US PRICES FOR DURUM AND HRS

[chaffmeister]

ag.student:

Private grain company buys wheat at $4, holds it, then sells it for $7. $3 profit from taking the risk and being right. If you think the farmer should get this profit instead of the grain company, then you also have to consider - what if the grain company is wrong and ends up selling the wheat for $3? Should the farmer take the losses as well as the gains? (The right answer to this hypothetical question is “yes”.) But if that’s the case, why would the grain company take the risk at all? Why bother?

Interestingly, what you and I have described, in a way describes the CWB. Whether the CWB makes a good sale or not, the farmer gets the gain or loss. So what incentive does the CWB staff have to really perform well?

To compare properly, you should compare the price the farmer sold and the price the CWB sold – it’s immaterial when the hypothetical grain company sold or what they got. If the farmer held his grain and waited for $7 – he would get $7. Timing is everything.

FYI - the $1.63 you mention about CWB costs aren’t CWB costs –the webpage you gave shows total deductions – freight and handling – not CWB costs.

[chaffmeister]

ag.student: you’re right – multiple buyers compete. Need to be clear as to where they compete.

End-users compete for the product – this is the D in an S/D and is a factor in the “market equilibrium” you mention.

Grain trading firms – elevator companies, exporters, dealers, whatever – compete for the handle. This is NOT a factor in the S/D. It is a major factor in basis. Grain companies translate buying prices to suppliers (farmers) and farmer selling prices to the buyers. Their demand is simply reflecting end-user demand; their supply is simply reflecting farmer supply.

Grain trading competition is what keeps the cost between buyers and sellers low. Grain traders want to sell “at the market” or higher – there is no glamour in selling below “the market” – the price where the supply and demand curves meet. Remember – once you’ve got the sale on the books, you have to compete for farmers’ grain against others who have sold at the market (i.e. higher prices). They’ll have a better buying price (because they have a better sale price) – all else being equal – and you’ll find it difficult to compete unless you shave your margins or find some way to reduce your costs below theirs.

Competition disciplines the market.

However, there is nothing that disciplines the CWB. It can (and does) sell below the “market” – the price where others are willing to sell. And because it doesn’t compete for farmers’ grain, it can get away with it. But farmers pay the price.

[SASKFARMER3]

Mondays prices

Milling Spring Wheat Sep 30, 07 -1.21 7.05
HRW Wheat Sep 30, 07 -1.81 6.77
Milling Durum Sep 30, 07 -186.50 11.50
Terminal Durum #2 HAD Sep 30, 07 0.00 10.90
Terminal Durum #3 HAD Sep 30, 07 0.00 10.40
Terminal Durum #4 HAD Sep 30, 07 0.00 9.40
Oats Sep 30, 07 -0.46 2.10
Corn Sep 30, 07 -0.76 3.00
Oil Sunflowers Sep 30, 07 0.00 15.40
NuSun Sunflowers Sep 30, 07 0.00 15.40
Canola Sep 30, 07 0.00 16.80
Peas Sep 30, 07 0.00 6.00
Flax Sep 30, 07 0.00 10.90
Soybeans Sep 30, 07 -1.89 7.90
RBST Barley Sep 30, 07 -192.70 5.30
Conlin Barley Sep 30, 07 -192.70 5.30
Feed Barley Sep 30, 07 -193.00 5.00
New Crop Flax Sep 30, 07 -8.07 0.00
New Crop Oil Sfs Oct 31, 07 0.00 0.00
New Crop NuSun Oct 31, 07 0.00 0.00
Lacey Barley Sep 30, 07 -192.70 5.30
Legecy Barley Sep 30, 07 -192.70 5.30
New Crop Soybeans Sep 30, 07 -9.79 0.00

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[silverback]

Must be nice to farm in ND right now.

[silverback]

I bet they have elevator space also.

[cropduster]

9.60 for SWS.......Saskfarmer......AGAIN I ask. Got your truck loaded????? 1-877-554-2106........PLEASE.

[parsley]

Got room for me cropduster?

[cropduster]

Most certainly Parsley!Just wish Saskfarmer would call so we can start organizing!