Pro's out to lunch

[craig]

Does anyone understand the logic. CWB issues a mid month Pro on malt barley to tell us that it is still the same as it was before.In the mean time fixed prices on wheat are in free fall and are way under valued to the Pro. What caught my eye was when the FPC on CPS red at my local elevator was below the current feed wheat price. With such a late crop it just didn't make sense. So wouldn't it have made more sense to offer mid month on wheat to indicate wheat values are falling. Can't see how next pro's will not be down big time. Just another note. Is the CWB prepared to initiate another study to show how well it's yearly price averaging strategy stacks up against those farmers who were so stupid and sold a large portion of their 2008 crop early.

[bucket]

From one of the conservative campaign offices:

If the conservatives get a majority the cwb is gone.


They are just wasting time and your money. The cwb has no plan B if they are forced to work in a open market. Wasting time and your money. The cwb doesn't care what happens now. The employees are looking for new jobs and that why every time you phone the cwb you have to talk to someone new. The older employees are waiting for their gold watch pay outs.

Meanwhile no one is minding the store. And the world is stealing our grain.

[chaffmeister]

Craig:
The malt barley markets are also in free fall - you just don't see it like you do with wheat - no FPCs.

What gets me is the drivel that goes along with the PRO announcement:

Sept 11: Malt PRO unchanged.

CWB Propaganda:
<b>Commodity prices have been under pressure during the past two weeks, which has weakened the price outlook for malting barley sales.</b>

Reality:
In the 2 weeks they're talking about (ending Sept 11th), European and Australian malt barley prices dropped US$37/tonne and US$40/tonne respectively.

The CWB doesn’t seem to have noticed that since July 1, they’ve dropped US$127 and US$106 respectively. In the same time the PRO dropped $12.


CWB Propaganda:
<b>However, the combination of good value sales already in the pool, weakening of the Canadian dollar and lower ocean freight rates have mostly offset the impact of lower international malting barley prices on the projected pool return.</b>

It’s only Sept 11 – how much has already been sold? Isn’t ironic that the CWB accuses US farmers of selling too early in the crop year, yet they seem to have sold early themselves – and now its cause for celebration.
Also, lower ocean freight rates favour all shippers - Australia and the EU as well.

<b>Supply concerns continue in Australia as rains continue to miss the main barley growing areas.</b>

Somehow that doesn’t explain the $40 drop in Aussie prices. Nor is it totally consistent with the following from World Weather Inc. (on Sept 12):

“Recent rainfall has been sufficient in eastern parts of Australia to bolster soil moisture in support of long term wheat, barley and canola development. Western and South Australia have not been nearly as fortunate with rainfall and both states would benefit from a net boost in precipitation. (No doubt this is what the CWB was reading.) No area in Australia is considered too dry right now, but timely rain is needed in these two drier states to maintain the best possible outlook. Greater rain is expected a little later this month.”

Somehow the CWB missed the point that “No area in Australia is considered too dry right now” and “Greater rain is expected a little later this month.”

<b>The progress of the Canadian harvest has been slow and there remains considerable uncertainty around the quality and selection rates of the crop. Weather conditions over the next two weeks will be critical in determining the quality of the malting barley crop in Western Canada.</b>

Yet they’ve sold enough to keep the PRO from dropping. Hmmmm…..


Something else to consider:

To compete with Australia into China right now means an instore price in Vancouver of about $260/t - <b>$88 below the PRO at $348/t</b>.

Logic tells me the only way the PRO will stay up is if the Australian price rises, the CD weakens further, and ocean freight is cut dramatically.

Check out the discounts on malt barley EPOs. On Sept 3, the discount on a 100% EPO was $29.50/t. Today it’s $44.25/t. Seems to me the CWB knows the PRO is too high and is taking protection by increasing the discount.


Wouldn't it be nice if they just told you what was really going on?

[Ron]

I would wager a bottle of crown royal that we get no bad news from the CWB untill after the elections are over then we will get a dose of reality. Any takers?
SCREW THE CWB

[silverback]

I have been thinking the exact same thing.

[silverback]

Sorry, forgot the most important thing.

Screw the CWB.

[bucket]

ron

Unfortunately the markets will go back up and the incompetence at the board has got our grain sold at the lows.

Look at the fees they are taking on the epo's - the cwb is forcing farmers to use the pools. If not the extortion fees for the epos indicates the grain was sold low and the pros are going down.

INCOMPETENCE.

[charliep]

I wouldn't necessilarily toss the EPO idea out even though they are expensive. The question I would ask is what the PRO would be today if it were released. If your answer is substantially below the current forecast, you are effectively taking ownership of an option that is well into the money in the case of 100 % EPO or close to the money in a 90 % example.(if I can use that terminology). Then you can look at the cost side and consider in your risk management strategy.

Note the real answer would be to have a cash price to react in an open market scenario or the old daily price contract from 2007/08.

Will note page 6 of the August/September CWB Grain Matters. Will leave the comments on the Informa alone (people can ask questions) but will note the table which documents their $560 mln claimed 2007/08 benefit. Interesting how they show the PRO versus US average prices - PRO market signal was below the US farmer one. Perhaps why the majority of western Canadian farmers prices early on the producer payment options. don't think this was included in their $560 mln benefit.

[chaffmeister]

I agree Charlie. Although the 100% EPO discount today is $42.25, by me reckoning the PRO is about $78.00 above where the offshore market is currently offered/indicated. (Don't know if it would even trade here as most buyers are pretty comfortable right now.)

So to sell a 100% EPO and get $305.75 instore, as expensive as it seems, is still about $36 above the competitive offshore market right now.

Problem though --- we don't know what the domestic brewer is doing, or has done. Right now I think they're covered for a bit but they will need to come in again, possibly just after Christmas.

The $64 question is can the CWB keep the price high to the brewer? And if so, what impact will it have on the PRO? If not, we know which way the PRO (and the EPO) is going.

[chaffmeister]

I agree Charlie. Although the 100% EPO discount today is $42.25, by me reckoning the PRO is about $78.00 above where the offshore market is currently offered/indicated. (Don't know if it would even trade here as most buyers are pretty comfortable right now.)

So to sell a 100% EPO and get $305.75 instore, as expensive as it seems, is still about $36 above the competitive offshore market right now.

Problem though --- we don't know what the domestic brewer is doing, or has done. Right now I think they're covered for a bit but they will need to come in again, possibly just after Christmas.

The $64 question is can the CWB keep the price high to the brewer? And if so, what impact will it have on the PRO? If not, we know which way the PRO (and the EPO) is going.