NO EPO SWS/Canada Feed and Only 100 % for CPS/CWRW

[charliep]

Will note the CWB has withdrawn the EPO offerings for Feed Wheat (Oct. 9), Soft White Spring (Oct. 10). They have only offered the 100 % EPO on CPS, CWRW and CWES since Oct. 10. The higher costs reflect the drop in market prices, higher volatility and an October PRO that is likely to decline $20 to $30/tonne. The reason from a visual side is you would almost have to pay the CWB on delivery if you used the EPO today.

When the market has dropped like a stone in water, why hasn't the CWB redone the PRO? The once a month is misleading to farmers and makes the EPO process almost totally irrelevant.

I could go on a big rant but won't. The new world of producer pricing options puts increased pressures on the CWB to provide better market signals and risk management products. Putting 100 % of effort into protecting single desk and operating expensive/ineffective risk management products to protect pooling accounts with 100 % download of costs on farmers who use them is inexcuseable.

And all this after they sent in a request for an increase in initial payments. If there is room for an adjustment payment, then there should be room for lower cost EPOs.

[charliep]

apologize for using the term "PRODUCER PRICING OPTIONS". The correct CWB term is "PRODUCER PAYMENT OPTIONS". Even the CWB recognizes their products have nothing to do with price.

[charliep]

Apologize for being slow. Worked the numbers and now know why the CWB can't offer EPO contracts/only 100 %. The 100 % EPO on CPS red is $207.25/tonne port (PRO initial $292 minus premium of $84.75). Initial payment - $192/tonne. Check after working days 10 days - $15.25. If you used the 80 or 90 % EPO, the CWB would have to send you a bill after 10 days to recapture the over overpayment. SWS and Canada feed initials minus premium for all levels (80, 90 and 100) are over the current initial payment. Something like the over payment requests from this past summer.
And the CWB asked the federal government for an initial payment increase?

I suspect this is a good indication that handing out adjustment payments at this point is premature. If not, the CWB should be answering some serious questions about their risk management strategies cost and effectiveness.

[charliep]

apology for answering my own questions but here is durum.

Current initial payment for 1CWAD 13 protein - $252.50/tonne port. The CWB has asked for (and likely will get) the federal government blessing to add an additional $25/tonne (see this week's CWB Bulletin). Initial payment effective sometime November - $277.50/tonne port. Farmer enjoys any payments over this level.

80 % EPO - $309.60/tonne port (80 % $387 PRO) minus premius of $36.75/tonne or $273.85 deposited in the bank. They get to participate in durum payments above $309.60/tonne.

Someone has to help me out here. What is going on.

[charliep]

You can work the same numbers for malt barley. Two row initial port is $254/tonne. Requested $16. Total $280/tonne. subtract the premium from the 90 and 100 % EPO and you get to $280/tonne quickly.

I guess the CWB answer would be only an idiot would sign one of these contracts. But why would the CWB spend the time and effort every day putting out values that have no relevance to any farmers decision making?

[craig]

Charlie
This fall shows the fallacy that the CWB is a good tool for sharing or spreading risk. No one wants to talk about the fact that as a producer I want someone to take on some of my risk when I make grain sales. The CWb has made it quite clear that it will take no risk. This leads to a super conservative approach when it comes to both PPO's and EPO's. Our farm made the decision early on in the harvest season to get aggressive on sales of open market or non board grains. Other than winterwheat there was no opportunity with board grains. It seems ridiculous that I'm sitting with #2 CPS that is worth much less than my feed wheat contracts. These current prices would also indicate that the board has been slow with pricing new crop.I don't see them jumping up and down this year telling us what a good job they are doing marketing.

[mcfarms]

Charlie
The interim proposed is for the previous crop year



The CWB on Oct. 7 submitted a recommendation to the Government of Canada for 2007-08 interim payments as follows: $10 per tonne for wheat, $25 for durum, $33 for feed barley and $16 for malting barley. Payments will be processed after approvals are received.

[charliep]

My mistake.

Thanks for correcting McFarms.

[mcfarms]

no probs, I just got excited when I saw the 80 and 90 was gone, It used to mean that the pool was so much higher and safe that it couldn't go below that level.

[charliep]

mcfarms. I shouldn't take too much heat. The
comments still apply but the comments on initials
adjustments and the reference to the $16 on malt
barley and $25 on durum need to be removed.

Signals for all levels of EPO mean that the 90 % is
likely the equivalent of an at the money put and
the 100 % EPO is $30 into the money if I were to
use options thinking/market signal interpretation.
For those not familiar with options, the implication
will likely be at least a $30/tonne drop in the
October PRO. EPO premiums should drop off a
similar amount.

Everyone needs to do their homework when
making CWB marketing/producer payment
decisions. Someone raised the issue of a deficit of
a deficit in the 2008/09 pricing pools - at this
point, low probability but potential exists. It may
be your initial payment is your last payment.

[Ron]

If I take the peedelivery top up can I leave crop in the bin and gamble on 2009 being a better year for low grade? I don't have to repay untill Sept 09 but am I tied into delivery? Why deliver if the grain is worth less than the advance? SCREW THE CWB