2004-05 CWB Initials

[TOM4CWB]

Charlie;

What percentage of the PRO is the federal gov. supposed to advance us on the initial payment;

75%

50%

40%

If we have an effective CWB management team, one would think higher would be better... rather than EPO's that cost our bank accounts every time we turn around.

Any bets on the percentage of initial on feed wheat and barley?

50%?

Who exactly does CWB management and directors work for... is it the feds or farmers?

[charliep]

I try never to second guess an announcement that will be made within a week. As a betting man, I would put the percentage between 65 % (high quality) and 55 % (feed end).

I will leave your question as to where accountability lies for setting initial payments to discussion. Perhaps within the next year or two there will be no more government guarantees of CWB farmer payments. The question is there today with the 80 % EPO cost likely to be in the $2 to $3/tonne range.

Why would anyone not take the 80 % EPO? You would have to be very rich/not need cashflow to bypass it. If everyone does it, why not offer as a standard feature? What would this mean for managing CWB pool risk? Which brings me back to my previous question of what the PRO forecast means when it is at a premium to the market like today (or vice versa if at a discount as during the spring)?

[TOM4CWB]

Charlie;

I understand the premium on EPO's are up to $16/t to get our own money back.

So the CWB can look like it was taking care of the pool... when in reality it was just taking our money and adding it to the contingency fund. Hedges do not cost the CWB more than $1/t.

Yet we are expected to cheer because the CWB offers to take our money... and the high PRO means nothing anyway.

If the CWB were to offer minimum price contracts, with calls or puts that were market tracible and transparent with value measurable... then

A reliable risk management option that means something beyond the twilight zone could prove the value of the CWB risk management strategies to "designated area" captive growers.

PRO/PPO projections are simply being used as political manipulation tools for the benefit of CWB management of where grain stocks in western Canada will go, (stay in the pool, next years pool, next years PPO, stay in the bin)... a simple gate keeper for the pools... and an election year tool for re-enforcement of the single desk.

When used in this manner... are we really getting anywhere near the possib le financial benefits that could be acheived?

The WTO is taking the last reasonable risk management tool away from the CWB... gov. backing of the pools.

Change 5 years ago to a cash based priced purchase system/pricing transparency by the CWB could have prepared the CWB for what the WTO is about to implement.

Obviously now the CWB Act will need to be opened up.... where will this go?

[charliep]

Percentage depends of initial versus final depends on whether you use port (Vancouver/St. Lawrence) or local. The port based percentage is in the 65 to 70 % area. Go to an Alberta based local payment and the percentage is reduced to 45 to 65 %.

The interesting one is barley. Port PRO - $127/tonne. Average deduction Alberta - $47/tonne. Alberta initial payment - $37/tonne. $37 divided by $80/tonne equals 45 %. Someone will have to help explain to me why feed barley payments are still pooled.