CWB PRO's

[TOM4CWB]

Charlie;

I see that #1CWRS 13.5 wheat is down to $274.00/t.

WHY is the CWB monopoly premium price dropping when we have only 750,000t of #1 and #2 CWRS left to sell... which certainly could/should have been sold at prices well over $325/t?

It seems to me the CWB is the last to raise prices on a market rally... and just as fast to lower wheat prices on the way down... especially with how little high quality wheat there was to begin with!

Feed Barley dropped to $177/t why?

Does the CWB believe an Alberta price for feed barley of $137/t or $3.00/bu for 51lb/bu barley is a premium price!?

AS we have seen export prices have been close to $210/t... so what is going on here?

[winston]

I am sick to my stomach over the PRO's.

I cant beleive how far they have dropped. I am mad at myself for trusting the PRO's that came out earlier. I allmost took the FPC and some EPO at that time but hesitated too long.


The ultimate insult was when the CWB announced they were out of the market (not selling?) when prices were high but after they dropped $2.00 bushel an announcement was made that they were back in the market!

[melvill]

This downturn in the PROs tells us two things:

1) Nobody but nobody can forecast prices with the kind of accuracy that producers and people like me that work with producers would like.
2) Producers need to learn how to manage price and market risk.

The tools are there to manage (but not eliminate) price and market risk . . . .
. . . and yet my Market Specialist colleagues, Neil Blue, David Wong and I have such an incredibly tough time convincing farm managers that they need to learn what these tools are and how to use them. Once they learn how use them, they need to use them.

Granted these tools don't work as well with Board crops but they're better than nothing.

Here endith my rant!

[TOM4CWB]

Lee;

PPO contracts work?

About A $57.00/t buyout on an unpriced CPS basis contract, that must be signed up before August 1st(long before harvest)!

Are you trying to tell me that this is risk management?

Soft White Wheat growers are worse off yet again!

THE CWB has proven, without question, that the pooling accounts are favoured by the CWB and payments biased against PPO's($57/t)... wasn't the point made that the PRO is a nightmare and not reliable?

[melvill]

Good morning, Tom. I actually wasn't referring to CWB PPOs.

The tools I was talking about were hedging by shorting (selling) US wheat futures or going long (buying) US wheat puts.

Tom, after I've said that, I can just hear you jumping up and yelling about how those two alternatives don't work 100% and you'd be right. However, do you know of anything in or outside the market place that works 100%?

They key is discipline and timing.

[TOM4CWB]

Lee;

It appears you have missed a few issues.

1. Basis Risk. Basis risk is one large consideration is a risk management strategy, the CWB basis risk is more than any other crop, as the basis risk is actually the pooling account itself, and with the CWB includes futures risk.

2. PPO contracts. The CWB creates a little pooling account with each PPO contract holder... with the initial price being the contracted price, only the final payments are all reverted back to the CWB. The futures calculation on CWB PPO contracts are only side show, to present an illusion, what most farmers miss is that the main risk with these contracts is the basis risk, which cannot be hedged with any futures contract... LETS FACE IT, THE CWB CREATES THE BASIS OUT OF THIN AIR, AND THIS BASIS CHARGE is the basis created by a monopoly... therefore they can charge whatever fantastic figure the CWB is in the mood to charge.

ON US futures, when I can deliver against the US futures, through a competitive basis contract, then these futures will have risk management mitigation qualities. Until then, If I use US futures for wheat, it is pure speculation, not risk management.

We do need a marketing plan, I agree, but the marketing strategy must be flexible enough to cover my weather and production quality risks... CWB PPO and pooling programs refuse to deliver any significant risk management value.

I say this, because the CWB continually is $40/t below fair market value on feed grains, and contracting CWB grain therefore contains risk no other non-board grain has.

Lee, if the CWB does not wake up and smell the coffee... "designated area" farmers have already been too patient with the CWB, as have the Americans.

[melvill]

Tom,

1) You're absolutely right in the CWB basis risk vs US wheat futures issue. That's why I said that US wheat futures & wheat put options don't work nearly as well as we'd like. (Incidently, I'm sure you've noticed how much basis risk there is for feed barley and canola vs their equivalent WCE futures) Basis risk is always a factor, but wheat futures and put options are still a tool that can be used.
2) You're right again about the CWB PPO Basis Contract. It's certainly not transparent. (Gosh I hate telling you you're right too often! grin)
3) You're not right in your suggestion that delivery against US wheat futures is required to use those futures (or US wheat puts) as a risk management tool. How may Canadian feedlots that use US live cattle futures as a risk management tool deliver against them? "None".
How many Australian growers or exporters using WCE canola futures as a hedge deliver against WCE futures? None.

Tom, want to finish our duel at Farm Tech? Look me up.

Lee