CWB Board Announcement on Adjustment Payment

[charliep]

Note the following quote in today's CWB bulletin.

Quote: "The CWB submitted a recommendation to the federal government on Mar. 14 for increases in the 2007-08 initial payments to farmers for wheat, durum and Pool B feed barley. The CWB recommended an increase of $34 to $53 per tonne for wheat (depending on grade and protein level), an increase of $80 per tonne for milling durum and an increase of $65 per tonne for Pool B feed barley."

From the directors report at the Legal CWB meeting, the reason the CWB is doing this is to provide farmers with information for decision making on things like the early payment option. It usually takes about 4 to 6 weeks for a recommendation to move through the federal system and be implemented. With the knowledge of the likely adjustment payment in the future, you can better evaluate the economics of using a program like the early payment option (cost of using the program/improved cash flow benefit versus waiting for 6 weeks/getting the adjustment payment).

[charliep]

To put things into perspective on 1CWRS 13.5, you have an initial today of $275/tonne port with a strong likelihood will be increased to $325/tonne by early May. A 90 % EPO would provide $349/tonne of cash flow (keeping in mind you get the $74 two weeks after you deliver) minus $2.25/tonne premium. Putting into a cash perspective, you have an extra $50 for a month plus an advance of $22 over the adjustmented price. If you go for 100 % EPO, you would have last month's PRO ($388/tonne) minus $14.75 premium. Your cash flow is $50/tonne for one month plus a advance of a further $48 (after subtracting premium) on your final payment. You are still able to participate in any increase above $388/tonne and in the 100 % EPO case, you have protected against the downside.

To put into another perspective, collecting a 100 % EPO may take some of the pressure off to market other crops for cash flow reasons. Whether that is a good or bad thing will only be apparent down the road but it provides alternatives.