Whats with the double deductions on feed wheat when using fpc?

[poorboy]

The weather has reduced some of my wheat to canada feed that is still in the field to harvest.

I lots of fpc on wheat and if I was to deliver it today I would get the fpc based on 1 cwrs 13.5 protein, and then the reduced initial payment is 47.20/tonne, plus on the fpc site it lists the feed wheat additional discount as 31.80/tonne.

Whats up with the additional 31.80/tonne discount? There was no mention of it on my fpc signup in July, but it is listed now and changes in value daily.

Make sure your wheat grades a 1,2 or 3 before signing a fpc!!!

[kamichel]

The discount on CWSWS wheat is listed as 1.43

[charliep]

If you have feed wheat, you are likely better to get a neighbor to fill the contract (realizing there could be some money exchanges hands but not as much as expected given no adjustment factor on July contracts) or pay the penalty to get out. Feed wheat will capture a better price in the domestic feed market with caveat will depend somewhat on location. Soft white spring is a somewhat different thing given it will be discounted heavily in the local feed market (likely will not roll or grind).

[kamichel]

Charlie do think there is any chance that some of the poorer grades good still make grade this year where other years they would not. Since demand is so high, just wondering.

[mcfarms]

nope-sorry to say they may even grade harder as everyday there is more feed wheat and less to blend with.
Don't get your wheat tested for falling numbers it may make you crazy. Or maybe do then if the numbers higher than 300 ask everyone you can why we don't have falling number testing in our grading system YET.

[mcfarms]

That said if you are a gambling man wait until after the fall Western standards meeting at the end of October the CGC does try and work as much as the major downgrading factors into the 3's as they can without affecting milling and baking quality. Thats when the standard grading samples for 07-08 will be approved.
I would so frost is likley the main downgrade this year in our area of south central Alberta.


And then ask why falling numbers haven't been implemented YET.

A personal little issue of mine....

[kamichel]

Just talked to CWB about my fixed contract. One day feed discount of 38 cents next day 1.43. Just doesn't seem right that I should have to take such a hit. If I priced lower to start then I should have a lower feed deduction. Not the same feed deduction of someone who settles on the current pro or current fixed price. Its like my grain will get sold if feed for way under market value or someone will pocket the money somewhere or perhaps it will go to top up the pro. At least when other grains get downgraded the price for the feed grade is usually the actual price that the feed is at the moment. Purhaps someone with more pull than me can bring this up with them. Like when a farmer is down the CWB will dig the hole. Still hoping its not feed though.

[poorboy]

Sure makes me nervous committing poor #3 to a fpc as well. If it should be graded a feed in February, the cwb deduction may be $4/bushel by then. The deduction number keeps changing all the time, yet the value for 2's and 3's is set only when they adjust the initial payments. I am sure that at times of the year the 2,3 and feed wheats may even sell at a premium to the # 1 grade, so why don't they change in value daily like feed wheat?

Just venting.

Not nice knowing your wheat is a poor 3 or good canada feed and you can't lock in a good price on the fpc because you don't know the feed discount, and if I sell to the non board feed market I am guaranteing that my wheat will never make a #3.

[kamichel]

Charlie just trying to make sense of this. And the CWB person I had on the phone also said well why don't you just buy out the contract, dam near smashed the phone. Its not so simple and not so fare. Ok so I priced low. My buy out today would be 1.66 per bushel. Or face a discount of 1.43 per bushel. Either way it is a screw job. Because feed or ethanol grain is only a discount of 10 cent to 2 dollars depending on location. To put it another way , Say I sold for 4.68 net to me. I get feed discount from the board and get only 3.25, Why should my grain be sold at 3.25? Feed wheat has not sold here for 3.25 or the past 17 months or more. My argument charlie is that feed should be priced at settlement day. Not a deduction of current pro. Anyone who priced early and ended up with feed is getting a royal screwing. Would like to hear your comment.

[TOM4CWB]

Charlie,

I see Aussie feed barley prices @ $430/t... and just shiver at what is going on down there!

THink about what feed wheat is truly worth (more feed value than barley)... the CWB is simply saying they are too lazy to do a good job on marketing... otherwise they could offer much more if they were willing.

If the private trade offers an offside basis to say they don't want to do the work... that is one thing... the "single desk" does not have this privelage. Market the feed at a fair price... or give up the "Pro Bono" Feed Policy and allow us as growers to arbitrage the international market! THis IS GARBAGE!

[TOM4CWB]

kamichel,

Call your MP and Honourable Minister Ritz. I am sure MP David Anderson is full on side with your issue... we all need to put the screws into the CWB issue on feed.

In 2004 the CWB got out of the bind by giving the futures gain back in cash... and letting every one out of contracts that got feed. How tricky.

In 2007... the loss is there... no money to refund... and the CWB is putting the screws to us!

Fastest way to CWB end possible... put the screws to the folks north of HWY 16... not at all smart!

[charliep]

You are asking me to defend the undefendable. What is needed on buyouts is to be very clear on where the calculation for money that is being asked from comes from. If it were a cash market, the CWB would reference the current cash market or talk about replacement cost. Today, the choice is CWB penalty with no discussion of where comes from. There is no right of appeal. Maybe this last point is mute in the non board but at least you can take your business elsewhere next time.

The reason I suggest a neighbor is you likely have a better basis if earlier pricing - prior to the May PRO would be $5 over or better versus -$7.51 today. You can also save the person the $19.75/tonne screwing on the adjustment factor. Whoever fills this contract has close to a $30/tonne benefit over signing a FPC today.

Might also be patient and wait to see for sure a feed wheat. Given the tight world supplies, we may be surprised what goes as milling quality. That comes to what the down grading factor is and what the potential for blending is where you deliver. You may also want to look buying calls or offseting your position contract with a futures long position futures position on a market dip while you are waiting to sort your contract out.

I apologize for not 100 % going after the CWB. Lots of problems with the contracts that will not be fixed with another set of producer surveys - the need for action has come and gone if nothing else to deal with the perception the producer pricing options are nothing more than lip service/a revenue source to pad the contingency fund. An open market would force these changes (no one would contract with the CWB under the current flawed sytem).

Actually is good to have the current directors allowed to use the contracts - they can experience first hand the problems (at least the one that have been around for a while).

[Steve_Winkler]

I feel your pain guys. I have about 440 acres of CWRS wheat sitting and waiting to be combined. Looks like a good yielder 50 bu./acre anyway, so 22,000 bu. that I would dearly love to price at the FPC price of $304/tonne!! But I am quite certain it may be feed by now with all the crap weather we have had. Gotta hope this price hangs in there for a few more weeks and get some agreement on grade from my elevator. I sure don't want to price anymore and then have it graded feed and lose $30,000. The FPC is great if you have #1 13.5 or even #2 but hang on to your ass if don't and that just ain't right.

Good luck guys.