CWB Chaos

[TOM4CWB]

Charlie and Lee;

I am trying to figure out what the CWB fall 03 barley and wheat pricing signals are telling us;

Today’s CWB Vancouver Port selling price is for a 1CWRS 13.5 appears to be about $250/t = while May 03 MGE futures trade @ $3.50/t near by …

Mar 04 MGE are still at $3.50, yet the CWB is discounting our 03 new crop CWRS an extra $45/t when the CDN/US exchange difference from .689 June to .679 Mar 04 is calculated in.

WHY?

Today the TBay Spread between CPS Red and CWRS 13.5 is app $20/t yet CWB is discounting CPS Red for 03-04 to $48/t ( TO fall 03 at $115/t CDN … ($78/tUS) AB feed wheat…$82/t CDN …($55/t US) 50lb/bu feed barley AB interior price) which is knocking the bottom out of our western Canadian Domestic feed wheat and barley markets…

If 58lb/bu fd wht are used in the CWB forward pricing, the CWB AB interior offering price is even worse... at a wopping $82/t CDN or $56/t US.

What possible good can the CWB do by sending out these price signals?

[TOM4CWB]

Charlie and Lee;

I see the CWB said this in there April 29th news release...

"A preliminary decision in the anti-dumping case against Canadian wheat and durum imports is expected to be announced by the U.S. Department of Commerce (DOC) on Friday, May 2. The decision could result in further unfair U.S. tariffs on Canadian wheat imports. Anti-dumping rules were designed for an industrial manufacturing environment and don't make sense for grain farming, where production costs are incurred long before final prices can be determined with any certainty."

I can certainly understand the US dumping concerns... with the above CWB fall 03 prices the CWB offers "designated area" farmers... which are all much below the cost of production as far as I can tell.

How can wheat prices be as bad as the PPO's make them out to be... with world stocks of grain so low?

Is this CWB policy not responsible for declining feed grain production in the "designated area" which makes nessasary the importing of US Corn to feed our domestic livestock?

[charliep]

Tom4cwb

You are asking me to answer questions on behalf of the CWB and perhaps this isn't 100% my role. I can answer your questions with some knowledge of CWB operations and as a moderator employed by the Alberta government.

Within the realities of the current pooling system (average price over a whole pooling year), $21.50/t over the converted MGE futures prices is likely a good reflection of potential new crop prices. The issue right now is an expected return to more normal crop production in 3 of the 5 major exporters and its impact on prices. Our other issue is Canadian grain prices have enjoyed the benefit of a low 60 cent loonie and this reality is now something closer to 70 (hopefully not the 75 you mention in another thread).

[TOM4CWB]

Charlie;

We wonder why the "designated area" does not produce feed grains of sufficient quantity to supply our livestock industry...

With the CWB promising 03 AB interior prices of $1.80/bu for heavy barley, and feed wheat at $2.28/bu... who in their right mind would try to produce a feed product that costs at least $50/ac more than these prices offer?

This is strictly econmics... and not a political issue about loving or not loving the CWB.

And Alberta is paying a huge cost... buying imported fusarium infested US Corn is very costly.

[TOM4CWB]

Charlie;

I see that the St Lawerence offering price for a 1CWRS 13.5 was $5/t below the $250.20/t initial price the feds pay farmers.

The CWB did not do a PRO this month... why not?

[charliep]

I should have the CWB pay part of my salary.

The CWB is a pooled price and can't be compared to a spot price. The assumption is that the CWB has a higher percentage of this years crop priced at much higher levels this fall/winter.

Your comment on old crop PRO forecasts is justified. There is still significant risk in the old crop PRO. My approach would be to treat initial payments as the total payment for the 02/03 crop year with at least some risk of a deficit. An interesing thing to watch (those outside the CWB will never know the actual numbers) is how inventory is valued at the end of the coming pooling year. The temptation will be to pump up values at the end of the crop to protect the 02/03 pool only to sell for lower levels new crop with a negative impact on 03/04 payments. Don't know if it will happen but something to watch for.

[TOM4CWB]

Charlie;

I know the CWB issue is a thorny one... but since all grains are effected by CWB policies... which determine planted acreages of all grains which in turn cause the supply demand price balance for each crop... it is critical to understand how and why the CWB is doing what it is doing with PRO's and PPO's IMHO.

My assumption is that the CWB stopped selling 2002-03 grain until early 2003, because with such a small pool... I don't understand how the PRO could drop like a rock in the manner it did... if any significant 02-03 crop had been priced between Aug 10 02 and Jan 10 03.

It would be very interesting to know what theory and methodology the CWB uses when pricing year end inventories... and what causes a roll over of stocks from one pool year to the next... or lack thereof... as the case has been or may be.

Thankyou for taking a stab at my questions Charlie... I am trying to better understand CWB pricing signals... as we decide what to plant... which is still a flex point with the SPE premiums that we will pay.

I see my neighbours without crop insurance and with livestock saying they will plant feed grains without consideration of fall prices... just to restore inventories!