First FlexPro Value Posted Today/Adjustment Factor Positive FPC

[charliep]

I will highlight the CWB employee's were in the office today and posted the first FlexPro and guess what - the flexpro is the fpc value with the adjustment factor excluded.

FlexPro for 1CWRS 13.5 is $302.52/tonne (port).

The first adjustment factor is a positive $4/tonne for 1CWRS wheat or a fixed price contract of $306.52/tonne (port). The implications of the positive adjustment factor is existing sales are making a positive contribution to the pool.

Perhaps more frustating is this is related to a PRO which is $339/tonne and a market basis of $19.89/tonne under for the FlexPro and $15.89/tonne under for the fpc when the adjustment is included.

Would watch the shell game on the CWB producer pricing options. The money to replentish the PPO contingency fund has to come from somewhere.

[charliep]

Links to CWB website.

http://www.cwb.ca/public/en/farmers/producer/

[mcfarms]

Charlie


Any comments on the EPO's?
Might know someone who has the bulk of his 07 malt production rolled into 08. He is pondering the 90 percent EPV at the .26 cent deduction. Should be .70 plus cents locked in over the 07 pool. With storage etc, pretty decent values.
Feels the 100 percent is a little steep.

Any thoughts for him?

[charliep]

Agree with the strategy. Risk that the 2008/09 PRO could come down given current international malt barley prices and the fact that malt barley cash plus will raid higher valued sales. Only concern I have is whether the CWB will let you use old crop deliveries/malt held on a storage ticket for an EPO - not supposed to for a fixed price contract.

A better deal would be to use the cash plus program (no premium) but suspect wouldn't be allowed on old crop deliveries. That would be getting close to something really evil that would ultimately result in destruction of the world as we know it - a cash price. Much better to make you jump the hoops of the 2008/09 pooling system.

[charliep]

Just got off the phone with the CWB and you can use an EPO on old crop deliveries priced into the 2008/09 crop year. Neither the fpc or flexpro can be used however.

[btjadenlepp]

would you want to carry over old-crop wheat for pricing in 08/09 though?

[charliep]

Simple answer no. Or I should say if your objective is profit, no. Unlikely at this point that wheat prices will increase enough (or perhaps increase at all) to justify holding.

I should compliment you on your letter to the editor in the western producer two or three weeks ago. I have to ask from a farmer standpoint in running a marketing plan why the flexpro is better than the DPC. I note again the highlight note in the year end that the vast majority (89 %) priced their fpc - kinda a self fullfilling target when there is a October 31 deadline on the fixed price contract and a dpc program that allowed farmers to roll old crop deliveries into new crop dpc pricing.

[cottonpicken]

Care to answer your own question bjtellp/farmlink****ions?

[charliep]

I know is not interesting but will be following the daily prices in flexpro and fpc. Will note Brenda highlighted the complexity of the program in the wp letter and today puts things into focus.

Change in the futures market. Market rallied today with the converted MGE futures increasing from $333.71/tonne yesterday to $322.41 (increase of $11.30).

The flexpro increased from $302.52 to $313.84 (the $11.30 increase in futures plus 2 cents).

Now the flexpro with. the value moved from $306.84 yesterday to $315.34 today (increase of $8.50). so why didn't the price move with the market? the adjustment factor premium narrowed from $ 4 yesterday to just $1 today (CWB counterbalance to market swings) and basis widened from $19.89 yesterday (someone corrected a mistake at the CWB) to $19.37 today.

By the way, none of the above reflected a change in the cash market - simply a change in the CWB generated price. None of the above reflected the systems needs to provide signals to encourage or discourage delivery. None of the above reflected a customers signals about a their quality needs. It simply reflected what the CWB deems as a fair price and a level they feel they can manage their price risk around pool returns.

And there ladies and gentleman is your complicated mouse trap. At least the DPC had some relation to a cash market.

[charliep]

Mistake alert. Basis narrowed on the fpc. am a buck a tonne out.

[charliep]

the 4th paragraph refers to the fpc - not the flexpro. Even I am getting mixed up between the two programs. and the reason there are two CWB programs that have the same basic design is ___________?

[cottonpicken]

Charlie,just where is this new round of liquidity that "has" to be injected going to go?

The global trading house has been fooled long enough,much longer than i thought it would take.

What has happened rescently is nothing more than a new entry point which is becoming less and less common.

More and more and more and more people are becoming aware that to protect your capital you need to own tangibles.

I will bet that one year from now grain will be higher.
And most other commodities.
And wages.
And health care costs,
Etc
Etc


The money in your bank account has lost purchasing power every day for the past six years,along with your fixed income wage!

Iffffff... credit dries up than we hit a deflationary wall.
Which would be even worse for the situation.
The velocity of money would be dead and shortly after everything else.
But cash would be king.

[TOM4CWB]

Dear Charlie,

I had an interesting conversation with the CWB this morning.

The adjustment factor was not done right/the table set up did not reflect the negative $19/t basis plus the $4/t adjust charge.

Iteresting that the ladies on the 800 line answering the phone... are as baffled as growers are... I had hoped I was wrong... but;

IF my grain is not a drag on the pool... cause I priced out 7 months ago... I should share in the positive adjustment factor cause I am not pulling the pool down!

This system makes less sense... every time someone tries to explain what the PPO dept. is actually doing!

The CWB has a license to steal money from my farm... it has never been clearer than it was today!

The 'Single Desk'

Has a 'Single Purpose'

'The Lowest Price is the Law!"

The CWB could make Zellers BLUSH more than the sun on a hot dry dusty August evening!

[charliep]

My only observation is that new is at a significant discount to old crop. from a cash flow perspective, old crop is at 90 % of the PRO while new crop is at 60 of a lower valued PRO. The CWB pooling system is meant to achieve an average price for the crop - that is their target and measure of success - see the annual report. The CWB basis and pricing programs impose significant risk on anyone who chooses to use them to achieve a better price than the pooled one. The issue of the PPO contingency fund hangs out there and needs to be recognized. Not opposed to being long something but also have a eye on profit objectives and cash flow needs.

My preference if I were bullish would be to sell old crop into the 2007/08 pooling year and reown something (futures or options). Would prefer to be long corn or soybeans but would wait for the market wreck to stop - think we both will agree with the expression the trend is your friend. Today's market was interesting in terms of slowing the fall but not a sign things are headed higher. Just my opinion.

[charliep]

mcfarms

Hope you pulled the trigger on all your epo strategy. Note that the CWB reduced their PRO today out of sequence with their normal releases.

Will be interesting to watch what happens with EPO premiums - should be lower given less risk but....

Another piece for anyone that reads this (maybe get comments from others). Use the cashplus for 2008/09 malt barley. Take your money at delivery (realizing their is still a small final payment - forget the CWB buzz words). International malt barley prices are dropping. Realize there is still weather in Australia/here but I still like the warm fuzzy feeling of depositing the whole value for a sale in the bank.