CWB Accountability MTGS.

[TOM4CWB]

Charlie;

I asked chairman Ritter why FPC/BPC PPO's did not have an act of God clause this year, and he said they had two choices;

1. To extend the deadline on the FPC/BPC

OR

2. TO have the act of God clause.

What is the logic behind this?

[carebear300]

I guess the reasoning is that by extending the date for enrollment till after harvest the act of god clause is not required, but in my books that may restrict your opportunity to lock in a higgh price. Wlhat does everybody else think? Maybe I am totally out to lunch again.

[charliep]

Not sure. Could someone raise this question at Vegreville Accountability meeting on Thursday (Mar. 4).

As a note, an act of God clause means higher risk and this is normally reflected in basis. Offsetting this to some extent is act of god clauses can work in both directions. That is, there is money to be paid if prices go down and there is a crop failure/not able to deliver. At the same time, there should be money to be paid out if prices go higher. Not a 100 % sure if CWB FPC or basis contracts are transferable to a neighbor in the case of a crop failure.

[TOM4CWB]

Charlie;

If there is a higher cost... OK that is fine.

Offer the option to us to take less in the BPC for the act of God clause clause in the contract.

This is not an optional delivery contract if the price goes up, we are simply dealing with a ACTUAL loss in production that can be confirmed by Crop Insurance/Hail Insurance conformation, How much should this cost? In Canola contracts we (in practice) are charged ZERO, NOTHING; why should the CWB charge more?

[charliep]

My experience says most grain companies will charge a buyout if a farmer can't fill a contract but you have to read the contract/know your commitment. Many companies will allow you to roll your hedge into another crop year (the CWB could do this as well upon presentation of a crop insurance document/field inspection that the loss had occurred).

Just to put a plug in for crop insurance in Alberta, the variable price benefit covers a rise in prices in a claims year and can be used to buyout contracts. The process for determining fall crop insurance prices and the fixed price contracts are similar. The major risk is the way the CWB calculates buyouts (spread over the whole crop year) versus SPE (based off Dec. MGE wheat futures).

[TOM4CWB]

Charlie;

I am puzzled at the answer I was given by CWB's Ward W about FPC PPO's.

Last year we learnt that the CWB does not hold a FPC hedge till the sale of the FPC PPO wheat to our customer, but puts PPO hedges in the greater CWB "Pool" of hedges... which are managed as one group and lifted as the pool year sales are made.

AS shipping/sales of most of our grain was held back till the second half of the crop year, this must mean that the CWB pulled off the hedges on PPO Fixed Price Contracts, before the grain was actually sold... losing the money indicated in the 02-03 financial statements.

How exactly is this risk management?

What good does it do to hedge PPO's if a specific risk management proticol is not in place to manage the specific risk created by the PPO?

What audit proceedures are in place to stop the CWB from giving FPC the hedge that lost money, while keeping the good hedge to the credit of the pools? It appears that after the fact 3-4 months further into the crop pool year, the CWB can create any number they want... to make any risk management program appear to turn a profit, or a loss whichever is expedient in the eyes of CWB management!

[TOM4CWB]

Charlie;

I see this on your AB AG site;

"Montana Dark Northern Spring Wheat #1 (13.5%) at Great Falls: $206.64/tonne (Canadian) or $5.62/bushel (Canadian)"

Obviously this US Montana price is a much higher price for "lower quality" according to CGC and CWB experts.

This point was made at the Carsland meeting and disputed by Ward/Peter.

I just looked at today's CWB price, for the May 04 futures they quote today's price at $207.85/t. THE roll over would have cost $1/t plus the spread in the futures between March and May on the 26th of Feb. This was about $6.70/t according to the CWB;
http://www.cwb.ca/db/contracts/ppo/ppo_prices.nsf/fixed_price/fbpc-wheat-2003-mhrs-20040226.html

$7.70/t minus the $207.85/t... equals about $200/t. Add about $15/t average PPO CWB Basis for CWRS... we get $215/t. Subtract the freight and handle to Vancouver B.C. we are at $170/t. Subtract the extra freight the Great Falls farmer must pay to Seattle, about $15/t...

we arrive at a cash CWB price in Lethbridge of $155/t or $4.22/buCDN.

And Great Falls Montana is at $5.62/buCDN

Please explain where that $1.40/bu went CHARLIE?

[Incognito]

Want to get a little closer to home:

http://www.ontariowheatboard.com/Basis.html

Today's price for HRS is $5.26 a bushel delivered, in the farmers pocket, no deductions, to either a mill or an elevator. PLUS you add $18.00 a tonne for protein if it is over 12.5 - so that is another 49 cents a bushel for a total of $5.75 NOW - no risk no BS.

So you don't have to go to the good ole USA and worry about *issing off our neighbours. You can haul it to our Eastern confederation cousins.

Charlie has some more ammo for your Ag Minister - the only Ag Minister with spheres.

[TOM4CWB]

Charlie;

For once in a blue moon, the CWB quoted West Coast $278.71/t

Portland Cash was $5.11/bu #1DNS 14px.

This converts to $6.84/buCDN or $251.45/tCDN for Portland

So not only do Montana growers get $5.62/buCDN, the export price the marketers in the US are getting, is $.74/bu less than the CWB is from the B.C. west coast ports.

Adds all that much more question why the PPO basis is so stinking high...

What good is a cash price that is over $2/bu lower than quoted CWB market price?

[charliep]

I will leave most of your questions for discussion.

With regards to the AAFRD posted prices, they are displayed to demonstrate cash prices in outside markets that would reflect similar values to that a farmer would get in an open market/Alberta test market. They are all publically available on the web. Farmers can use these values in decisions/evaluating the CWB.

With regards to the comparison of the Vancouver and Portland price, the formers premium reflects the Japanese price. Vancouver is an in store price so you have to add a fobbing cost (cost to move out of terminal/load vessel) of about $8/tonne. That puts the premium at about $35/tonne or the US $25/tonne. Most other sales off the west coast would occur at Portland values.

[boone]

Post: So what is the first casualty of war?.....
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The Truth.

[TOM4CWB]

Boone;

Funny thing is:

As the CWB Monopoly has its roots as a direct result of WWII...

Obviously World War Two is not over in Western Canada... over 60 years after the CWB War Measures Act provisions were put into effect.

THe Canadian Chamber of Commerce officially has asked the Federal Government for the CWB monopoly to be removed... asked why the removal of the CWB monopoly was supported by Chamber's across Canada;

The response at the Carsland CWB Accountability meeting was something like this:

Other Eastern Canadian Chamber of Commerce groups had to support the western Canadian Chamber's of Commerce fight to have the CWB Monopoly removed...

OR

Risk having the CWB monopoly extended to eastern Canada... which eastern Canada does NOT want.

I asked what chance we have that Paul Martin would implement this policy;

THe answer was they (the Canadian Chamber)have met with Minister Alcock's staff responsible for the CWB file...

and were assured that this issue would be dealt with with a satisfactory resolution to the CWB monopoly problem.

[TOM4CWB]

Kernel and Parsley;

DO you folks remember VADER AKA Rod Flaman?

Here are a few of the words of wisdom that Rod shared with is in the fall of 2002... when he was the "Poster Boy" supreme for the CWB;

Vader posted Oct 25, 2002 9:49 in the TOPIC:
“How do you define Commodity Marketing?”

Normally we market about 20,000,000 tonnes of wheat out of Canada. This year it might be closer to 7,000,000. Mother Nature has effected "supply management" on Canada and has also limited the size of the crop in Australia and the US. Isn't it amazing how the market has responded. In the month after the CWB announced that it had withdrawn from the market wheat prices went up almost a dollar a bushel.

Perhaps if we "planned to have" something less than 20,000,000 tonnes of wheat each year we might be able to "sell at a high price" more often.

How do we do that?
We don't have a supply managed system. All we have is the PRO.
The PRO doesn't always reflect a profitable sale for many producers and yet they continue to produce large quantities of wheat.

What if there was you could divide up CWB sales into different price ranges and each producer could exercise individual control over which CWB sales they participated in?
Perhaps a sale to one country would make sense while a sale to another country would not.
Rather than offer all of their grain to the CWB, some producers might decide not to participate in lower value sales once they have covered their cash flow requirements.
This grain could be carried forward to sell to the high end markets the next year or offered to the domestic feed/ethanol industry.”

Vader posted Oct 25, 2002 6:43
“What is the best way to meet the millers and bakers exact protein requirements?
They purchase a range of products and blend to their exact specifications. Does Canada supply the higher end of Japan's protein requirements?
You bet we do. Do you think that puts Japan in a situation where they might want to pay a premium to satisfy both their policy and quality demands? You bet.”

Vader posted Oct 24, 2002 17:09:

“…How do we best market our grain in a fiercely competitive world market to maximize returns to producers in these parts of the world.

If you simply dump your grain in the elevator pit whether that be in Moose Jaw, Saskatchewan or Wolf Point, Montana are you marketing your grain? When you select a pricing option and hedge your sale, are you marketing grain?
Where does the rubber hit the road?
Who will travel to Bahrain to convince the customer that this product will meet his quality specifications.
Who will convince him that this shipper will meet the delivery requirements of his mill?
Who will broker the deal?
Who is the marketer of that grain?”

A question to VADER and all CWB Directors (Jim C excluded, as he already apologised);

What good is the CWB monopoly, when it is used against "designated area" grain farmers, like in 2002, and now again today?

Why do I say today?

Check the Portland price in the latter half of Jan 04 ($6.41/buCDN), and the price today($6.84/buCDN).

THe export value increases .43/bu (15.80/t) and the PRO does not move one cent a tonne up at the end of February. Today's prices are lower than the 03-04... The CWB's own Feb 26th 04 @ May $214.16/t VS yesterday @ May $207.85/t.

SO we had a $20/t increase in selling price between Jan 04 and Feb 04 PRO's for the 03-04 crop year... and no increase in the POOL.

Where exactly does this show effective CWB Monopoly management of our grain sales?

Who is the real profit oriented Marketer in Canada, farmers or the CWB?

How can we have accountability at the CWB without competition?

[melvill]

Last year CWB fixed price and basis contracts were transferable to other producers. I believe there was a small fee to carry out the transfer - about $1 per tonne.