Today is a pool return outlook. I like to look at a the relationship between the PRO forecasts and all the producer pricing options to develop strategy.
What is catching my attention this month is the protein spread relationships in the CWRS class.
There is a $19/tonne spread between a 1CWRS 14.5 protein and 1CWRS 13.5. The spread in initial payments is $12/tonne. Fixed price contract spreads are based on initial payments. Implication - do not use the fixed price contract on high protein wheat but rather stay in the pool/use the EPO alternative to generate cashflow.
The spread in the PRO for 3CWRS wheat is $38/tonne (relative to 1CWRS 13.5) versus an initial payment spread of $29.60/tonne. You have an $8.40/tonne incentive to apply the fixed price contract to early deliveries of 3CWRS.
I note that this only applies until the next round of 2005/06 adjustment payments when it is likely spreads (including protein) will change.
With these notes in mind, it is important that every farmer review your marketing plan with regards to the grades you have in the bin, when the CWB is likely to ask for delivery and your cashflow needs. As an example on 3CWRS wheat, you have the ability to put an extra $8.40/tonne in your pocket in a low priced year.
I note that none of the above gyrations reflect market signals about what the market needs to move to port right now - high protein/top grades. I also note the artificial deadlines in the system (October 31 to be exact).
What is catching my attention this month is the protein spread relationships in the CWRS class.
There is a $19/tonne spread between a 1CWRS 14.5 protein and 1CWRS 13.5. The spread in initial payments is $12/tonne. Fixed price contract spreads are based on initial payments. Implication - do not use the fixed price contract on high protein wheat but rather stay in the pool/use the EPO alternative to generate cashflow.
The spread in the PRO for 3CWRS wheat is $38/tonne (relative to 1CWRS 13.5) versus an initial payment spread of $29.60/tonne. You have an $8.40/tonne incentive to apply the fixed price contract to early deliveries of 3CWRS.
I note that this only applies until the next round of 2005/06 adjustment payments when it is likely spreads (including protein) will change.
With these notes in mind, it is important that every farmer review your marketing plan with regards to the grades you have in the bin, when the CWB is likely to ask for delivery and your cashflow needs. As an example on 3CWRS wheat, you have the ability to put an extra $8.40/tonne in your pocket in a low priced year.
I note that none of the above gyrations reflect market signals about what the market needs to move to port right now - high protein/top grades. I also note the artificial deadlines in the system (October 31 to be exact).