Ethanol Strategy... do we have one?

[TOM4CWB]

Kernel;

Really a good question...

FIDP has been paying out between 95-150mil/year... possibly 200mil for 2002

Acreage payments between 300-400mil/year...

Crop insurance has been 150-375mil until 2002 02 itself is said to be about 750mil

How exactly the new NISA ties into all this is rather difficult to tell yet... except that we are expected to put about 15% of our gross margin into NISA... to get the other 85% coverage... Charlie might help more on this...

It looks like Crop Insurance premiums will be up somewhere near 60% for all the new bells and whistles...

So if typically we spend 300mil on Crop insurance... we farmers will now be required to put in close to $480mil... farmer's share... for full package coverage.

How this will translate into more coverage back to the farm gate is yet to be seen...

Pretty soon gov. risk management programs will be our biggest single expence for our farm!

[ianben]

TOM
Why is it morally better to depress world prices selling grade one wheat at below its value as a fuel?

Would this really happen if lower grades where burnt and taken out of the food chain?

Removing land into biomasss production is long term and totally dependant on energy market. This could put food supply at risk if low production years occur around the world.

Would this be morally more acceptable?

[TOM4CWB]

Ianben;

Good questions...

Being good stewards, of the resources we are privileged to control, demands hard questions be asked...

[TOM4CWB]

Ianben: Your statement: Why is it morally better to depress world prices selling grade one wheat at below its value. That is a prefectly good question to ask our CWB monopoly single desk seller of wheat and barley. They must have the moral answer because they depress the world market pricing mechanism to a lower value ever time they cherry pick their way around the world price. They are dumping grain on to the world market to gain market share and that is what the USA farmer is so upset about.

[TOM4CWB]

Tom: we might need to clarify some figuires but from what your fiquires say the government could give us a better coverage then we had last year at the same premium or less and save $400 million a year over a 10 year period. If they dropped all the other add hock programs.

I think it is time farmers were required to produce crop imput receipts before collecting on their insured coverage. This would remove a great deal of the fraud that accompanies crop insurance at this time. I'am not saying a farmer should make money on insurance but give him the capability to cover his input cost. But I guess that would be politically incorrect to some people. But in the end it would give us better coverage at a smaller premium. After all this is about making the system better not making it easier to farm for the fat of the land type welfare farmers.

There I go again being politically incorrect.

[TOM4CWB]

Kernel;

You are right about concern over farm imputs...

If Crop Insurance has doubt over "uninsured causes" they can easily document what the farmer has spent, and if it was not reasonable... reduce the payment... this is in the Crop Insurance Contract today...

But the payment will not be reduced any further than what should have been produced...

For instance... a herbicide application increased my yield from 9bu/ac to 14bu/ac, therefore the uninsured causes to be deducted from my payment, would be 5bu/ac.

Further, the extra yield lost goes against my index in the future, therefore my coverage is reduced, for future years.

In a disaster year, the will of politicians to enforce this uninsured causes is diminished, as we are already forced to take a "deductable" (coverage is only avaliable to 80%, so added pressure occurs to deal gently with those who were hurt... Many farmers have paid into Crop Insurance for decades... and I see the treatment given farmers is very close to what auto insurance pays out on auto accidents... in this year's examples.

IMHO the cattle folks were the biggest benificiaries of Crop Insurance this year... with all the writeoffs that were done... but I guess that is ok... we need these folks around too!

[ianben]

Kernal
Does the CWB have any control over the amount of wheat it must sell/market?
If as I understand it has to sell whatever Canadian farmers produce be that 25million tonnes or 8million.

How can any system manage to dispose of these variations of produyction if export is the only option.

Markets continually change FSU and UK are both exporting wheat today totally the opposite of past history.

Just being free to market might help but the answer must be to have a CUSTOMER for what we produce.

How can farmers get from the questions to the answer.

Your grade1 wheat might be the best in the world but if there are fewer customers prepared or able to buy it can you market it?

How much rat bait will I sell in Alberta?

[ianben]

Ian: No rats here in Alberta. You are required to market that rat feed in Winnipeg Manitoba at the CWB thats where the rats are.

Ian are you taking a poorer that average yearly price for your wheat there in jolly old England or are you allow to attempt to extract the highest price you can from the free open market.

I'am saying that the CWB and the AWB monopolies by with holding their production off of the world pricing mechanism tends to lower the price on the world market because it is not effectively in the bidding process. Thus it weights heavily on the world price because it is traded or cherry picked outside of the system.

[ianben]

Hi Kernal

It is a shame the Cwb has not moved with the times and provided a better service for farmers and customers. Change can be difficult though as confidence and perception play such a large part in success. Weakness is used to lower prices, SWP and canola, just the perception can cause large falls in the free market.

I am free to market but in effect can only obtain a small location premium over world price.

World price rules with or without CWB.
Supply drives world price.

More customers able to pay or more non food uses are a must because as individuals more production seems to be the answer. Run faster to standstill!!!

[ianben]

Ian: The CWB sells wheat into 70 countries in the world and has 20% of the world export market. The AWB has a simlar marrket. Their system of marketing removes 40% of wheat from the world pricing mechanism. This type of monopoly marketing does not create a fair market value in the world price. The world price is lowered as a result of undercutting selling done by the monopoly grain handlers. The price will not rise even in short supply times because of this type of marketing being allowed to continue to exsist.

Ian you should be complaining loudly about these monopoly sellers of grain from these two countries as they lower the price that you receive.

The CWB claims they get Canadian farmers a premium but we never see the premium at the farmgate. The prices are all diluted by the above marketing of our poorer quality grain and the pooling system.

I would do immensely better on the open market with all grain handlers and end users buying my grain, whether it be feed or milling quality grain.

Bidding is what creates a fair market value. As it is the monoploys foster a customer subsidy on wheat throughout the world.

Theres no great surplus of wheat in the world just a huge interference in price discovery.

[ianben]

Kernal
There is and probablly always will be huge interference in price discovery CWB AWB monoploies verses US and EU subsidies and third world debt thrown in for good measure.

I agree the surplus is small, non existant if the poorer countries could stop exporting and feed themselves.

All present systems which operate drive prices lower and lower altering just one will have little effect in my opinion.

Removal of CWB, decoupleing of EU subsibies, may slow down the spiral but while farmers continue to produce and accept the price without providing a real service low prices will prevail.

While we continue with a short term individual attitude that someone will buy what we produce can we expect more?
Will the free market with a few large buyers ever see the thousands of farmers as a strong seller?

I still believe we could learn to act a strong marketer. One internet based organisation monitoring prices and giving all farmers the confidence to sell for the same price.

Markets work on confidence just look at the stock market.
How low will that go? No crop insurance or subsidies there.

[TOM4CWB]

Ianben;

Look at Canola and Flax markets... and Canadian farmers have worked together to hold premium prices... as with peas and lentils... this system will work... especially for human consumption crops.

How do we stop the CWB from price discounting... ?

[ianben]

Tom
Canola might be better but is it good enough!
From Western Producer on line report from MCGA meeting Cargills Canada in Brandon

But the major processors and restaurant chains will not adopt canola oil if supply is in doubt, Hawkins said. They want guaranteed supply or none at all.

There is core demand for about eight million acres of canola from the Prairies, and more can easily be sold into the bulk commodity market. But new buyers will be scared of incorporating canola until its acreage here is bigger and more dependable.

"We have to get a mature industry in Western Canada for canola production that virtually guarantees that farmers will at least plant a minimum of 12-13 million acres a year."

Hawkins hopes a new, long-term contract system will keep farmers growing canola consistently, not jumping in and out of the market based on guesses about where prices are going.

Keys words Guaranteed supply or none at all

We could try to guarantee supply if we had confidence to store a large crop not accept a low price then force customers to switch or use inferior product when we ask a too high and uninformed price. Did your crushers really want all that green seed you guys produced?

Pulses? Are they better
From agri-ville thanks Lee.

My experience this year talking to producers is that either, they forget to consider the substitution possibilities for many products or they don't know about the substitutes that are out there.

A perfect example is yellow mustard. A lot of yellow mustard is heat treated and used as a binder in processed meat products. A yellow mustard dealer told me that many meat processors have already switched to other binders and it will take a long time and much lower prices for them to switch back. Some of the processor market may have been lost for good. They view mustard as overpriced with an unreliable supply.

Illustrates again the old adage - the worst thing for high prices is high prices.

Not supporting CWB but we could do better in all sectors with a little help and education dont you agree?

I can find all this from a different continent. Dont you see the possibilities?

[TOM4CWB]

Ianben;

Market distortions and lack of transparency are the biggest resourse abusive factors on my farm.

I must adapt to the world around me... mitigate risk wherever possible, as much as is cost effective...

when the cost of risk mitigation becomes higher than the risk itself... then the risk mitigation itself becomes the culpret.

How do we apply this to Ethanol in Alberta?

The folks over at API know all about this situation... Alberta has no ethanol strategy... while many other jurisdictions do... with accompanying tax concessions and fuel blend preferences...

API is at a serious disadvantage... guess what... they are in receivership... shouldn't be a big surprise to anyone, should it?

[TOM4CWB]

Ianben;

On the Canola production stability issue... there is no problem for Cargil.. for specialty oil production... if they set up a fair contracting program... and don't leave all the risk in the farmer's lap.

CanAmera got all the acres they needed, for their HEAR contract... proof.. no arguments needed... we farmers will supply the needed production capacity... if we are paid reasonable compensation for the useage of our assets!

Can't it be this simple, Ianben?