Benchmarking CWB Performance

[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.

[ianben]

Tom I try not to argue for or against the CWB but point out that marketing 8million tonnes one year and 20 million the next is a problem however you do it.

Benchmarking US prices must also unrealistic a bit like comparing list prices for cars without taking into account discount special deals "free" insurance low interest deals.

The Egypt deal with US was reported as being done at around $125/tonne when EU wheat was offered at $90 cash.

Must have been some special offer in there somewhere dont you think?

In a normal year you guys have a lot of wheat to export.

Wether there is one seller 1000, or 100,000
There is only a premium market for a given quantity.
It is after this that sale at any price becomes a premium.
One seller or 100,000 prices will fall

Farmers worldwide all still expect to sell all they have produced every year regardless of demand.

How can anyone market consistently and at a premium with this remit?

[TOM4CWB]

Ianben;

Good points!

Risk Management!

THERE ARE management tools that can take the highs and lows out of the income stream... and the futures markets are a very good system to give risk to someone that agrees to take it, of their own free will.

Insurance is a good example, as long as a choice of insurers are competeing for my insurance needs... the system works to smooth out our cash flow.

This should be no different with grain marketing!

THe CWB may seem be in a tough spot, yet they are not. The CWB risks nothing of any of the CWB employees assets when they sell my grain.

In fact few of the CWB directors actually make a profitable living from selling wheat or barley through the CWB... a very telling story all in itself!

Management of such a powerful marketing tool, is important for everyone on this planet... yet the majority of commercial farmers avoid the CWB whenever possible, why, the CWB refuses to deal with farmers honestly and manage our risk effectively.

The CWB pubically Withdrawing from the market in August 02, may have caused wheat prices to go up an extra $1.00/bu,...
yet,.... now we will have prices drop $2.00/bu more because of CWB manipulations that were not commercial or good for "designated area" grain farmers.

[ianben]

CWB, EU subsidies, US farm bill, Futures options etc. All these were considered best option at the time they were implemented to even out the highs and lows for us farmers and garentee a supply for customers.

My argument is that NONE of the above has succeeded in providing the stable price the producer needs or the stable supply and price the customer needs.

I still feel there have been such great advances in comunication that improvments could be made to ALL the above systems to help deliver advantages for all.

Perhaps the best way to try to benchmark any of the above systems performance would be to try to compare farmers income compared to the rest of the communities they live in.

In the UK the farmer has certainly become poorer both in wealth and esteem in the last 20yrs.

I guess it would be the same in Canada and the US???

Welcome your comments

[liberty]

Ianben,

No matter what market you look at, whether it be wheat, barley, pizza or computers, there is no such thing as a "stable" price. They change all the time. That's the way markets work. Advances in communications may enable farmers to more readily observe these prices, but that in itself won't make them stable.

Supply and demand are pretty volatile forces. The weather is rapidly changing factor, as are political developments around the globe. Then there is the issue of consumer preferences. There again we have the influence of health and environmental concerns that can change demand for, and prices of, many commodities. If prices were "stable", then farmers would have no way of knowing how to respond to these changes.

[ianben]

I agree there will always be market forces but I am sure there is a difference in the way pizzas and computers are marketed.

There is more customer care and sevice and also more knowledge on pricing and affordability of their own and competitors products.

It is in these areas I would like farmers to improve and reduce volatility
created at times by our ignorance.