk, it is gone and it is an open market, so this should be called what it is - an open market.” You say this as if it’s a bad thing.

Single desk implies monopoly – no other players – period. BUT – a dual market is possible if you define it as farmers would have 2 choices (hence, “dual”): (1) they can sell through the CWB or (2) they can sell directly to a customer (this also means through a grain company). Two choices – the CWB or not the CWB.

If you argue that the CWB can’t survive in a dual market, could this be because you see it’s only strength is the single desk? If so, you must also support the notion that the CWB’s timing on sales is really no better than anyone else's.