$85.4mil Wheat Pool Deficit.

[TOM4CWB]

Ration-Al;

VERY good questions about the A, B, and C contracts, remember when there had been a D series as well?

So we must decide by Jan 31st if our grain is going for export... not be able to shift crop years... all more and more restrictive.

I have no problem with a seperate pool for each of the A, B, and C contracts...

Why not just have a cash price avaliable, a minimum pricing contract avaliable like the AWB and OWPMB does... but to refuse to take farmer's grain when there is an international market avaliable is draconian and unacceptable!

[Ration-Al]

I'm trying to understand what you want when you say you want a cash pricing option. Is this something that would still allow the CWB to market the grain using their "single desk"? Would the participants in the pooling system remain unaffected by the "cash pricing" activity of those who choose that option?

There is right now the option of a fixed price contract but as it stands you have to lock in the price prior to July 31st. Obviously this limitation is anacceptable.

If you could arbitrarily choose between the fixed price contract and the pooling system at any time during the year this would have the same negative impact that we saw with last years C series contract. The only time people would go into the pool would be when the spot price was in serious decline and this would drag down the pooling price for those who had in good faith opted for the pooling contract early on.

What if there was a contract where you would commit your tonnage before the beginning of the crop year without the requirement of locking in the price or the basis. You would then have the entire year during which you could independantly lock in both the price and the basis. If you didn't do it yourself the price and basis would be locked in for you on the last day of the contract.

How close would that come to simulating the non-board environment?

[TOM4CWB]

Ration-Al;

THere are many options:

Pool each Series of contracts, just as you said earlier, A series ends and is paid out within 3 months of the pool changing to a B series pool.

Or as the AWB does it, the pool could be signed up to extend over 2 years, as an option to average income.

AWB works with many options, much more flexible than the CWB.

A cash price could be determined at time of delivery, the basis and futures estimated, call it a Cash Return Outlook (CRO) to give a close estimate of a daily price... allowing for fair splits of sales between the Pool sales for that day and Cash sales sold to the CWB daily.

It would be simpler to have competition determine a cash price, but the CWB could easily provide a single desk daily cash estimate to provide for daily pricing.

The options are endless... especially for feed barley and malt... it is unacceptable the CWB has not provided more options within the Single Desk, just as AWB does and the OWPMB did before de-regulation.

[AdamSmith]

Ration-Al,

What is so special about the farmers who support the single desk that they need everyone and everything to bend to their whims and desires to preserve the integrity of the "POOL". Your arguments are so 1995.

The only workable system is called an OPEN MARKET.

The CWB and it's supporters will have to bend to make the pooling system work within the open market system.

And Tom, You of all people should know that open market simulations within the single desk system will never, never deliver the results you and I are looking for.

[Ration-Al]

AdamSmith

You said

What is so special about the farmers who support the single desk that they need everyone and everything to bend to their whims and desires to preserve the integrity of the "POOL". Your arguments are so 1995.

I am not arguing. I am being a realist. If the CWB and pooling are here for the time being, I am simply looking for constructive plans that will provide more options and flexibility.

Your line of "arguing" has accomplished nothing in the last decade. Let's get over it and move forward with some rational, constructive discussion.

[AdamSmith]

Ration-Al,

Down on the farm we're not arguing anymore, at least I'm not.

I'm just made a decision not to grow wheat for the CWB anymore. More farmers are making the same choice al the time.

I use the term Arguing as a figure of speech.

Am I being uncoperative by not growing wheat, by not choosing to use the CWB as the marketer of my grain?

That is the reality on this farm.

I just think it's a shame for Canada to let our wheat industry decay and crumble when it doesn't need to. But I'm doing my best to prevent my farm from decaying and crumbling. Not growing wheat for the CWB is a crritical part of that preventative plan.

[TOM4CWB]

AdamSmith;

A Bird in the hand is worth two in the bush.

Cash pricing is a must, no matter how we arrive at this point...

THe taxpayers of Canada have paid a huge price to maintain the CWB monopoly... legal/court costs/fees, Saftey Net payments... lost opportunities.

THE CWB elections are turned into a farce... I cannot be an active wheat farmer and run to be a CWB director... because I grow CWB wheat and use PPO's.

I must only use the Pooling system, No EPO 90% only the pool if I am elected as a Director... how insane.

THe CWB MUST change, I am simply drawing attention to the fundemental flaws in the present CWB system... to make it a better system as soon as possible.

[AdamSmith]

Tom,

Just as long as you and others understand that just because it is a cash price doesn't mean it will be an open market price. There is a huge difference.

To me a cash price from the single desk system is only a 100% payment at time of delivery. 100% of a set price not 100% of a negotiated price.

An open market price is one that is mutually agreed upon by buyer and seller.

Price is determined when a willing buyer's price and a willing sellers price converge. That of course is just the beginning. In order for this to occur, the buyer must have the free capability to accept the grain and then transport that grain to it's next destination whether that be an export destination or a domestic processor. That buyer must also have the freedom to resell that grain or sell the processed product under those same market conditions.

I'm talking about the free negotiation between buyer and seller. Without these basic fundemental features in place it will be impossible for buyers to make offers to buy and sellers to make offers to sell. And without bids and ask there is no cash price.

As long as single desk remains, the best that can be achieved is a 100% payment upon delivery.

And the reality is that a 100% payment upon delivery is not going to save the CWB or the wheat industry from sliding into oblivion and it certainly isn't going to cause this grower to get back into growing wheat for the CWB.

[Ration-Al]

Adam

I can watch the cash market in Canola and know what the price is whether I am actively involved in that process or not. The same goes for wheat. I can watch the Minneapolis futures along with Kansas and Chicago and the corresponding cash markets and I can know exactly what wheat is worth whether or not I am directly involved in the process. Having a physical buyer for my product is not essential to the process. There is after all in the order of 100 million tonnes of the stuff traded in the world each year.

If the CWB can offer a cash price throughout the year they become a willing buyer. If I can compare that price to the active grain exchanges and determine that the price they are offering is attractive to me then I can become a willing seller.

You can be as negative as you want about the CWB. Your opinion on this matter will not change the fact that the CWB is currently the only game in town for milling quality wheat. If the current price of wheat does not cover your cost of production then I would say that you have made a good decision not to grow the stuff. If you have made the decision to not grow wheat as a protest against the CWB then I ask if a tree falls in the forest and nobody hears it.............?

[TOM4CWB]

Ration-Al and Adamsmith;

Prudence is the better part of Valour.

I will continue to grow significant volumes of human consumption wheat, because my farm produces high quality good volumes of milling grade product.

I have no reason to request changes to the CWB, if I am not growing products that require me to use CWB services.

AdamSmith, you have fallen into Art Macklin and Ian McCreary's trap... if you choose to refuse to use the CWB...

There point is that if you don't like the CWB... don't grow wheat... and the CWB will not cause any problem for you.... THIS IS FALSE LOGIC.

The CWB and it's pricing policies and single desk have influence over Commercial Canola, Lentils and Peas, Canaryseed, virtually grain product we grow on our farms.

WHen the CWB creates a PRO in the late winter early spring that is low (because the CWB wants our expectations low on market returns) then all other crops must compete with low base price to buy acres.

AND Brian WHite made it very clear at the C to C mtg. in Nisku, that if we did not like the prices offered through the PRO, don't grow wheat if the PRO is too low for you!

PPO's are better than nothing, but they clearly represent CWB opinions of markets a year away, and represent a sale to the CWB not to an end user... which defeats the purpose of clear market signals reflected back to my farm.

Adamsmith... I must fight from the inside (sell the CWB milling grain of many types)... because only then do I have an understanding and practical experience gleaned from this experience will truly allow me to understand what is happening at the CWB.

THe CWB is changing... no doubt about it... even though the same old retoric looks the same... they KNOW they are toast if they do not change!

I hope that we can effect change to make all our communities stronger... not destroy simply because we have the power to destroy!

[AdamSmith]

To Ration-Al, I assure you the decision was made for economic reasons, in fact I was mentioning to a farming neighbour just the other day that should the CWB lose it's monopoly tomorrow, I probably still wouldn't seed any CWRS next spring.

To Tom, I still must grow cereals in my rotation, and those for the last few years have been malt variety barley (a CWB grain) and winter wheat (another CWB grain) so even though I don't grow CWRS I'm still growing grains that are hugely influened by the CWB. Other than the first year I grew winter wheat, I have sold all my production into the domestic feed market and the barley seems to be 50/50 (malt to CWB and feed to the domestic market)

But gentelmen let's just suppose the CWB does offer a cash price program. And lets say the market price in Minnie or KC rallies and hundreds of producers lock in the rally prices yet the CWB does not resell right away and then the market falls leaving the CWB losing money buying grain from those producers. In the commercial world that's no big deal but in the non commercial world of the CWB it becomes a little more complicated. Ultimatly that money comes from somewhere and we know the CWB is not at commercial risk, so who will cover that loss? Also do not underestimate the importance of basis negotiation in determining farmgate price.

I haven't even touched on the varietal issues like varietal development or quality issues.

A learned individual in the grain policy buiz, was talking to me the other day about how Corn yields, Bean yields, HRW, SWW, and Canola yields have increased since 1960. Corn alone has increased by close to 150% yet CWRS specificly has managed only a 15% increase in trend yield since 1960.

That alone speaks volume about the single desk system.

Lastly Ration-Al about the tree in the woods thing, I'll refer to Dr.Phil who says that the most important relationship that we're ever going to have in this life is the relationship we have with ourselves. So when that tree falls, I hear it and that's all that really matters to me.

[Ration-Al]

Adamsmith

You said
"But gentelmen let's just suppose the CWB does offer a cash price program. And lets say the market price in Minnie or KC rallies and hundreds of producers lock in the rally prices yet the CWB does not resell right away and then the market falls leaving the CWB losing money buying grain from those producers."

Before you condemn the program you should take the time to actually understand it. When a producer enters into a PPO that grain is hedged so that there is no risk to the CWB. The producer has taken himself out of the pooling system completely. The producer who enteres into the producer pricing option pays all of the costs of doing so. He pays the admin costs -- he pays for the borrowing costs, and he pays for the cost of hedging.

You see the producer pricing options were intended from the outset to completely indemnify those producers who choose to stay in the pooling system. Cash pricing is simply an extension of the fixed and basis price contracts with the addional ability of pricing throughout the year. The principle remains the same, except that at some point in time those who wish to price outside of the pool must make a committment that they will in fact stay out of the pool even if they called it wrong and the cash market drops below the PRO. You cannot have the freedom of cash pricing throughout the year and still have the ability to jump back in the pool and drag down the PRO for those who committ early to the pool.

[AdamSmith]

Ration-Al,

In a free society it is my right and privilidge to condemn any product or service I choose. This is what allows for progress. Bad products, Bad Services and Bad Businesses fail because consumers have the freedom to condemn.

But what I see and here from the single deskers is You'll take what were offering and you'll like it. Well Henry Ford tried that trick with his Model T. He said to a customer who wanted a different color car, "You can have any color you want, as long as it's black". Had Henry Ford had a legislated monopoly we'd still be driving only black cars and trucks.

If you believe the CWB PPO/cash price system is fine, that's great. But don't, I repeat, don't try and tell me what I should like and dislike.

[Ration-Al]

I don't recall telling you to like or dislike anything. I did suggest that you understand something before you make false assumtions.

That is a simple rational statement. No need to bring Henry Ford into the discussion.

[TOM4CWB]

Ration-Al;

I cannot agree that there is no risk to the pool on PPO contracts.

When I hedge a PPO, the CWB SAYS they hedge the risk, but in fact there is no specific risk management procedure to back this up.

I found this out last year when I tried to liquidate a CPS PPO... and was told no specific hedge was in place on the contracted CPS I had not yet delivered... in fact that my hedge had probably been lifted months before.

We will know more when 2002-03 CWB financials on PPO's and contingency fund/risk management accounts in the PPO statements.

The CWB has a real mess for risk management going on, and says what is convenient to allow them to keep as much PPO basis margin as possible, to build up the contingency fund.

It is just another symptom of same problem that created the $85.4M deficit.