CWB Producer Pricing Options

[charliep]

Just a note that the first Daily Price Contract prices have been released.

http://www.cwb.ca/db/contracts/ppo/ppo_prices.nsf/daily_price/2007_index.html

All the DPC values are down the $5/tonne the CWB talked about to cover risk. Quote from the CWB "The CWB intends to increase the risk discount by approximately $5 per tonne from the current 2006-07 program levels to offset the higher level of basis risk, which means the daily prices offered in 2007-08 may be lower than historical comparison may suggest. However, the changes to the way daily prices are established will improve the long-term viability of the DPC program." If this hadn't been a factor today, prices would have crossed over the crop year pretty much unchanged (the increase in the loonie would have offset the impact of higher futures).

Spreads for higher most grades and proteins unchanged with the exception of lower grade/protein CWRS (now a slightly wider discount). The base grade on winter wheat is now special select.

[charliep]

The first fixed price of the new crop year is also released today including the adjustment factor.

http://www.cwb.ca/db/contracts/ppo/ppo_prices.nsf/fixed_price/2007_index.html

You'll be happy to know your CWRS, CWWS and CWES have been adjusted by a further $2.50/tonne (basis just got uglier by $2.50/tonne). The pleasure in the case of prairie spring (white and red), winter wheat and soft wheat spring is $3/tonne. Your historically ugly basis (hate to call it that because it is the relationship with the PRO) just got worst.

[craig]

Reality is the DPC and FPC are still tied to the PRO and because the board has no way of successfully using the futures to improve returns to producers means that these program will never match open market value and opportunity. If the board claims they will be offering more pricing options there is a serious need to look at ways producers can move price risk to someone else. The current options mean that the producer takes all the risk and the CWB takes none. There is a real simple reality. Producers want the opportunity to sell into the spot market when they see what they believe are good prices.

[silverback]

The key is being able to sell when we NEED to at a price we find acceptable.

I guess CWB supporters have never had to wait for quota to open up again.

[btjadenlepp]

the first thing i noticed was the same point charlie made: change from yesterday was about the same as the $5/t stated increase in the 'discount for basis risk' or whatever the fancy title is for their fudge factor.

anyway, now that we have a more certain starting point, which is frankly better than i expected based on the price declines we've seen in past years at the start of the pricing window for this program, doesn't this mean cash market gains in u.s. wheat pricing should be mirrored in this pricing option?

if that's right, i'm inclined to wait with pricing, but then i also don't see a lot of downside in the wheat market near-term. this is seasonally one of the worst pricing windows for the dpc and it's already ahead of the pro.

does this strategy make sense? wouldn't it be great if whoever at the board comes up with these pricing programs were to post their thoughts and tips here?