CWB 2003-04 Pool Returns Lower

[TOM4CWB]

Charlie;

The CWB says;

The CWB today released its first Pool Return Outlook (PRO) for the 2003-04 crop year. Wheat values range from $30 per tonne to $67 per tonne lower compared to values in the January PRO for 2002-03. Durum values are between $30 and $55 per tonne lower. Feed barley values are $41 per tonne lower while two-row designated barley values are down $36 per tonne and six-row barley values dropped by $32 per tonne.


Is the CWB serious/

Feed barley first...

02-03 $177/t minus Alberta basis... $38/t equals $140/t which is a farm gate price for this 2002 crop... totally out of step with the real market this year...

However for the CWB to claim that feed barley is going... in Alberta to less than $100/t farm gate price is...

simply absurd... and I am being kind.

THis is obviously not reflected in the futures for Lethbridge Western Barley.

CWRS #1 13.5 isn't much better at $216/t PRO... the futures today Minni is at $3.78/bu while Mar 04 is at $3.63/bu... certainly not a drop of anywhere near $58/t.

This proves the CWB PRO is being manipulated by the PPO pricing system... as we experienced last spring... the CWB is back low balling everything in sight.

How can the PPO pricing options possibly work when the CWB is stealing over $40/t out of the basis... again...?

Am I Wrong Charlie, Lee?

[TOM4CWB]

Charlie;

THIS was on DTN today;

"Canadian Wheat, Canola, Soy Prospects Improve 02/27/2003

Printable Page


Canadian wheat, canola and soybean production should experience a robust recovery this year, according to the Prospects for Canada's Industries report from the Bank of Montreal.

According to DTN's Good Morning Ontario report, the BMO expects wheat, canola and soybean prices to increase at average annual rates of 8.5%, 7.5%, and 7% respectively, in 2003 and 2004.

The forecast assumes a return to normal rainfall conditions."

How can we possibly reconcile this with what the CWB has just spewed out?

I guess it is a great risk management strategy for the CWB... put the prices so low they can't go lower...

But what does this do for CWB advance sales... other than to indicate that the "designated area" farmer is a easy target to take grain from...

WHAT A DEAL

[charliep]

Tom4cwb

Just a reminder I don't work for the CWB and am not in a situation to comment on mechanics of their programs.

The CWB feed barley PRO's (as you indicate) are totally irrelevant to prairie farmers - the sales opportunities are in the domestic market. The question remains why feed barley is even under the CWB. A comment I will make is that new crop US malt barley prices are well above current 03/04 PRO's.

With regards to new crop wheat including durum, there were no surprises. The assumption (yet to be proven) is the CWB has sold a high percentage of this past years crop at high values this past fall and are able to obtain premiums from sales of a small crop. This has yet to be proven and I still think there is substantial downside risk to old crop PRO's.

On the PPO's, I encourage everyone to have a look at current values.

http://www.cwb.ca/db/contracts/ppo/ppo_prices.nsf/fixed_price/2003_index.html

A note produce pricing prices can be above PRO on the day of release (it was in all cases the first release) - last year, this was a restriction. It is going some ways (not all the way) to meeting concerns of this past year. I look forward to Agri-villers comments on the programs.

[rain]

Tom how does BMO expect higher prices on improved yields. It would be safer bet making each of the BMO numbers negative based on average yields. The numbers could be off.

[charliep]

I agree Rain with the caveat than world supplies remain tight/weather will be critical.

My comparison this year is to curling against a tough team that is a combination of reasonable skill/lucky. My call as a skip to lead (recommendations for new crop risk management) would be to through up a center line guard (do some reasonably agressive new crop pricing) or outside guards (use minimum price or options strategies). Leaving the lead in the bar (doing no forward contracting) is a risk decision.

What will happen this spring/summer? Don't have a clue. From this baseline, a farm manager can work with some other strategies or simply increase forward sales as more is known abou the upcoming crop year.

[TOM4CWB]

Rain and Charlie;

We have significantly lower world wheat stocks, therefore a projection of the futures values should be a good and fair estimate... who are is the CWB (or us) to say that the March 04 futures are not the best indicators of what the future price will be?

THE CWB Basis between cash prices and the Minni futures is the real problem here... and the Cash price the CWB recieved 2 years ago, this year, as well as a strong likelyhood of next year... is usually $50/t to $70/t over the US nearby Minni futures price... in store Vancouver B.C..

Somehow the CWB has decided this "extra" basis is the "pool" farmer's money, is is not going to allow PPO farmer's a share in the real value of our wheat... we are second class citizens. Further... this CWB PPO price signal distorts the real fact... that If I price...

I have taken on huge risk...

and am rewarded by having a CWB special $40/t discount incorporated into my hedge!

What a deal!