Cash Pricing Wheat

[TOM4CWB]

FYI;

St. Joseph, MO - Wed Dec 10, 2003 - USDA-MO Dept Ag Market News


Daily National Grain Market Summary

Grain and soybean bids got off to a red hot start early this week, especially soybeans, but cooled off a little today. Wheat 2-5 cents lower. Corn steady to 2 cents lower. Sorghum 1-2 cents lower. Soybeans mostly 2 cents lower.
As usual the market maker this week has been exports and prospects for
exports. A Chinese delegation is coming to the US in the next week or so, supposedly looking for soybeans and maybe wheat. Currently, it looks like there is good chemistry between China and the US. Recently the US lowered tariffs on steel and this pleased China. We have 13 billion dollar trade deficit with China this year. Also, recent declines in the dollar favorable for exports. Soybean stocks in very tight supply and producers are hoping for a big China order. After recent price upturns US soybeans 2.15-2.20 above a year ago, this up around 35 percent. World usage of soybeans increases every year.
However,
wheat prices in the US are 10-15 cents under a year ago. The US had had an
increase in wheat production last year but world stocks are at a very low level.
China may find some wheat cheaper out of other countries. There have been some fairly good wheat export announcements this week, including listed below.

[Ration-Al]

Tom,

Are you suggesting that Canada is the driving force in the Minneapolis Wheat Futures?

The market goes up......the market goes down. Traders are happy.

[TOM4CWB]

Ration-Al;

You are absolutely right Canada is a major driving force behind the MGE Spring Wheat futures contract.

This is why the CWB has a seat on the MGE board.

[Ration-Al]

You are losing me Tom, are you saying that the CWB has a seat on the MGE board so that it can impact wheat prices?

[TOM4CWB]

Ration-Al;

The MGE is the Single price discovery point, not counting basis adjustments of course, to in my estimation of over 75% of all CWB business.

Canadian Milling grade wheat is a good size factor on where MGE Spring Wheat futures go. When Stats-Can announced the Higher Canadian Production Numbers, MGE went down.

With the amount of control the CWB has in the high quality milling wheat market, CWB volumes of trade can have a major impact on the futures.

This is why Canadian Farmers should pull the trigger on CDN wheat sales through a cash pricing mechanism rather than the CWB sales dept.

When a cash price is avaliable, the CWB cannot be blamed for 50-70% of wheat risk we carry as farmers carry.

If CWB feed wheat prices were required to be competitive with domestic prices, it would help the present PPO system out significantly.

If we were allowed to switch tonnage between classes of wheat that are traded on the same exchange, it would also be a great benefit.

However, PPO's as they stand involve no diciplined risk management at all by the CWB.

The CWB DOES NOT match hedges put on by farmers with deliveries against these hedges, which destroys the integrety of PPO's as they stand.

This is why we need a cash pricing option/pool, instead of the present pool/PPO's which is nothing but a tax on PPO users, last year the CWB took over $20/t extra off my PPO cheque and put it in the contingency fund.