Initial CWB #1CWRS 13.5 03-04

[TOM4CWB]

Charlie;

The baseline is out of the bag, What will the initial be for 1CWRS 13.5?

My best estimate, using last years Aug 1 spreads, VERY close to $140/t basis Vancouver instore. But you guys probably already know anyway...

1CPSR, $110 initial, my guess.

I am not allowed to say what the 1CWRW 11.5 is, but it was in print at the meeting in Lethbridge yesterday...

Am I close Charlie and Lee?

[charliep]

I don't to forecast something that will be released in less that a week. 70 to 75 % of the June PRO is the most likely level. That would make 1 CWRS 13.5 initial $140 to $145/t port or an Alberta initial of $100/t. The 1CPSR would be $110 to $120/t port or an Alberta initial of $70/t. The real numbers will likely be out early next week.

[TOM4CWB]

Charlie;

Since CWB and the Liberals know what the initial prices are, why wouldn't they be public yet?

By the way, the CWB has decided to offer $10/t CWRW incentives plus storage from Sept 1, so it looks like a price could be fixed today as follows;

$162.21/t PPO July 25th;
$10/t Select premium;
$4.30/t Dec delivery storage Pymt.
$3.30/t 12.5px payment.
Total= $180/t

Basis in AB = $44/t
$136/t net or $3.70/bu

What do you think Charlie and Lee, does this look OK?

[charliep]

I don't know how to answer your question.

FPC today is $165.73 or about a dime higher to allow locking in $3.80/bu. From a pricing/risk management standpoint, this is a good place to get started on forward pricing.

From a economist standpoint, does the $10/t accurately reflect the value of the new CWRW varieties? From the Lethbridge meetings, it sounds as if these new varieties are major improvements from the old winter wheat varieties. Adding in $10/t premium puts these new varieties at a $5/t premium to CPS red and equal to CPS white. Are these spreads accurate reflections of market values? Is the CWB discounting the new CWRW values to establish market share? My issues are having smaller crops valued using spreads with the CWRS and not having a direct link to their actual. Is $3.80/bu an accurate reflection of value? Don't have a clue.

[TOM4CWB]

Charlie;

This is the time of year, that convergence of PPO's with new crop help understand shortcomings of the CWB system, IMHO.

ODJ reports CWB export St. Law. # 1 CWRS 13.5 @ $243.45 July 29th. The PPO is $209/t which can be delivered Aug. 1.

The near by MGE futures are $.10US Sept 03 under Dec 03, which means the CWB gets to keep the futures carry as well.

So as close as I can figure to a CWB cash price, shows a $25/t (if we say the CWB offering price is $10/t less than published #'s)loss to the pooling accounts.

1 CPSR is $11/t under 1 CWRS 13.5, (T Bay quotes July 29 03) yet PPO is $38/t under CWRS PPO. It appears a further $27/t is lost on CPSR, but the pool is no better in this spread.

1SWS however, ODJ CWB Quotes are at T Bay $208.72/t, yet the PPO pays $196.22/t. The spread on SWS is only $12.50/t, between T Bay Price and PPO offer.

1CWRW is the worst, at $166.56/t (St. Law.)PPO offer, while T Bay offer is at $203.32/t. Since we produce a CWRW tonnage that COULD be all sold domestically, just like SWS, this wheat is treated the very worst.

This is an indication of just how political CWB wheat class spreads are... The AB. soft white wheat guys have done a good job of pocketing the favours of CWB support, it sure appears.

Was this what you were questioning Charlie?

[charliep]

The question is how many people are aware of how spreads between classes, grades and proteins in CWB pools. The point to emphasize is that spreads do not reflect individual sales/values but rather average assumed values over a whole year as determined by the CWB. New varieties/classes of wheat carry this same baggage.

In my humble opinion, the CWB should let individual grain companies run these programs with the premiums for crops with additional quality benefits being paid to the producer who grew them. Currently, all these signals are getting lost in the pooling system. At the same time, market development costs or for that matter discounting to establish markets (if it is occuring) are being born by the pools.

I also note success at marketing wheat classes other than CWRS. Both CPS and CWES were toted having potential to offer other alternatives but both seem to have fallen in disfavor. The new super stars are CW hard white spring and red winter. I will leave to discussion.

[TOM4CWB]

Charlie;

SWS seems to have had the biggest gain in CWB special status; CWRW is at a big disadvantage because the CWB refuses to develop the Domestic/North American Market, which the CWB gives Soft white Wheat on a platter with premiums, cause it competes with OWPMB and doesn't compete with CWRS.

The CWB wants to push CWRW offshore to the pacific rim, as revealed at Lethbridge last week, and other recent conversations with CWB Market development folks.

[melvill]

Just a quick point on the Board's CWRW Select program. A number of people thought it only applied to deliveries for export. Actually it doesn't. The RW Select program applies to all contracted Select RW regardless of whether it goes to a domestic mill or for export.

Ellison in Lethbridge has a rather interesting program for RW. It is offering a $5.00/tonne premium over the initial price plus trucking from farm to the mill, a $5 to $10/t value. If the wheat that Ellison takes is also contracted to the RW Select program, there's another $10/t from the Board, not including any protein premiums. Delivery to Ellison could all add up to a nicer $20 to $25/t or more above non-Select RW markets.

[TOM4CWB]

Lee;

I asked specifically about this at the Winter Wheat CWB day last Thursday.

The CWB said the "might" allow permission for select premiums to be paid to deliveries to facilities like Elisons, but added that a farmer needed the CWB's "permission" to collect the $10/t on domestic deliveries.

I had been told in no uncertain terms a few weeks before that I could NOT deliver under the CWRW Select program to a domestic miller, the day I signed up on this program.

Just so people are aware that what you are suggesting above (on domestic select CWB premium deliveries) is more the exception than the rule.

If someone from like Patti from the CWB Market Dev. would comment, HERE, it sure would be helpfull!

[melvill]

Just got off the phone with Andrea Hilderman, CWB producer contracting Poo-bah. She said unequivically that deliveries of CWRW Select contracts to domestic millers is A-OK. This year the $10/t premium for that program and any protein premiums will be paid up front with the initial price. In past years those monies were paid directly from the CWB.

Producers that sign a CWB RW Select contract must nominate a delivery point so that the Board knows where to call the grain from. The only hitch with mill delivery is that producers must inform the CWB of mill delivery so the Board knows that inventory is no longer available for export.