Cash Pricing Wheat

[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.

[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.