FPC basis levels

[charliep]

rook

Noted your question but don't have time to adequately answer (holidays tomorrow so cleaning things up).

You are right about the adjustment factor reflecting existing sales where money has been deposited in your pool accounts. It also is a recognition that the pooling process only occurs once a month. A markets rise within the month, the existing sales will look poorer relative to the current market and the drag factor becomes bigger. As markets fall in value, the existing sales look better/adjustment changes to reflect. It has become a counterbalance to stabalize the fixed price contracts around the PRO. Good, bad or indifferent is up for discussion.

Is this an indication of the CWB comfort with the PRO. Will have to think about. I use the EPO premiums (particularly at the 100 % level) as a better indication of risk.

[disker]

Charlie,
I could not agree more with you about the confidence level of the PRO. One would think that if that PRO was a confident one then the basis would have come back to a respectful level and they could have used the adjustment factor if the markets ran. I get the feeling that there is little confidence in that PRO number and they are just trying to appease the pool lovers and make them think they are going to get a decent return or they are scared to death that this wheat market may bolt higher and they would have $40/tonne adjustment factors that would cause a riot. Personally I would take a high adjustment factor for a month so that I could price out my futures only contracts.(HA HA)
If there was more confidence in the PRO the EPO numbers would be something more realistic.
I am trying to speak with someone at the CWB about these basis levels but I am getting the 12 secretary shuffle hoping I will just go away.
I hope people keep writing and thinking about these issues and don't get complacent just because the prices are higher. Losing 10 or 20 cents/bushel in these programs is still 10 or 20cents/bushel whether the wheat is $3 or $5.50
My thoughts
Disker

[charliep]

Perhaps equally important is the fact that most of costs are not market related but rather reflect the charge/premium the CWB charges to manage their risk (not the farmer who participates in the pooling system) relative to the pooling accounts. Part of this is administration, risk and time value value. Part is the cost of using futures, options and/or derivative markets. Part could be a potential profit center to either pad the contingency fund for down the road and/or deposit money in the overall pooling account (similar to 2004/05).

[charliep]

A birdie whispered in my ear that I should highlight today's adjustment factor on fixed price contracts. Ouch!

[TOM4CWB]

Disker,

I too am on a futures only pricing from January... the CWB is really going to clean up on the basis on us unless something happens real soon.

This connection between the pool and fixed prices... ESPECIALLY for those who forward price over 6 months into the future... creates a huge risk exposure. 2X an ordinary deffered delivery contract. I note the Ontario Board has a reasonable fixed basis for off the combine 2008.

The CWB is not providing reasonable services... they are simply dreaming up new and innovative ways of milking folks who can't stand or afford using the CWB pools...

[parsley]

melville

Changes to some organizations will not come at all unless there is a mutinous approach.

Surely u have learned that by now.

A parallel would be having a conference call with the appointed Board of Directors of the Berlin Wall.

LOL


Parsley

[TOM4CWB]

Parsley,

Two gaurds... (I mean CWB district managers) are standing on the Berlin Wall... (I meant were looking east to Ontario) and the one asked the other:

Are you thinking what I am thinking?

The other nods... in agreement.

The first guys says: You had better keep your mouth shut or you will get us both thrown in Jail (I mean get fired and need to get a real job)!

I know Benny... it is just like stealing candy out of a toddlers' Easter basket for you and the NFU crew!

[parsley]

The West has been Easter's basket, hasn't it?