CWB LIVE PRICING AND MORE TIMELY PRO's ARE NEEDED

[mbratrud]

CWB monthly PRO’s sends poor Market signals to Farmers. Much has changed in the Wheat Market in the Past two weeks that is obviously not indicated in the latest PRO. I will pass judgment when I see the Aug PRO, it should be significantly higher.

In today’s world the Board should be posting a Daily PRO! Or at the very least a Weekly PRO. The Board should also be pricing PPO'S LIVE, step out of the stone ages and into the digital world this is not rocket science!

As far as Basis goes we know they will never be able to be competitive with the US because our Wheat is marketed all over and the Basis is averaged that’s just a fact of life, Maybe when we are growing less than 15 million acres of wheat we can just sell it all to the US and be done. (could happen sooner than you think)

SO CWB guru's and I know your reading this. CWB LIVE PRICING AND MORE TIMELY PRO's ARE NEEDED. I would challenge anyone of you to give me 3 good reasons why this can’t be done!

Ok Rant complete!

[charliep]

agree with the all the above.

Good questions for the CWB director candidates this fall as to their vision of the new CWB and products the organization will offer farmers.

On the heals of the above, the question also has to be asked as to how the CWB as organization handles risk (both opportunity and negative consequences) in a rally like this. This will present challenges under the current system.

No idea about how much money is in the PPO contingency fund (only reported to the end of the 2008/09 crop year). The fund would appear at the present time to be something that is bumped up in lower price volatility times (harvested to prop up the contingency fund) only to have wasted through high cost risk management policies and proceedures in times of higher volatility like today. Frustrating in that this represents a transfer of wealth between crop years and farmers.

My ranting.

[charliep]

Since this is the ranting link, I thought I would express more frustration and this is on durum. Note that durum fpc prices have stayed flatter than a pancake in spite of the rally in overall wheat (see CWB historical prices). Know the issues around managing risk in durum using futures but why not have a program like the malt barley cash plus one that would match durum fpc values against actual sales. Why is it acceptable to run the durum fpc in this manner? No fpc program would be preferable to today (realizing there have been changes to the durum/ability for the CWB to top up).

[mcfarms]

They've got a new market explanation thingy the cwb site I emailed it to a smarter man than I to post the link here if he so chooses , otherwise go look at it there . ( unless you are afraid you'll burst into flames if you go there, like I do when I go into a church)

[liberty]

What's needed is a voluntary CWB. Then producers would get the timely responsiveness that they require.

Asking for a monopoly CWB to be more responsive is like asking a central planner to plan better. It's never happened in history and won't happen with the CWB. It's in the very nature of centrally planned organizations to be unresponsive and lethargic.

[mbratrud]

Just recieved this from the Board, Still would like to see a PRO UPDATE. I can find the PPO prices What is the PRO doing?

Special wheat market update - August 2010

August 05, 2010

View video commentary on YouTube

Wheat futures markets have now posted their largest monthly percentage gains since 1959, with values shooting up over 50 per cent since the beginning of July to more than US $8 per bushel as of opening on August 5 - the highest levels since the rally of 2008.

This special market update is being issued to alert western Canadian farmers to potential pricing opportunities. Farmers are reminded that you have a variety of pricing choices for wheat through the CWB. These options, including the CWB wheat pool and Producer Payment Options, can help you set your own preferred level of pricing.

Farmers should check posted program values on the CWB's Web site at www.cwb.ca. CWB program service representatives are also available to help you factor these market conditions into your own farm-business plans. Contact information can be found below.

Among the options to consider through the CWB are:

Booking a "futures-first" Basis Price Contract through the rally and floating the basis.
Locking in current values through the Fixed Price Contract.
Using the FlexPro program (if you have already signed up) as a reflection of the forward market structure, given the CWB's price pace to date.

To illustrate the potential opportunity window, the following table compares current prices available for base grades of wheat through the CWB's Fixed Price Contract (FPC) to the last CWB Pool Return Outlook.

CWRS/CWHWS CWES CPS-R CPS-W CWRW CWSWS
PRO $225.00 $195.00 $188.00 $186.00 $184.00 $175.00
FPC_Aug 3 $268.98 $239.00 $235.42 $233.32 $231.42 $219.43

--------------------------------------------------------------------------------

FPC over PRO $43.98 $44.00 $47.42 $47.32 $47.42 $44.43

--------------------------------------------------------------------------------


FPC_Aug 4 $276.91 $246.93 $244.63 $242.53 $240.63 $227.50

--------------------------------------------------------------------------------

FPC over PRO $51.91 $51.93 $56.63 $56.53 $56.63 $52.50

--------------------------------------------------------------------------------


What's happening: Wheat market changes are occurring extremely quickly in the current environment. Opening August 5 Minneapolis futures values (December 2010) were US $8.05, compared to $7.45 last week and only $5.22 on June 29.

Weather-related problems in Russia, Kazakhstan and the EU-27 - coupled with current concerns in Canada - are behind the market rise, with the recent surge in wheat futures based primarily on Russian drought concerns and the Russian government's response. At the same time, basis levels have been pressured way down.

However, the markets are highly volatile and may move up or down very quickly in a short period of time. The Russian situation in isolation may not be sufficient to sustain futures values. In order to sustain current futures levels, unanticipated demand will likely need to emerge - whether from corn or additional wheat crop problems in Argentina or Australia. In the interim, wheat futures could begin to be subjected to downward pressure as the North American spring wheat harvest commences.

The role of speculative funds: Money-market funds are also playing a role beyond supply-and-demand forces, which could keep the markets high for a while. Money floating from equity markets to the commodities can bid wheat beyond the level supportable by current fundamentals. This is important to note since a sustained wheat rally is most likely to occur only through a tightening of the U.S. wheat supply-and-demand balance. While U.S. exports are above last year, they have yet to demonstrate the strength necessary to significantly erode the huge U.S. wheat surplus (or even to see U.S. wheat stocks narrowing year-on-year).

CWB price pace: CWB FlexPro values are reflecting the forward market structure through the adjustment factor, which is based on how much of the crop has been priced today by the CWB. The CWB has now priced approximately 13 per cent of the 2010-11 crop, based on current CWB production estimates. As a result, the Fixed Price Contract is based mainly on the estimate of current prices available for 2010-11 crop year production, with a small amount of impact from previously priced wheat. As the CWB advances the level of pricing, the FPC will slow down and will not reflect the full market move. By the end of September the CWB anticipates a pricing level of 25 per cent. This will result in an FPC that is exposed to only 75 per cent of international price moves.

CWB Pool Return Outlook: the next PRO will be released August 26. If market prices remain high or continue to rise (and depending on harvest prospects), significant PRO increases could occur. The CWB will assess the August PRO to determine whether an immediate increase in the 2010-11 initial payments to farmers should be recommended to government. Note: unlike futures or spot prices, the PRO does not capture a price "snapshot in time" for a single market, but projects what returns may be for the entire crop year from all markets where western Canadian wheat is sold.

We're here to help: CWB program service representatives are available to help you assess your options and determine how market conditions might factor into your individual farm business plans.

Alberta
Tim Baranyk
Red Deer, AB
Cell: (403) 554-0038
Fax: (403) 986-5562
tim_baranyk@cwb.ca

Western and central Saskatchewan
Chris Kuntz
Saskatoon, SK
Cell: (306) 280-1247
Fax: (306) 975-6966
christopher_kuntz@cwb.ca

Manitoba and eastern Saskatchewan
Mavis Willson
Winnipeg, MB
Cell: (204) 250-4469
Fax: (204) 983-8031
mavis_willson@cwb.ca

[btjadenlepp]

What kills me is that they send this
novel little write-up out right before
hosing us on the Basis!! Like, what's
the purpose of this little newsletter
guys, get all the farmers to price on
the day you crank your margin out, build
up the warchest to protect the pool?

We just got off the phone with some U.S.
mills, they've seen the basis on wheat
IMPROVE this week. So this $12/t
worsening of the FPC Basis is totally
unsubstantiated against outside wheat
markets.

WORSE YET - Their own wheat offer prices
(truck) went UP today, by about the same
amount as the cash price to farmers went
down! Someone please explain to me why
we have to pay these guys so much - in
salary and price protection - to simply
cover some upside price risk.

www.farmlinksolutions.ca

[charliep]

Hopefully don't burst into flames but here is the youtube link (written text is posted above). You can also see my explanation on Access prime time tonight (Alberta only) between 7 and 8. By a small explanation, I like to do links based on the theory, practice makes perfect. Perhaps better at my age, repetition means I don't forget how.

<a href="http://www.youtube.com/watch?v=vBwgOzX-HBY">CWB special release</a>

[mbratrud]

If they priced live they wouldn't have to take extra risk money on their basis!

[charliep]

A part of the problem is the CWB manages risk from the PPO programs across futures months representing the whole pooling year. Things like cash marketing (allocating farmer contracts against sales/direct hedging) would allow more creativity.

For those that want minute to minute sales opportunties, you can still hedge on the appropriate futures market and do an EFP (exchange of futures for physicals).

from the CWB website.

Exchange for physicals (EFP)
The EFP option enables producers lock in a futures price that the CWB is not yet offering. The EFP can be executed once the CWB begins offering that futures month. It also allows producers to take advantage of intraday trading values. Producers can take a short futures position through their broker and exchange this position with the CWB to lock in the futures component of a BPC. When the EFP is executed with the CWB, the producer receives a long futures position at the previous day's settlement price posted on the CWB pricing schedule, to unwind their short position. The CWB takes on the short position at the same price to lock in the futures portion of the BPC. For more information on EFPs please view the information sheet.

<a href="http://www.cwb.ca/public/en/farmers/producer/1011bpc/pdf/10-11/infosheet/1011bpc_is_efp.pdf">efp</a>

[Hopperbin]

Come on guys your ppos prices are going to suck this year. The CWB will be propping up the pros all they can. We are all stupid to take a fixed or Flex stupid price. Pro is where it is at because that is the only chance we have at the moment.

[mbratrud]

Yes Charlie you can sell the Futures and do and EFP after, but why should we have to? why pay extra brokerage? It just seems like an extra step. It is retarded that they put the price out at 3 and have it expire at 9PM? Why not price while the open and show guys the basis at the same time. I still don't have a good answer as to why this can't be done.

What percentage of Farmers do you think have a trading account?

[charliep]

Haven't seen any surveyed numbers but likely less than 5 % have
futures accounts. Not saying the best alternative but the only one
available in current for inter day trading. Also does not deal with
currency risk.

The first step to your concerns is to allow pricing/risk management
outside the current pooling system.

[chaffmeister]

Fixed price pools and PROs is the problem.

The CWB price to farmers should be nothing more than a basis - to be priced by the farmer at his discretion against the relevant futures market.

Pooling should mean pooling of CWB "benefits" or "marketing efforts", not futures (flat price).

Remember when the CWB took their foot off base a couple of years ago and decided to speculate in flat price and lost $229 million in the wheat pool account? That wouldn't have happened if the CWB's responsibility was for basis only.

[TOM4CWB]

Charlie,

This is supposed to be about "RISk management"

This market is haywire because there is huge risk... western Canadians are among those globally most at risk in production risk problems.

Trading futures solves none of these problems.

IF a frost comes... the carnage will be massive. We miss out on the premium prices... and pay HUGE costs to buy back pre-priced positions.