CWB -08-09 'late sign-up adjustment factor'

[TOM4CWB]

Dear Charlie and Lee;

It really bothers me that the CWB has no LOGICAL right to adjust basis in the manner as explained below...

Since the 2008-09 crop does not even start to clear through until October/08 for export... and the beginning of the crop year is August 1...what justifies charging us with 'late marketing' surcharges?

Where in the CWB Act... does it say the pool accounts/contingency fund have the right to be 'cross subsidised' from PPO sales of our grain... with arbitrary deductions of this kind?

Does anyone understand where this money goes... where the $100's of millions of basis distorted funds end up?

Why is the CWB doing this?

Is this charge/deduct a function of CWB 'risk management'... more correctly the lack thereof...

Would this not be proof... that the CWB sells a massive amount of the 2008 harvest... BEFORE August 1... if we are charged a late selling charge after August 1/08?

BACKGROUND;
http://www.cwb.ca/db/contracts/ppo/ppo_prices.nsf/fixed_price/fbpc-wheat-2008-mhrs-20080731.html

..."To accommodate sign-up of tonnage to the program after August 1, 2008, the late sign-up adjustment factor in effect on the date of tonnage commitment to an FPC or BPC will be applied. The late sign-up adjustment factor varies to account for the amount of priced sales already attributed to the pool accounts and is dependent on current prices versus previous sale prices. The late sign-up adjustment factor can be either positive or negative depending on current price levels."

[charliep]

Will have to get the CWB to pick up a portion of my salary when I answer questions like this.

The fixed price contract includes existing sales. After August 1.

Lower priced existing sales in the pooling account in a rising market (like last year) are a net drag on the pooling account and will result in a negative adjustment factor (like last year).

Higher priced existing sales in the pooling account in a falling market (potentially this year) are a positive for the pooling account and will result in a positive adjustment factor.

How this transfer is handled in the black box pricing and contingency fund system is unknown to anyone except those in the inner sanctum.

Someone off topic but interesting is how the CWB handles risk over their 18 month period. As per their year end report, the operations side/board of director are very proud of their ability to come up with an average price over an 18 month period (this process cost farmers money last year - page 43 annual report).

The CWB concept around price averaging/their risk management program is something farmers should be asking questions about.

In a year of limited beginning inventory and uncertaintly around grade, how much forward pricing has the CWB done (cash and/or futures)? This will show up somewhat in the adjustment factor. If the CWB has priced only small volume, then the adjustment factor should be close to zero. If the CWB has made sales in the 2008/09 pooling year (positive or negative contribution to the pricing pool), then this will show up in the fixed price basis/adjustment.

Will note there was not posted fpc or flexpro Friday (Aug. 1) so will have to wait for Aug. 5 for the answer.

[TOM4CWB]

Dear Charlie,

The 'pool' was supposed to be 'independent' of PPO contracts! AND for many years... it was a much better reflection... especially on basis... than what is going on now. It is like the hedge cost... is being extracted through the basis... because of improper CWB futures risk management... causing the CWB basis to pay for a good chunk of the move in the futures.

The whole purpose of PPO's in the first place... was a valid risk management program was to be executed... and separate my farm from CWB sales and market timing decisions!

It is irrelevant to me what the CWB management did or didn't do on forward sales... I should not be charged or credited with any value... I thought I OPTED OUT... and was to have fair market returns for the RISK my farm took on... and took AWAY from the CWB pool accounts.



There is absolutely nothing in the CWB Act... that says I must participate in the CWB pooling system!

Why then... is CWB management dragging the pool account back into cash pricing calculations?

[charliep]

Not sure what you are wanting me to say. Will let others handle the political questions/policy questions. If I was a farmer using the CWB producer pricing options, I would be concerned about the CWB using the 2008/09 fixed contract wider basis (profits if you like) to put the contingency fund back into the black. But that is policy issue in that the board of directors/operations side of the CWB decides how farmer funds are allocated.

From the operations and risk management side, all producer pricing options (including the recently deceased daily price contract) were tied to the pricing pools through the CWB risk management programs right from day of the programs. The adjustment factor was introduced with the CWB extended the fixed price deadline from aug. 1 to Oct 31 (actually the 2nd year of the extended period).

[charliep]

The answer to your question is to allow pricing outside the pool by the way - that is, allow direct pricing against actual cash sales but that is not a road the CWB B of D has been willing to entertain (came close on cash plus for malt barley but still needed a 10 % hold back on price/some final payment and control over returns).

Will note the three amigos complained about lack of market focus in a thread a while back.

https://www.agriville.com/cgi-bin/forums/viewThread.cgi?1217441009

I would encourage them to help me explain CWB programs. they can step up to plate in terms of treating the CWB as a business issue and not a political one.

[TOM4CWB]

Dear Charlie,

Thanks for the thought and insight into what is going on... the CWB keeps promising they will provide 'commercial' transparent pricing... market based ...

The disappearance/1.5 hour sellout of the DPC proves the CWB can't come close to offering these opportunities for 'designated area' growers.

Did anyone find out how much 'flexpro' was signed up?

The recent restricted (3-9pmCT) hours on PPO sign-ups shows just how inconsiderate the management has become...

It worked just fine for years to price till 7:30amCT... not any more...

Just like the pricing forward roll deliveries for FPC over crop year end... switching classes within the same futures exchange... the the erosion of basis values diverging in a massive manner from commercial values... with the policy of keeping futures profits traded on behalf of a grower... while charging any futures losses against the grower...

These are all signals CWB managers don't have any intention of dealing with integrity or fairness with PPO's for CWB 'designated area' growers.

Promise BROKEN... Code of Conduct BROKEN.