No FPC on Feed Barley as of Thursday

[charliep]

Notice no fixed price values have been posted for feed barley on Thursday and Friday. Has anyone seen a press release? Does this mean 100 % cash pricing? Notice the EPO is still there. Interesting with a grain company offered feed barley cash bid (with full support of the CWB) is beating anything the pooling system offers (including malt barley).

[wd9]

ok Charlie, got me interested here. Need to know more. How can the CWB be shorting the malt side then? if prices are better on the feed?
As I read the PRO's it is an indication of possible prices, yet still nothing I can take to the bank as security such as a priced contract.
If they are in the game then where's their argument of logistical problems with shipping?
Now damn it if the weather improves I'd rather be combining than figuring out what the CWB is up to!!
any ideas any one?
thanks
Erik

[charliep]

Just talked to CWB represenative and they indicated that posting an fpc doesn't make much sense when grain companies are offering much higher elevator bids to attract feed for existing sales. Noted there is no CWB feed barley guaranteed delivery contracts.

[charliep]

From today's CWB bulletin.

Quote: "The CWB cancelled its Fixed Price and Basis Payment contracts for Pool A feed barley on Sept. 27. A wide-open Guaranteed Delivery Contract (GDC) has been issued for feed barley, which will allow the CWB to manage pool size in the best possible manner in an environment of very tight capacity for grain movement."

Not trying to suggest the boogey man. I just look for things that change unexpectedly.

Had lots of conversations around malt barley today. Most around the malt versus feed decision. One around a letter from a maltster about their contracts during the open market which have become null and void. All these conversations are difficult today by a feed barley system that is providing market signals and a malt barley system that provides no signals. As I indicated, I would be chasing the higher price market. Pain in the domestic feed and malt consumers will have longer term implications after the Europe has responded to price signals and the Saudi moves their business back to traditional suppliers.

[charliep]

Sometimes I get the sense I am the only one who looks at the fixed price contracts and tries to understand the mechanics.

http://www.cwb.ca/db/contracts/ppo/ppo_prices.nsf/fixed_price/fpc-desbarley-2007-2R-20071001.html

I note the difference between the FPC ($262/tonne port) and the PRO ($285/tonne port). $23/tonne discount. I also note the basis ($93/tonne over) and the adjustment ($43/tonne discount.

http://www.cwb.ca/public/en/farmers/producer/historical/pdf/2007-08/0708fpcbpccharts.pdf

You can look at the historical pricing to check basis levels out on page 29. Basis levels (2 row) have shifted from around $60 over Dec Western futures to $75 over to $90 over.

Signals

The $90 reflects the value of additional sales. The $43 under adjustment reflects the drag factor from existing sales.

The deduction to allow the CWB to manage pool risk (not farmer price risk) is high and reflects their lack of confidence about making additional sales. This is also a signal about the probability of the CWB achieving pool returns of $285/tonne

Assuming $52/tonne of CWB deductions, the return to a farmer would be $210/tonne for an fpc (2 row). This is equal to the offers being provided by the domestic/export feed market. If you believe the PRO there is an extra $23/tonne plus all the other malt barley payment CWB/maltster additions (trucking allowance, VIP, low protein premium, interest/storage) but you are accepting initial payment/taking the risk (perhaps reward) on pool returns.

[charliep]

Will note the 100 % EPO premium (Oct. 1) is $26.75 or a cash flow of $258.75/tonne basis port with the potential for payments above $285/tonne.

[charliep]

Should fess to a mistake. Will note the October 1 2 row malt barley basis was not $93 or $90/tonne (both used in the analysis above). It was really $90.92/tonne (a mistake).

As I go back to correct, I notice some interesting changes when there is a market move as with October 2. December futures off $5.10/tonne and fixed price contract off 40 cents/tonne. The adjustment remained at $90.92 (Dec.) but adjustment factor narrowed $4.50/tonne (now $38.50 discount versus $43).

[charliep]

Oct. 3 2 row malt barley fpc.

Dec. western barley down 60 cents/tonne. Adjustment factor narrowed by 50 cents. Fixed price down 20 cents.