CWB prices above market in the US

[TOM4CWB]

WASHINGTON--(BUSINESS WIRE)--Oct. 8, 2002--Representatives of the North
American Millers' Association (NAMA) testified on Friday at a hearing of
the International Trade Commission (ITC) which, along with the Department
of Commerce is reviewing antidumping and countervailing duty petitions
filed by the North Dakota Wheat Commission (NWDC). NDWC is seeking again to restrict trade in wheat with Canada. The U.S. Trade Representative declined to impose such restrictions in February 2002 in response to a previous NDWC petition.

In a written statement submitted with its oral testimony, NAMA said, "Based on the evidence and on the milling industry's experiences as daily
participants in the market, Canadian wheat is not unfairly traded into the U.S. market. In the strongest possible terms we urge the International
Trade Commission to deny the petition."

The NAMA statement highlighted supply and quality reasons behind the necessity for the imports in all years, but especially in 2002 when USDA
estimates the wheat crop as the smallest in 31 years. And each year, according to the NDWC's own quality reports, significant portions of the state's crop fail to meet the milling quality grades of U.S. Number 1 or 2.

Testifying for NAMA at the hearing were: Randy Marten, Vice President, Miller Milling Company, St. Louis, MO; David Potter, Executive Vice President,
American Italian Pasta Company, Kansas City, MO; James Meyer, Executive Vice President, Italgrani USA, Inc., St. Louis, MO; John Miller, President,
Miller Milling Company, Minneapolis, MN; Greg Viers, Wheat Purchasing Manager, Barilla America, Inc., Ames, IA; and Glen Zearfoss, Vice President,
Logistics, New World Pasta Company, Harrisburg, PA.

The NAMA spokesmen each stated, that in their years of purchasing wheat from Canada, they had never bought from the Canadian Wheat Board at less than
market prices. "The bottom line is that U.S. millers will be facing quantity and quality constraints again this year, and Canadian imports will play
an important role in filling that void," according to the NAMA statement.

NAMA has 42 member companies operating 164 wheat, corn, oat and rye mills in 38 states and 150 cities. Its membership represents about 90% of the
total U.S. capacity.

Media Contacts: To read the complete statement, go to http://www.namamillers.org/is_briefs_ITCstatement.html


Tom

[TOM4CWB]

Thalpenny;

We need to go through actual numbers, to see what you are writing about, and if what you say is true.

USDA Portland cash price for October 9, 2002

US 1 Dark Northern Spring Wheat (with a minimum of 300 falling numbers and a maximum of one percent total damage)
12 pct. protein $5.68-5.76 dn 3-5
13 pct. protein $5.76-5.84 dn 7-5
14 pct. protein mostly $5.91, ranging $5.84-5.92 dn 7-5
15 pct. protein $5.88-5.96 dn 7-5

The Canadian dollar Dec 02 closed at 1.6021

This leaves a #1CWRS 13.5Px equivalent 1DNS 14Px at $5.91USD

$5.91 times CDN exchange of 1.6021 is $9.47CDN

This is $348/t CDN instore Portland, October delivery.

Today the CWB PPO was quoted at $289.00CDN, with the best basis offered by the CWB of $24.72/t, is a total of $303.72CDN in store Vancouver BC.

With the CWB Price over $40/t CDN short to “designated area” farmers, giving you all the benefits on basis possible, how do you figure CWB prices are higher than US prices Thalpenny?

The Quality and supply benefits the CWB offer my customers, are on top of the missing 40/t, cause it costs me as "designated area" wheat producer to provide these services to Domestic and US Millers as well as our international customers.

It costs us as "designated area" wheat producers great deal of blood, sweat, and tears to produce wheat... Thalpenny, .....especially this year.

All the US Millers prove is that you are obviously giving them a steal of a deal, or they would buy their own domestic wheat from their own communities in their own country!

[charliep]

Not to throw water on this debate but I have to ask if this is the right direction to this debate. A comment I will make is the CWB has generally sold wheat into the North America market at a fair price based on quality charistics.

The real discussion comes down to the CWB ability to price differentiate between different markets (this includes all customers - export and domestic). Price differentiation is the ability to sell the similar quality grain into markets at different prices on the same day - there isn't necessarily a relationship between quality and price. This above all else is the issue that gets our competitors mad. The real question for western Canadian farmers is whether this ability in fact puts more dollars in our pockets? Would (as the CWB sometimes suggests) all premiums be given away or the market change into something different? What would this market look/feel like?

The other area I always find of interest is timing of sales. A pool is effectively an average price for the year. Does the CWB do a better job of timing sales than you would as a farm manager? Because of the disconnect between the pooled price (an average price) and the daily cash price, does this reduce the ability of a farm manager to utilize appropriate risk management strategies for their business?

[TOM4CWB]

Charlie;

There is a reason the Millers like CWB services, and that the CWB has increased market share.

The question that must be asked, is, what are the real costs to "designated area" wheat producers, and is this method of selling our wheat the best way to maximse our returns as farmers?

CWB risk management that is offered to North American Millers and value adders comes at a cost, a cost that "designated area" wheat and barley producers must pay.

Many Many marketers have sold products into the global market place... and a large percentage of them go broke, costing their suppliers dearly... and at times bankrupting those suppliers in the process.

Just because a marketer has a major presence in the market place does not mean what they are doing is fair or sustainable.

Take a look at ENRON

Take a look at NORTEL

There are thousands of other examples.

I, if I have any business capability to manage my and my family's assets at all, as well as my obligation to other "designated area" growers, am obligated to ask the really hard questions, and have my marketer prove beyond the shadow of a doubt that what is being presented is actually the truth.

I have been asking the questions, as have others, hard questions, and the CWB refuses to answer them.

You yourself have asked hard questions, and the CWB has failed to answer them.

And since Jail terms have created political prisioners in this province, answers had better be forthcoming that are sufficient to prevent the need for us as farmers to go to jail to protest CWB spin and waste of the very limited resourses our farms have left.

The CWB has not proved that they have changed their ways Charlie, the July PRO and PPO basis fiasco's are proof.

Someone from the CWB should go to jail for what has happened...

It is extremely sad that Director James Chatenay who is the "designated area" director who is the least deserving of paying the price for CWB mismanagement, is scheduled for prison.

Yet he is responsible enough to understand, that the only way to serve the CWB's long term interests to really force CWB into change that will actually result in the long term viability of the CWB Corporation, is to serve prison to expose CWB's present failures.

Thankyou Charlie and Tom, you are causing the real issues to be exposed and understood, and that is really a needed and a helpful benefit to and for us as farmers in all of Canada!

[Kasro]

Dear Mr. Halpenny,

With respect, I have to say that you seem to be grasping at straws to support the CWB in its present form. And in so doing, you seem to be revealing to us that you are unable or unwilling to make your assessments with the cold hard realities found in the marketplace.

You can use the political statements of vested interest groups to make your point if you wish. Tom, have you ever gone back to your automobile dealer and said you paid too little for your car? Would you as a consumer, testify before government that the car dealers were charging less for their products than the marketplace would suggest they should?

I prefer to make my assessment of performance of the CWB by comparing their prices with known verifiable prices available on an open marketplace.

Today, October 9, 2002, this is what I find. Canadian $$.

CWB PRO 1CWRS 13.5 $8.38 basis Vanc
CWB PRO 1CWRS 13.5 $6.99 basis Virden

US Cash 1DNS 14.0 $9.45 basis Portland
US Cash 1DNS 14.0 $8.06 basis Virden

The CWB PRO is $1.07 less than the price that would be available if the elevator in Virden could buy my wheat, and with the same margin and costs, move it onto the international market. And this is after values have slipped 25 to 30 cents from their highs.

Mr. Halpenny, based on this, my assessment is that the CWB is not going to maximize my returns. And it seems like a much more useful and credible analysis than going by what the US Millers are trying to get politicians to believe. Their interests are too obvious. With my apologies in advance, I think so are yours.

Yours truly,
Kasro

[charliep]

I should let discussion carry on but I have to highlight the CWB is a pooled price. With an inverse market and an average price, there is significant risk the CWB will overshoot actual payment results on a PRO series this fall. Thus the logic for using the CWB EPO alternative.

I hate to get theoretical but in a normal inverse market, the incentive is to sell cash/deliver in the short term. If you are optimistic about the market, you would replace your inventory with calls in lower priced deferred months or by buying futures. Sell expensive/buy cheap.

A pooled price is based on aspects of sales including who they are made to and their timing. The problem for a farm manager is there is no direct tie between a pricing/delivery decision and results of the pool.

My objective is not to interfere with the debate but make sure everyone has an understanding of mechanics of pooling versus cash sales.

[charliep]

Kasro, I looked at cash prices quoted at Bottineau, ND. The cash price quoted was $4.43/bu for 1 DNS 14. That's $7.08/bu Cdn. Hoow is this explained?

There are different guidelines for transportation in the US vs Canada. The pricing is largely done off of the MPLS cash price, not the PNW price. We can expect no different to happen in the absence of the CWB.

So the hard evidence you presented doesn't really reflect what would happen in reality. I don't think anyone should be fooled into thinking that the PNW cash price would be reflected back into the country at the same basis levels.

I think Charlie shed some light on the difficulties of comparing a pooled price to a spot price. As I have said many times, in a rising market the pool price will lag and farmers will choose a spot price. IN a falling market, it will look more attractive and farmers would choose to deliver to the pool, burdening supplies.

Tom

[TOM4CWB]

Thalpenny;

Every single time I sold my grain in the US, all 4 years, the prices were always based off the PNW cash daily price.

The beauty of the commpetitive pricing system, is that we can build relationships that yeild real premiums.

I will give a good example.

I needed to sell my Flax, for cash flow reasons last week, the bonus was that I believed we had come to a fall high on flax.

I did not need any quotas, or a permit book, or any other persons permission to sell this flax.

I checked my local elevators price.

It was $9.33/bu.

I knew this was a pretty poor price.

I simply listened to the noon Alberta Grain Commission (AGC)reported prices, and they were quoting $9.70/bu.

I went down to my local elevator, showed them the AGC web site, and informed them that any price report on this site was an average of three different companies, and that it was obvious the price was good province wide.

They asked me if it was OK to do the deal the next morning during trading hours, I agreed.

My farm rep asked, what about if we were to offer more than the average of the three companies? Would this be fair?

I answered that if this company could give more than the average, I would be really happy, but that I was just expecting the average price.

The next day, by lunch, I had my money, and deposited all 100% of it in the bank.

Guess what Thalpenny, they paid me $9.90/bu, twenty cents a bushel more than I asked for, fifty seven cents a bushel more than they were innitially offering!

Now Thalpenny, I hope you can understand that just a little salesmanship is valuble is extracting a premium for our products that a hungry world needs.

SO maybe talk to the folks in North Dakota you would like to deliver to, offer to commit to a long term relationship, deliver quality, build trust, and then don't be surprised when a premium price well above the quoted price is offered to you!

Isn't that what we need and yearn for as farmers, being appreciated, and appreciating those who we work with???