Pooled vs spot

[craig]

CWB media relations are at it again telling us how much better we are off than our American neighbors. Everyone knows you can't compare pooled vs spot prices. So the question needs to be asked. If the pooled price is better than an averaged spot price over a 12 month period then we would assume that over a 12 month period the PRO should be higher than the spot price at least 50% of the time. I need someone to show me when the PRO was higher than a U.S. Spot price at anytime in the last 6 months. Reality is that the goal of the CWB media branch is not to bring clarity to this issue but to discredit those who aren't prepared to accept their dribble.

[chaffmeister]

Craig:

Not once this crop year has the PRO been above the (US) spot price.
Not once last crop year was the PRO above the (US) spot price.
On any CWB grain.

I posted the following on 2 Row barley for 06/07 – just after the finals came out:

2 Row final = $202.02
From July 1, 2006 to July 31, 2007…
- the US 2 Row price (basis Portland) achieved an average price of $202 on Dec 29
- the EU 2 Row price achieved an average price of $202 on Oct 27
- the CWB selling price (the “Card” price) achieved an average price of $202 on July 28. Before the crop year even began!!

Between Feb 24, 2006 to Aug 10, 2007, the difference between the PRO and the US price ranged from $2.67/tonne to $48.26/tonne. The average difference was $27.60/tonne. The PRO was never above the US price.

You are absolutely right about the CWB PR department. Unfortunately, its more effective than the marketing department.

[charliep]

Will also note the US prices are cash on delivery. Farmers who used CWB producer pricing options to generate cash flow/manage price risk (there won't be many by the way) would have to include the discounts to the PRO over the year as well.

[TOM4CWB]

Dear Craig,

There is a VERY BIG problem for the CWB here.

In 1998 I sold a large volume of wheat through the buy-back... when the US spot price was below the CWB PRO.

In July, it is very easy to have a very good idea where the pool price will end up at...

SINCE that time, the CWB has refused to allow buy-back prices to track US prices when they in reality are below the CWB pool price.

Of course the question is asked... why would anyone sell to the US when spot prices are lower than the CWB pool price?

Very Simple, US quality and discount/pricing/grading systems almost always pay a huge premium over CWB pool spreads... which are used as the PPO/FPC/DPC basis spread to accommodate quality difference on CWB flat prices.

Clearly the CWB is now keeping the buyback price above the PRO, which of course distorts the whole process itself.

The CWB system fails to follow the CWB Act. The managers have chosen to manipulate the whole system, particularly since the 2002-03 pool deficit made the problem glaring and very hard to miss.

What the CWB has done with organic wht/bly appears at first glance to be a reasonable "solution" for all CWB grains. A set fee, the pools isolated from export licenses!

Then artificial distortions would be eliminated from the cost of attaining an export license from he "designated area".

Except export licenses are supposed to be free, and paid for by the federal government.... according to the CWB Act itself.

[just_wondering]

Is there anywhere that tells what the CWB ask price is on malt barley?
Maltsters all say that they are paying high prices yet they never pin down #'s. Why don't they publish what they are paying, is it simply fear of CWB retaliation?

[wmoebis]

I don't think they ever would.

Do you think WestCan wants Canada Malt to know there deals? Would Walmart tell Zellers what they are paying for goods or do you think their suppliers would want them telling?

[charliep]

The CWB asking prices (Thunder Bay) are graphed in the western producer in the price survey area, market section (January 3 issue page 8). I note asking prices - not transaction prices (no one but the CWB knows the timing of sales during the year - the maltsters price major volumes at select times during the year). If you want to know prices for export business done in competition with European malt, you have to look at the E-malt newsletter (http://www.e-malt.com/). There are a couple of Aussie newsletters as well. Again, you have to look at timing of sales to understand the relation with the CWB pooled price.

Looking at this last issue, the TBay for special select 2 row is about $375/tonne. The price for Montana two row (right column) is US $6.72/bu or somewhere in the Cdn $305 to $310/tonne range.

Your PRO today is $287/tonne port or $230/tonne delivered Alberta elevator.

[charliep]

wmoebis

I suspect the pricing process between the CWB and maltsters is realively transparent based on the posted price (at least between each other - the farmer is in the dark on this process). There is some negotiation around terms and quality as best can be defined by our commodity based grading/pooling system. There will also be differences in timing of when contracts are signed. You also have to look at the different customers for different maltsters which will be a blend of export offshore, export US and domestic brewers.