New freight charges for Winter Wheat

[Fransisco]

*** CWB NEWS*** A separate Freight Adjustment Factor (FAF) for Canada Western Red Winter wheat (CWRW) will be in place for the 2009-10 crop year to better reflect rail freight costs. An increasing proportion of CWRW is
being produced in the eastern Prairies, while the majority of markets for this class are best reached through West Coast ports. The new FAF will not be calculated until 2009, but it is expected to be between $15 and $20 per tonne, which could mean an increase in winter wheat freight costs of between $2.65 and $7.65 per tonne. Farmers with questions can call their local Farm Business Representative or the CWB's business centre at 1-800-275-4292.

[Fransisco]

Oh joy!

When I look at the Federal Grain Monitor data in the Informa report I see that it's already costing me an extra $11 a tonne to get my wheat to port vs canola. I guess in the wheat board world where up is down and black is white the way one gets more competitive and efficient is by charging farmers more for freight.

[AdamSmith]

Their mouths say, "We're only here to help you"

At the same time they are kicking your feet out from underneath you.

The CWB's words are meaningless, it's their actions that count.

And this my friends is now reason #36 why the cwb has got to go.

It's clear they are desperate to discourage farmers from growing winter wheat.

Winter wheat in Bottineau ND this AM is 7.11/bu or 7.65 $Cdn vs around $5.65 here Non Board and CWB fixed price.

But of course this is just a "Spot" price. And well..., you know..., you can't compare spot prices, because..., well they're "spot" and spots are like stains and stains are dirty and grimy and no one want to be dirty and grimy because you would look like a homeless bum and homeless bums are poor and so by our rational(cwb's), Spot prices have to be poor prices.

Ok then, as you were.

[charliep]

The freight adjustment factor has been a feature of CWB deductions for years. I will ask my perenial questions every year for everyone (may be prizes for the winner but previous winners are not eligible - that means you tom4cwb).

What is the freight adjustment factor and what is it meant to accomplish?

What the current freight adjustment factors for wheat ex durum, extra strong, durum and malt barley? Where do they apply?

[Fransisco]

On top of which there will now be,and I quote from the CWB release, "A separate Freight Adjustment Factor (FAF) for Canada Western Red Winter wheat (CWRW) will be in place for the 2009-10 crop year."

[charliep]

Interesting, I used the CWB search engine on "freight adjustment factor" and came up with the 3 references to the 2009/10 CWRW but no explanation of what the FAF is seemed to come up.

Is the FAF broken out on the cash ticket when you delivery? The information is available from an industry table called "Freight Rate Consideration Table or FCR table) at your local elevator.

[AdamSmith]

The FAF stands for Fleese All Farmers.

But what is it?

It is a riddle, wrapped in a mystery, inside an enigma.

OK, but really what is it?

It's a fee paid by wheat and barley farmers.

OK, but who to?

Dhoknow?

The railroads?

could be!

The grain companies?

maybe!

The pool account?

sounds about right!

Do you pay it on Canola?

Nope

Flax

Nope

Oats

Nope, only cwb grain.

So it's the cost of freight on wheat?

Nope

But I thought...

But there's your problem, your dealing with the cwb and thinking is frowned upon there.

So...?

So the FAF is a money grab by the cwb to pay for the higher costs of the system that they claim don't exist.

And...?

They sat in a room one day and decided that the new charge to cover shall be called the Freight Adjustment Factor.

Pathetic

Yup

[parsley]

"What is the freight adjustment factor and what is it meant to accomplish"

[parsley]

btw, I jotted down a few notes for a newsletter a while back and they sent me a new hat in appreciation, so I have to sport their hat. I thought just in case you are handing CWB hats out, I could not possibly wear it..but of course I could mulch it, if I won.

Parsley

[AdamSmith]

No, No, parsley.

They use a different formula for the FAF.

Informa just doesn't get this stuff, ya know!

[redbaron]

Adam - I am not sure if it is the wet weather that has you primed but love your formula.

Pardon my ignorance but why would increased production of winter wheat in eastern Canada reflect on my freight rates out west. Hey when the markets were being shipped out of eastern Canada we still paid. How does the CWB have any jurisdiction on freight rates that is not part of their monopoly.

[Kodiak]

FAF- Freight Adjustment Factor

An amount (arbitrary) charged by the CWB to account for the extra costs of getting CWB grain to export position in Eastern Canada (Montreal, Baie Comeau, Quebec City) from Thunder Bay. The rational is that eastern prairie farmers should have to pay the full cost of getting grain to export position rather than just to Thunder Bay since more western located producers are deducted rail freight covering the full cost to export position in Vancouver. Initial payments are based on Thunder Bay and Vancouver, even though Thunder Bay is only part way to export position.

But as I think most people know, it doesn't matter where the CWB is actually shipping grain to from any particular location. (That’s a topic for a whole other thread) Farmers who deliver CWB grains are deducted rail freight based on their proximity to either Thunder Bay or Vancouver - the reference point for initial payments. I believe the "centre" is Scott Saskatchewan, a point where at one time the rate going east was equal to the rate going west, and depending if you were east or west of Scott, your freight deduction was either the Thunder Bay rate or the Vancouver rate, which ever was lower. Freight rates were “distance related”.

The rational is that the FAF is the way the CWB can simulate what would happen naturally in an open, competitive market.

But since we don't have a competitive market there is no real way to arrive at a market value for CWB grain or for the market to arbitrage and allow grain to flow naturally to the area which would net the seller the highest value, it has to be simulated and conjured up.

So why we just don't open the market up so that wheat and barley find their highest and best use and flow naturally? The CWB turns itself inside out and creates all kinds of complicated formulae and calculations (FAF being just one example) in a futile effort to try and simulate it. But because the marketplace is a dynamic thing - always changing - they can never hope to get it right anyway. And furthermore, while they say they are trying to simulate what would happen in an open market, we all know of examples where other motivations dictate their decisions, and why we must never know what goes on inside their black magic box.

Besides, for the CWB it’s better to keep things complicated so that it can’t be figured out. It leaves all kinds of wiggle room in the pool accounts to cover up mistakes, arbitrarily reward things that the marketplace may not reward but the CWB wants, and makes farmers (some at least) think they need the CWB to protect them because, after all, wheat marketing is way to complicated for farmers to understand and Cargill and ADM would fleece us all.

In short, in the minds of the elite thinkers at the CWB, farmers are way to dumb to make the right decisions.

[furrowtickler]

Funny, where is agstar,willie,burbot? Strangly silent when the CWB is caught with their hands in the cookie jar.

[Jay-mo]

They're still doing the math on the above stated formula's......"hmmm, hehe thats good stuff

[Fransisco]

Substitute the word farmers for parents and CWB for Department of Education and this clip pretty much sums it all up.


http://www.youtube.com/watch?v=LLDb2V86Ei0&eurl=http://gerrynicholls.blogspot.com/