Techinical Questions on Producer Direct Sales?

[charliep]

A couple of quick questions on the producer direct sales through the CWB.

1) Will the CWB offer a forward price on a direct producer sale or do you have to deal in the spot market? Example - I am an organic farmer and I have agreed to sell a miller somewhere in the world a container of 1CWRS wheat every two months at a set price till the end of July (say 6 months)? Working through the buyback program, will the CWB provide producer direct sales prices this far out so I can capture the margins/manage my price risk (realizing I am still exposed to any changes in the pool returns)?

2) Does the PDS documentation require me to provide both sales destination and buyer? What about price? Will the CWB price descriminate on a PDS sale? Example, if I were shipping containers to an off shore subject to subsidies/more intense competition (the CWB may already be a seller at a lower price), would I get a different PDS price than if I were selling to a domestic miller?

3) Has anyone ever heard of or done a PDS sale to a domestic processor

[TOM4CWB]

Charlie;

On #1), typically PDS expire within 30-60 days, but may be extended to 90 days is special circumstances I was told.

2) My understanding is that the new CWB export licenses do not require specific info on the buyer... but the CWB can obtain this info through customs anyway... my best guess is... on the premise of confirming sales destination and product use issues.

3) PDS to domestic millers although not common... is tolerated by the CWB sales dept. PDS US Truck market buyback values apply to CDN millers... I was told by the CWB.

[parsley]

charliep,
Comments on Part of #2

All exporters require CWB export licenses. And that includs OntarioWMB and individual Ontarian exporters.

Ontario was at war with the CWB because n the past, Ontario was required to supply, on the export license, the name of their buyer, to the CWB. Keep in mind that the Wheat Board is also a marketer, and as soon as they found out the name of Ontario's buyer, it became obvious to Ontario that their markets were at risk if the CWB whisked in and undercut them.

So two years ago, Ontario approached the Federal Government to see if Industry Canada could assume the role of licensing OWMB grain exports instead of the CWB, claiming the CWB had a conflict of interest.

In fact, Ontario went so determined, they filled out their own export licenses and exported without an CWB license! The load passed through Canada Customs, but the CWB was not happy(understatement), and Ontario was quietly told not to do it again by the Feds.

Of course, Parliament via the CWB Act, has declared that the CWB has sole licensing authority in Canada, so there was no relief in trying to find a replacement licensing agent. So Ontario fumed.

The CWB, however, did design a new license form that allows a space for grain grown outside the DA to be checked in order and thus omit buyer name. So Ontario has been superficially appeased, but they will be aware that Canada Customs buyer-information is but a mouseclick away. And the CWB will be sniffing Ontario's fruitful buyers.

The CWB cannot assume both a licensing function and a marketing function without a conflict of interest, which is exactly the reason why the Australian Wheat Board identified the problem and legislatively separated the duties.

In the Designated Area, the CWB demands the buyer's name for ancient grain exports, for example, or no license. Kamut is granted the license,via policy, and thereby circumvents all association with Board marketing and pooling. But, Western Kamut growers are required to provide buyernames, address, and selling prices and your mother's shoe size(kidding).

Parsley

[charliep]

Thanks for your help. A couple of more questions.

1) On a PDS sale, can a farmer book a basis and not a flat price? The assumption is I am trying to do direct business with an end user. To do this, I need the commitment I can supply grain (need the export licencse) and I need some ability to manage my price risk around that transaction. The easiest way is to book the PDS price and my customers price on the same day. It may not work that way as there are three businesses involved that will each have a different view of the market - particularly as I move out of the spot market to forward business/longer term contracts.

2) Realizing I am going to get shot down by those who favor alternatives outside the CWB, what is the relationship between producer direct sales and the producer pricing options? Could this be used to allow a farmer more freedom/increase cash flow. This process makes your contribution to the overall pool (wealth redistribution if you like) very visible.

[parsley]

CORRECTION
I'm not just technically correct.
There is no place to "tick off" box per sa indicating the applicant is from the DA; there is only a name and address line for the exporter to fill in, dependent upon the supplemental Terms and Conditions page which states:

" 16. Export licenses issued for the export of grain grown outside the CWB's designated area are granted on condition that the commodity being exported is grain or products from grain grown in the province or state identified on the accompanying statuatory declaration."


So if you are in Ontario, you just fill in your name, address, commodity, etc., but not your buyer.

If you are a Prairie farmer you have to fill out the Statuatory Declaration in addition to the License application. The Stat Dec has all the ripe details necessary for the Board to step in and pluck your market.

Parsley

[parsley]

Indeed, PDS to domestic millers although not common... is REQUIRED by the CWB sales dept.

Parsley

[parsley]

Charliep, you ask, "Working through the buyback program, will the CWB provide producer direct sales prices this far out so I can capture the margins/manage my price risk (realizing I am still exposed to any changes in the pool returns)?"


Here was Kirk Torkelson's published experience:

"According to the CWB’s own projections, they estimated my buy-back costs would be about $0.53 per bushel. Since I did all my own marketing and carried all the risks while they did nothing, paying them any amount seems like extortion. But in December, 2003 I couldn’t believe they wanted $6060 for my 2659 bushels. That’s a buy-back cost of $2.28 per bushel the CWB is demanding, just so I can sell my own wheat."

And then the CWB organic marketing specialist that actually hasn't marketed one bloody bushel of organic grain, (and organic producers don't ever want her to), has the audacity to try and blame Mr. Torkelson for not planning his business affairs better. She should apologize for trying to demean him, and then be fired.

She'll probably get a raise for trying to make a farmer look like he can't market without the help of the Board.

How do you deal with snakes?

Parsley

[parsley]

We've done a buyback with a domestic processor.

Parsley

[parsley]

CWB Price discrimination? Hmmm.

This is my take Charliep:

I want the license.
I go to the Board.

They say do the PDS
They say pay them the initial price

They own the grain.

They say buy it back
I say How much?

They say wher'es it goin?
I say California.

They say How much you gettin?
I say $A15.00 FOB farm uncleaned

They say, Oh we just had a sale there (price discovery), so you will pay the the price of Grain in California which is say $14.50 bucks minus initial price.

Ouch

And that is the way the Wheat Board seems to function.

One exporter had some advice.

He said his buybacks were always just a few cents over the initial price and he's done them year after year. He's a Board supporter in public.

He said I'd have to learn to "be nice to the Board"

Parsley

[TOM4CWB]

Parsley;

10-4 on the be nice to the CWB... to get a good buy-back... I was offered one... stared at the CWB salesman... turned red... and said YOU GUYS!

I don't know if or where the swiss bank accounts exist... but no sane person on earth could set up a system more prone to corruption and conflict of interest issues than the CWB has done.

Then we as Canadians throw farmers in jail who object to this disgusting process... that has no legitimate legal backing... and claim we are upholding the rule of law.

Nothing could be further from the truth.

The law NAFTA states that the price inside and outside Canada must be the same.... and since a export license to a farmer avoids the CWB and grain handlers totally... neither the CWB nor Canada has any interest in the fruits created in my fields... sold without a CGC grade name;

Yet the CWB says it is automatically feed wheat or barley... and charges the highest buyback possible... in the CWB schedule.

THis automatically stops any innovation... pushing everyone out or into the CWRS box. High grade CWRS have normally the lowest CWB buybacks... day after day... month after month,,, year after year!!!

And the CWB is extracting a premium doing this? HOW?

I KNOW I KNOW... don't confuse the issues with the truth!

[parsley]

charliep,

I've been a little reticent to get into looking at the merits of improving the buyback. You say:

"This process makes your contribution to the overall pool (wealth redistribution if you like) very visible."

Or does it, charliep? For example, the admin fee for one guy is CWB$2.00/tonne, or another price for another guy? The buyback quote will be one price for one and different for another.

Farmers can hardly compare individually, and a daily buyback board is simply not available to farmers. The grain companies could probably attest to the discrepancies in quotes they get, if they've shown a little tto much spirit to suit the Board. There is no REAL transparency. Period.

So we end up working on the details to make the buyback better for scenarios that simply take up my time and my money.

In organic, some of the guys found it difficult to come up with the buyback money up front, so the CWB muddled, and met, and huddled and wept, and finally offered a Credit program. Torkelson took it.

The CWB puts you "on a tab", and you don't pay til the end of the pool. They charge interest, they charge an admin fee, they issue the license, they monitor the sale, and they are nice to his buyer when they get his address, his phone number and his mothers e-mail address. They have a whole department set up for this operation and Donna Youngdahl is in the Sales and Market Development Program which facilitates this "service".

The laughable part is that the CWB has not yet marketed one bloody bushel of organic wheat or barley.

Nor do we want them to.

But wait until they "educate" all the buyers with promises of reasonably-priced grain, and make sure the buyback is an economic nightmare; all this legitimizes their goal, and they will ride in on a snorting Flamin horse, to save these poor organic farmers from the greedy clutches of the open market system.

Can you imagine Toyota setting up an entire department to facilitate selling boats when they don't sell boats?

This is an example of how the CWB operates, highhanded and full steam ahead on farmers' dollars. Donna Youngdahl must have been paid out of somebody's purse to become a non-marketing organic expert.

And dabbling about the buyback isn't addressing the problem head on:
Why din't Torkelson get a no-buyback license?

Parsley