It's Your Fault

[Zaphod]

Here's an interesting note about durum from the latest CWB Grain Matters. Apparently, the CWB sells the same amount every year and if you have extra in your bin, it's your own fault for increasing production. The CWB can't be expected to market "extra" durum. Oh, but they say the durum market is inelastic. How about increasing market share from 50% to 55%, and exerting even more market power? What a joke! Anyway, here's the quote from Grain Matters:

"The CWB accepts a similar tonnage on the Series A contract for durum each year and often accepts more on the Series B contract. What changes is the amount we grow as farmers and how much Canadian durum is needed in the world, keeping in mind that 80 per cent of our market is overseas. World trade in durum is around seven million tonnes. Western Canadian durum production was close to last year’s total of 5.5 million tonnes, combined with carry-in stocks of 1.9 million tonnes. That means western Canadian durum supplies are greater than the total world trade in durum."

In essence they're saying, "You stupid farmers, why do you keep growing more of this stuff? We're only going to sell the same amount every year. After all, you can't expect us to generate new sales for you, that would mean even higher admin costs. So it's not our fault you've got bins full of durum, it's yours."

Dump it in the non-board market for a better price and immediate payment. It's a no-brainer.

[Fransisco]

Yup, it's a real mystery where farmers got the idea to grow all that durum. I mean it's not like they were getting any kind of price signals from the CWB, right?

[ado089]

Well why do you keep growing more Durum? Sounds pretty simple to me, if you produce 7.4mmt, never mind all the other producers alot closer to the consumer, but only have demmand fo 7mmt you're going to have two things happen, you're not going to sell it all and when you do you'e going to get a shitty price. That's an econ 101 issue not a CWB issue. Durum only get's used for a certain amount of products so the demmand is pretty fixed. I'll have an extra couple of scoups of macoroni tonight to try and help you out though.

[charliep]

Perhaps durum is a good crop that has a fit in crop rotations on brown soil zones. It has also paid well over time. As an analyst who in a previous life gave doom and gloom durum forecast in the spring prior to seeding and who faced the same audience the next year to explain why I was wrong and followed with another doom/gloom forecast for the new crop, things aren't always that simple.

A couple of notes is that durum should not necessarily be 100 % about contolling supply but rather building customer base on the consumption side. Can anyone name a new market/customer for durum developed in the last 10 years?

Also note the issue should also be about having a process that allows the durum market to clear supplies at the end of a crop year. Durum farm storage between crop years should be a farmer decision - not a CWB one. A process like was used with malt barley would accomplish this. Early shutdown of the durum pool to protect results plus a cash pricing alternative at the end of the crop year. I guess we could also be really innovative and have 365 day a year cash pricing but that would be getting carried away.

[Zaphod]

ado, you're right that there isn't much growth in world durum consumption. But Canada has only 50% of the world trade. There's still room to grow that share larger. Look at peas and lentils as an example. Don't give me the crap that we can't do any more. That's the same lame excuse why we export the same amount of malt barley year after year after year. Somebody needs to light a fire under those CWB "sales" people.

[ado089]

Like droping the price??? Market share does not come cheap and if you have too much you're doing something wrong or you have a target on your back.

Profit= Price X Quantity

[stubblejumper]

Fran it's a mystery why farmers planted so much Durum when only 74% was accepted last year?

[Zaphod]

Let's see. How is the CWB doing on price by holding product back? How in the world do they think that with big production in the US and North Africa, that they could possibly keep prices up? Wait a minute, they can't.

The sadly ironic thing is that the CWB export offers are just following the Minneapolis mill bids anyway. They're not leading the market, they're following. Don't forget that the CWB price is basically the same as everywhere else, Cdn farmers also have the disadvantage of higher system costs thanks to the CWB and they have to pay something else called storage and interest costs. The only groups getting rich due to CWB policy are the grain handlers and bin manufacturers.

The truth is (economics 101, don't you know) that keeping supplies inflated by forcing farmers to store the crop only extends the bottom of the market. Efficient markets (not that the CWB knows anything about that) get rid of excess production by pricing it accordingly and then the recovery can start. Don't you think that world durum buyers know that Canada is sitting on 3 million tonnes of durum? They can wait out the CWB.

Or they go elsewhere, like the US. The US is expecting to export more durum this year than they have since 2001, and they're well on their way so far this year. Again, how's the CWB doing on that front? Check the numbers.

[ado089]

Does not most of our durum tonnes get sold to the USA where it is then re-sold?

[Zaphod]

No, actually only about 10 or 15% of exports go to the US. But does it tell you about the CWB's selling price if they could sell it into the US and the US could turn around and sell it on the world market at a profit? Hmmm.

The US exports close to half of its durum production. That tells me that the price received by a guy in North Dakota is based on world prices. And the ND guy gets more than the CWB PRO every year. Yes, the CWB can point out the one year out of ten that they lucked into a rising market and got a decent price by sitting on their hands. I'm talking about year over year better performance in the US. The "horrible" free market has provided better prices year after year after year.

The comparison is simple to do, if you dare. Simply compare the CWB PRO for each of the last ten years to the USDA marketing year average (a true weighted average) price. This price report is on the USDA web site and reflects the average price for all grades and proteins of durum. Let me know if you need the link. The currency conversion may be a little more work but I can help you with that too if you need it. Compare the annual prices side by side and you'll see how poorly the CWB actually does. Go on, I dare you.

[cityguy]

What Cdn grade would be comparable? In the 2008 crop year the "average" price in North Dakota was $10.30 US/bu and in 2007 it was $11.00. DO you convert that to Cdn/mt and then compare that to the final's less mid-point saskatchewan for 2 cwads 13 just to get close to apples to apples. Is that the public benchmark that the CWB should be held accountable to? or at least one of the benchmarks. You guys are told the CWB has benchmarks but does anyone know what they are?

[furrowtickler]

The cwb's benchmarks. Butt prints in their chairs from doing sfa!

[Zaphod]

Just so you don't have to do the math, here it is. The first column is the CWB final payment (PRO for 09/10). The second column is the marketing year average (a true weighted average) for all grades (good, bad and ugly) of durum in North Dakota converted to Cdn $. The last column is the difference. It shows that when prices are rallying sharply (in 2001 due to Sask drought and 07/08 when the mkt went crazy) the CWB gets better returns simply because they sell about the same amount every month, but that's not due to smarter marketing. Take a look at all the other, more normal years. How does the CWB do then? And don't give me the line about the US being a premium market. It's a fact that they export nearly half of their durum into the same markets as Canada does.

How about the last two years? Yoinks! Over the nine years shown, the average disadvantage for the Cdn farmer is $19 per tonne. If exports average 3.5 million tonnes a year, that's $66.5 million every year or nearly $600 million over the last nine years. Class action lawsuit, anyone?

2CWAD 13% ND MYA Difference
01/02 213.06 166.68 -46.38
02/03 221.45 219.82 -1.63
03/04 176.35 193.17 16.82
04/05 155.27 169.12 13.85
05/06 129.98 142.52 12.54
06/07 167.30 189.25 21.95
07/08 452.60 406.73 -45.87
08/09 299.76 443.11 143.35
09/10 149.45 210.25 60.80

[bucket]

stubble
The real mystery about last year is the cwb's PRO on durum.

The marketing people that do such a good job (according to proboard people) came out with pro's that were a premium over spring wheat. The problem was that those PRO's meant nothing - the cwb is not held to those marketing signals when the cheques have to be written. Nor do they have to tell farmers in February how much they will accept in the fall.

The only other job that is comparable is being ---- you guessed it ----

A WEATHERMAN

Never see them held to account either.

[stubblejumper]

bucket it is not their fault if you don't understand PRO's and how they get the numbers.