Benchmarking CWB Performance

[ianben]

Can any marketing system be compared with the benefit of hindsight?

I see CWB blamed for selling early what it did not have

Had it rained and you produced 20million tonnes would you be arguing they should have sold more?

Why do you imagine looking at US prices gives you any idea of the average price CWB can acheive world-wide.

I have told you my free price bears no relation to Chicago.

Black sea is my benchmark today and that is way below US

Then there is the political element Egypt and the US for example do they actually pay cash or even repay loan? EU restitution payments. Cash to ensure a sale? Will you have to offer a discount or better spec?
Out there in this oversupplied market the sale is the premium.

If you want to export wheat outside the US you will not get a price higher than US published prices.
The more you sell the lower this figure will be and the less likly you will recieve any cash for it.

Just how big do you think the market is for high quality wheat or more importantly how many people are willing to pay a premium to garentee it?

[TOM4CWB]

Ianben;

All really good questions you ask...

Now, let me ask this,

A monopoly, that makes the decision for 100,000 farmers... is it not more likely to have a bigger negative impact on the market... on any single day, than 100,000 different decisions being made on a different day, a decision being made specific to individual conditions on each farm.

It is clear the CWB will have a much more negative effect on the market than you or I individually.

The large monopoly has big problems in todays market place!

[chaffmeister]

In 2001-02:

The CWB achieved net price for #1 CWRS 14 was, basis instore Vancouver (after all CWB expenses):
$219.84 per tonne
Source: CWB website

Converted to US dollars = US$139.97 per tonne (using the average daily spot forex rate through the crop year)

PNW cash prices for #1 DNS 14, basis track Portland (over the crop year):
High US$4.55 per bushel (US$167.19 per tonne)
Low US$3.90 per bushel (US$143.12 per tonne)
Source: USDA

Summary: In 2001-02, based on west coast pricing, the CWB’s stated selling price for #1 CWRS 14 (all sales in aggregate, all destinations, even domestic and US) was lower than the lowest west coast public price for #1 DNS 14.

The comparison is even worse if you look at #1 CWRS 13.5, which is considered closer to #1 DNS 14 in quality.

Data from previous years show similar results (Cdn average achieved prices are well below average US price).

Questions:
1. Where are the premiums the CWB is getting?
2. Can individual farmers do better?
3. What am I missing?

[charliep]

A question in my mind is how much wealth is being spread out through the pooling system as a result of the assigning of spreads/transportation adjustments such as the freight adjustment factor. Total payments do not necessarily reflect actual value of wheat classes but rather how the CWB chooses to allocate funds from the pooling system. My experience would suggest 99.99 % of farm managers do not have a clue as to how funds are allocated out the pricing pools and the impact it has on price signals for individual grades/proteins/classes of wheat.

[dnach]

Good day Charlie, easy on the term 'wealth' you make it sound like we actualy make money growing cwb grains.
Total payments absolutely should reflect the value of a wheat class in every situation. As a farm manager please fill me in on how funds are allocated out of the pricing pools.

[chaffmeister]

Allocations in the pool also concerned me in this analysis – I would say I would be in your 99.99% category. But look at the top price achieved for the top grade (#1 CWRS 15.5) which was C$230.06 per tonne – this is the highest price the CWB paid out for any non-durum wheat that year – what proportion of the whole sales program this is, I don’t know. This equals to US$146.47 per tonne, which is only US$3.36 above the lowest US price and US$20.72 below the high. This is also US$3.64 per tonne below the average US price. In other words, the highest price paid by the CWB for non-durum wheat is less than the average price for #1 DNS 14 in that year.

I still say I may be missing something but I can’t think of anything large enough to bring the CWB price up to where its performance is better than average prices.

[chaffmeister]

One more thought - on my "favourite" topic: interest. The CWB prices I have been quoting above include interest revenue from old credit sales. this is roughly about $4.00 per tonne on wheat. Without this, the CWB "achieved" is even lower.

[chaffmeister]

Sorry - above should read "Without this, the CWB "achieved" price is even lower."

[TOM4CWB]

Charlie and Chaffmiester;

One more thing is missing from this benchmarking...

THE cost to get grain from North Dakota vs. Sk, Montana vs. AB.. is significantly less for the CWB than for US grain marketers.

When I shipped milling wheat through Montana, the basis charged was over $20/t more through the US PNW Port, than through Vancouver B.C.

THis means the CWB, particularily in Alberta has a $20/t competitive advantage to US marketers, before we even compare the U.S. and CWB marketing systems.

It seems to me the CWB gives away our competitive advantage, as there should never be any pressure to send wheat south to the U.S. from Alberta, simply because of the way our markets/infrastructure are working.

US Marketers must sell more wheat, to lower priced markets than the CWB is doing, yet US marketers are getting more money consistantly in the world wheat markets.

Very good proof that the monopoly "single desk" lowers world wheat prices, rather than supporting them!

A little competition would smarten up the CWB in a hurry, too bad the CWB wouldn't be honest for just a moment, and realise the monopoly is the biggest threat the CWB has to the survival of the CWB Corporation itself!

[liberty]

Chaffmeister,

Some of the research I've seen indicates that the CWB is able to use interest payments from past sales as a bit of a gold mine. It seems they're allowed to treat interest payments as income whether or not the debtors actually made any payments. This appears to be the case with former Eastern European customers going back to the 1970's. This goes a long way to explaining how the CWB's debt continues to rise even though their sales volumes have shrunk over the past several years.

Sounds like a shell game to me.