Cash Pricing Wheat

[charliep]

Should have read your question better. In terms of hard red spring wheat, we have the best quality/most consistent grading standards as compared to the US and Australia. This is for sure the case for Japan keeping in mind they are very specific about quality/milling characturistics and the CWB/grain industry is prepared to cherry the system to achieve this quality.

Your comment about the delegation is actually an annual event. Their are regular delegations that visit Alberta/Canada from government and industry. They are relationship who like active communication and dialogue. Japanese are also diggers for information. Finally, it doesn't hurt western Canada has some golf courses.

[TOM4CWB]

Ration-Ai

Brian White of the CWB was asked this same question in Nisku C to C Mtg.

His response was that the typical premium was in the $15-25/t range for the Japanese market.

We should remember that unwritten trade balance issues between JAPAN and; Australia, The US, and Canada...

means that a balance of imports of grains from us as wheat producing countries is part of the Japanese food procuring system.

What I am saying is that Japanese exports of Cars, Computer parts etc. and access to our markets is VERY Important to the Japanese.

In realisation of this, and since Japan can afford to pay more for an assured just in time grain supply, this is a simple way of greasing the wheels of trade, and keeping the high cost of local Japanese storage and grain handling to a minimum.

Obviously since we import so much from China, now, this same type of relationship with China will be developed over time. Wheat for TV's, DVD players and clothes.

[Ration-Al]

The premiums from the Japanese contract go into the wheat pool account and are ultimately returned to producers.

Since the Japanese normally only purchase #1CWRS do those premiums go entirely to the producers who sold #1CWRS or are they somehow diluted through the spreading process with other grades and classes of wheat?

I would say that my farm has the right through the pooling system to a proportionate share of the Japanese market. That would be true in a pooling environment or in a competitive open market environment although I might have to fight for that share. We should in fact be able to quantify that share on a theoretical basis. The problem is that in order to receive my "entitlement" I am also forced to accept my share of all the other markets in the world. This is the rationale for "pooling" or at least a part of it.

What if I do not want my "share" of the Malaysian market for example or the Iranian market. What if I would voluntarily either not grow that wheat or store it into the next crop year? Could I customize my "PRO" be growing less wheat? I could let some of my land go idle. Seed it to grass or grow other crops.

Somehow the sale price of wheat must relate to cost of production. I know that customers do not give a r**ts *ss what my cost of production is. The world is supposedly a competitive environment for grain sales but with the US and EU subsidizing and pushing commodity prices below cost of production we are all going to go broke eventually.

[Ration-Al]

Yes Tom,

Wheat for DVD players and X-Box games. And going forward wheat for India so they can operate our call centers and do our bookkeeping.

China and India have billions of mouths to feed and their economy is beginning to boom. They are doing all of our manufacturing and will soon take the burden of many of our service oriented jobs as well. China is today driving the cost of ocean freight from $25 per tonne up to $55.00 per tonne with their demand for coal and iron ore. They are graduating 345,000 engineers per year. What do you suppose 345,000 engineers will do with all that coal and iron ore?

Sure China will have the money to buy wheat and we will have lots of wheat and barley to sell them. But how many DVD's and how pairs of Nike shoes will I want to buy? There are a billion of them and only 30 million of us.

[charliep]

Ration-Al

The premiums paid for Japanese (and to some entent UK) wheat are returned to all participants in the wheat ex durum pool (not just those who grow 1CWRS 13.5). Similarly, the pain of selling into discounted/low value markets is shared by the whole pricing pool - not just the class/grade that was sold at these levels).

To much stuff in here/I apologize for ranting but you have hit a sore spot. Everybody asks me what a new more open wheat/barley market would look like and the impact on the pricing/delivery signals they would get. At the same time, they don't have a good handle on how the current pooling system works.

[charliep]

Saw the questions on canola. Japan doesn't pay premiums on canola given there are only two and one half sellers (Canada, Australia and sometimes the EU) that have a generic product. Common theme with wheat is they are a consistent monthly buyer of about 150,000 tonnes (6 times 25,000 tonne boats). China prices would be competitive with Japan on a sales day but with the caveat that the Chinese are only in the market when canola prices are competitive with other oilseeds. Mexico is somewhere between these two extremes.

Specialty oil canolas do pay premiums in Japan but this premium is not known based on the value to the consumer. How much and is the fully reflected back to the farm level - don't know.

[Ration-Al]

I don't think you are ranting at all. Too much of the discussion in this forum is finger pointing. Mind you if the finger is pointed in the right direction that can be constructive. But once you have figured out where the problem is then you need to propose a solution.

I think that if everyone had a much better understanding of the pooling system we might just find that all of their anger and frustration would be directed there and not at the Boards ability to market.

We need constructive discussions about the mechanics of the alternative to the existing pooling system.

[TOM4CWB]

Charlie;

As with Japan buying a consistant volume of Canola raising the price in the fall of 2002, to levels domestic crushers lost BIG money, and everyone did recieve the benefit of this transparent system.

It would be VERY helpful if a CWRS 13.5 were traded in Winnipeg, to allow this visible arbitrage to take place in wheat.

I note;

Canada sells wheat to China through the CWB, the wheat market drops generally because of the sale.

If China needs a whole big wack of Canola, you can be assured WCE futures would rally, not drop...

[Ration-Al]

Tom,

Canada sold wheat to China last week and the March futures hit a contract high. Doesn't seem to fit your theory.

[TOM4CWB]

Ration-Al;

On Dec 11th, the MGE Mar. 04 closed at $3.94/bu, and I remember reading DTN articles about the disapointment of Canada getting the wheat sale.

On Tuesday Dec. 9, the Mar 04 close was $4.04/bu, at the height of US hopes of a big Chinese sale of wheat.