anybody sell some wheat

[disker]

Hi,
Just curious how many have been selling on this rally. Tried for half an hour this morning to fax in some FPC contracts, also tried calling but the lines were busy. Guess I should have done it last night when we got rained out. Too bad one could not sign up on the net, would like that over faxes.
Anyone hear why they widened the basis a couple bucks the last couple of days, over and above the adjustment, thought this was only supposed to happen at PRO time. It will be interesting to see if the CWB price falls penny for penny when the correction hits or if they are going to cushion the fall like they cushioned the rise(about 1/3 adjusted off).
Later

[terralex]

I am holding a great basis contract with them right now. Still waiting on fixing the futures.

I have notice that the basis changes daily, usually not as much as it has in the past week.

When the CWB says that PPO's make cents. They mean it. All you end up with is a few extra cents over the PRO.

You could have got and extra dollar out of this last rally. Now that is money!

[charliep]

Off topic but interesting to note the increased use of the CWB producer pricing options by farmers. Means a whole new world for the CWB and how it considers/acts on their pricing risk. They will no longer be 100 % long the market/average sales over 18 months but rather will have to manage the risk around the quantity sold under the PPO's. The farmers using the producer pricing options are still picking up the tab on the CWB risk premium as well as depositing significant amounts in the contingency fund.

What brought this up by the way is the level of use as reflected by the inability to phone the CWB. Amazing how comfortable farmers are getting in using these products after only being around for 6 years. Almost all farmers I talk to as well as those who participate here are well aware of the flaws with the current producer pricing options.

[disker]

terralex,
With a basis only contract does that lock in the adjustment factor or if you pick the future price today do you not have to add (subtract) the adjustment factor out? I know when I did the futures only contracts it locks the adjustment factor for that day, could be a few dollars a tonne in this market.

[melvill]

disker, the adjustment factor is locked in the day the basis contract was signed. If that date was before Aug 1, when the adjustment factor was $0.00, it stays at that. If a basis-first basis contract was done after Aug 1, the adjustment factor is locked in on the day the contract is signed. If a futures-first basis contract is signed after Aug 1, the adjustment factor in effect on the day the basis is locked in, is the one that applies. Clear as mud!?

[Braveheart]

We just priced a FPC today for winter wheat. The CWB area rep had just been at the local elevator and had been asked why the basis was going so wacky. His reply was that because uptake on pricing options was so strong, adjustments were being made to contribute some monies to the pool accounts or they just would not work. (I can't believe he said this in public.) His further comment was (paraphrased), that they were still getting used to this dual marketing situation. He actually said "dual marketing".

So, we're padding contingency funds, and now helping pool accounts? To me this is like crossing the streams of some ghostbuster ray gun, just should never happen.

But seriously, this can't be legal. Someone else is benefitting financially from gains created by holders of FPCs. Can anyone tell me is there the makings of a class action lawsuit here?

[melvill]

Better would be a clear explanation of how the accounting process works for grain inventory, futures trades & hedging activity, the contingency fund and sales all tie together. There may be a perfectly legitimate reason for the FBRs comments but we'll don't know because the process isn't understood very well.

It seems to me the Board has a big reponsibility to explain its operations and, so far, in my opinion, it hasn't done a very good job of that. Hope there's a director or two that reads this.

[TOM4CWB]

Braveheart,

I too just got skinned on the CWRS and CPS basis/Adj. factor today.

There is more distortion/CWB tookage factor on my CPS... than the 1.75/bu profit/bu above the cost of production.

A sale of my CPS to India... at over $390/t... should net me farm gate much more than $216/t !

Any one care to explain how the "Single Desk" netted me any "Premium" in this transaction?

[NeilS]

I just locked my futures price on my basis contract. Priced the whole thing. Will I regret it? Possibly, especially if I see $12 prices as some are suggesting.

As I see it, all talk is bullish right now, and that sometimes signals a top. We shall see.

[crusher]

Terralex and NeilS,

Good marketing!! I'll be extremely impressed if you hedged the dollar around 85 too.

[charliep]

Just a note that the CWB has updated their historical charts. I look at these charts regularly.

http://www.cwb.ca/public/en/farmers/producer/historical/

A couple of things I find interesting.

The first is the fact the fixed price basis (should call adjustment) has weakened for the two nearby contracts but has strengthened for May and July. Reflects the widening inverse (old/new crop). Just for discussion, is it more worthwhile to defer the fixed pricing option till later in the year? Obviously weighing off the opportunity presented by some crop problems during the winter versus monster world wheat acres (assuming this happens - all crops are competing for acres this year). Also considering how wide this inverse can get versus when/if it snaps back to something more normal.

Just raising for discussion.

[charliep]

Likely for another thread but also note how closely the DPC is following the FPC - almost as if it is being managed to do this. The DPC and the FPC seem to be managed to take out the volatility (read pricing opportunity) that US farmers are getting. Perhaps an indication that CWB contingency fund took a major bath on the DPC program in 2006/07 (annual report will be intersting).

Equally of interest to me would be to have the producer direct sale price (available only with a phone call) graphed along side the FPC and DPC.

[NeilS]

Crusher

Sad to say, no currency hedge by me. Non the less, I am satisfied with my net $6.90 per bu for my wheat.

[parsley]

Oh charliep,

The producer direct sale buyback price is an arbitrary figure pulled out of an Easter type hat by a Orchard bunny type, on certain days and setting certain prices.

Prices can change by the minute, or by the buyer.

Perhaps the chart you speak of would have to reflect the buyback price of the folks the CWB likes and another chart that reflects buybacks that the CWB dislikes, as there is a PERCEIVED difference between the two.

The chart showing the difference in buyback prices between Board lovers and Board haters would be the valuable one.

.....That is, if the difference exists, other than in the minds of over 50% of those surveyed in the DA who now WANT TO DUMP THE CWB.

Parsley


btw, that number will go up. 70% next time. What say?