For Cottonpicken - a thread on the CWB

[chaffmeister]

Although this was started at Cottonpicken's request, all others are welcome.

OK, so let’s say you’re the marketing manager at the CWB and Indonesia is in the market for 100,000 tonnes of wheat. (Assume we don’t care what kind or grade – let’s keep this simple.) Market fundamentals are terribly bullish (again, let’s not worry about the details). Trouble (from your perspective), is the market (futures) price is at the bottom of a trend channel – not a place or time you want to sell.

What do you do? (As the CWB, you have two options: you can sell or do nothing.)

[SASKFARMER3]

OK chaff how much wheat was moved off the combine by the CWB in Sept and Oct and November at our point nothing. No cars etc. But we moved Canola peas etc.
So if the price increase happened in late October and November then exploded in Jan don't you think this genius who has all the information would have seen that their was going to be a shortage and waited for this time period. So our PRO would be what 12 - 14 not 8-9. They missed it and their the experts yet most farmers new in November this one was going to go.

[SASKFARMER3]

You do nothing!! If they want the Wheat that bad they will pay for it. Now Chaff you say we will lose Indonesia as a buyer if we say no......BS, this is buisiness they will be back.

But a smart man would make the sale and buy the futures back!!

[cottonpicken]

you do nothing.

[chaffmeister]

snappy:
just for clarification - when I said "if you pass on business, it doesn’t come back", I meant the 100,000 tonnes of business, not Indonesia as a customer.

Interesting that you have two answers:

1....You do nothing!! If they want the Wheat that bad they will pay for it.

2....But a smart man would make the sale and buy the futures back!!

[chaffmeister]

CP - thanks.

I kinda thought that would be your answer.

I assume that you would take the same position whether we're talking 100,000 tonne or a million. (Please correct me if I'm wrong.) I also assume that at some point, you (as the CWB) will want to sell and move grain.

At what point do logistical constraints bear an impact on your strategy?

[SASKFARMER3]

Do nothing

[Zaphod]

The perceived ability to pick the top of the market never fails to amaze me. Just as much as the idea that someone (the CWB, Cargill, or CP) can have perfect market knowledge.

Of course you have to sell some. Otherwise you have SF3 screaming that the wheat isn't moving. I'm no board supporter, but there are certain market realities you have to face.

[cottonpicken]

Its not really about picking tops.
Its about market direction,understanding and opportunity.
And its so complex that its not worth the average guys time to figure it all out.

Logistically,i suppose a price has to be paid but selling low and driving the market lower makes no sense.

[Hopperbin]

Someone in the market for wheat will purchase it likely from the cheapest source, or pay more on account of past performance, delivery reliability, grain quality etc. If the market looks bullish then the CWB should set example by setting the higher price, even let the sale go by because total stocks left and demand which drive market price will be the same weather the CWB made the sale or someone else. I don't believe we need to have 1/12 of exportable grain wheat or barley at port every month. The CWB should take into account weather indonesia is a premium market or an average market. We should supply premium markets if they require steady supply.
"And its so complex that its not worth the average guys time to figure it all out." I don't agree with that, especially if you are considering a farmer an average guy. We sell grain, we should take the time, some time, not all our time of course.

[chaffmeister]

CP remains unconvinced.

Unfortunately, the CWB is but a seller of grain. It is not a merchandiser. If it were, it could separate pricing and cash dealings/movement. Sell to Indonesia – or anyone else – and replace it with paper if that fit with its long term view of the market. But it can’t. Or won’t.

CP – you’re right. It’s not really about picking tops. But it’s more than market direction, understanding and opportunity. It’s about taking market intelligence and using it day-to-day.
Something Charlie has been talking about forever.

CP - you seem to have missed another question I asked in another thread – so I’ll ask it again.

I know a guy who worked for a multinational company. One year, through some brilliant trading, he made gobs of money for them. But instead of a big bonus, after reviewing/auditing his year, they thanked him for the huge profits and fired him. Seems he took on too much risk for the company’s appetite.

Sincere question, CP: Does that make any sense to you?

[cottonpicken]

Charlie missed the market direction as bad as most here.

A multinational company fires a guy whos making oodles of money for them but they dont like the risk?

Isnt it possible the multinational is wrong?

Its sort of like people who buy bonds.They think its a nice "safe" way to invest.Not even noticing that inflation is eating up more than their return and they are losing money.

Question to you chaff-what do you think the rate of inflation is?

Did i dodge some other obscure question?