Fixed price contracts with the CWB

[charliep]

Perhaps I should be careful in commenting about
looking after farmers interests in terms of the fpc
given the CWB lost (or perhaps redistributed) $40
from the contingency fund in 2006/07. From
indications, the producer pricing options have lost
even more in 2007/08. Hopefully these dollars
were redistributed to farmers and not spent on an
ill conceived expense risk management program.

More interesting will be 2008/09 and how (if at
all) the CWB puts back money back into the PPO
contingency fund. I note the daily price contract
was is no more. I also note (perhaps others see
things differently) that fpc (and by proxy the
flexpro) are about $20/tonne wider than a year
ago.

[charliep]

that should be $40 million.

[chaffmeister]

Agstar:

The type of company that you want to deal with is the one that is responsibly managing its own bottom line. The smart ones know that to protect their business over the long haul, they have to play fair. And that pays dividends down the road.

Read the following taken from the Aug 28th Manitoba Cooperator:

<b>In early 2007, when Terra Grain contracted with area farmers for wheat deliveries for both 2007 and 2008, $4 a bushel was enough to attract two-year contracts.

Wheat prices since rose sharply. A lot of companies would have rubbed their hands in glee, pleased with securing feedstock so cheaply.

Terra Grain went back to its farmer-suppliers and offered a $1-per-bushel top-up for the second year as long as producers would sign up for a third year. The 2008 price became $5 a bushel and the price for next year has been set at $5.50 a bushel plus up to 25 cents a bushel more depending upon what happens with input costs.

The company didn’t take the short-term gain of securing wheat at a low price. It realized that the business is long term and farmer-suppliers are vital. </b>

To say that Terra Grain management cares more about farmers’ bottom lines than its own would be wrong. But they clearly want to foster good working relationships with their suppliers and paying more for their supplies yet to come would certainly work. Often, when taking care of your own enterprise, those you work with - suppliers or customers – also see the benefits.

Think about it. Do you have a supplier that you prefer over others because of the something he did - and the sense of being treated fairly?

Don’t think for a minute that these relationships have always gotta be antagonistic and non-trusting.

[johnsmith]

Remember guys that CWB has NO DUTY OF CARE to its captive audience. I as a farmer take that as they do not have to take our board grains if they do not find a market. So who's care does the farmer run CWB care for? hmm
Would somebody like to explain?

[charliep]

Chaffmeister

I think you have indicated over time (and I agree) that the CWB is a good customer of grain companies that provides a solid contribution to their bottom line. CWB grain handle has guaranteed elevation (might also say profitable), paid storage (with a caveat the problem is lack of control over inventory and movement) and almost no cost risk management. On the latter point (and trying to tie to the topic in the title of the thread), risk management for any company these days is expensive given the volatility and I am not so sure that I wouldn't be glad to hand this responsibility to the CWB in exchange for quaranteed margins (read profit). The problem grain companies have is the overall control the CWB has over logistics and from there, the companies ability to operate efficiently/lower costs.

[parsley]

johnsmith,

The Board has a LEGISLATED duty to buy wheat and barley that is offerred to them.


However, they can legislatively sell it for what THEY deem is "reasonable".


Two bits a bushel could be deemed reasonable.


Yup

And legally, there's not a bloody thing you can do about it.

Parsley

[johnsmith]

Thanks parsley

I was hoping that the love the CWB side would explain why it's so pleasureable having the heavyhand on my shoulder.