2004-2005 CWB PRO

[lakenheath]

Errol Anderson said a month ago that the CWB was out to lunch on the spring wheat PRO. He said it was terribly over-valued. Well, surprise. He was correct. Spring wheat PRO's dropped nearly 40 cents/bushel. Why do I follow the PRO's? Once again the durum leap-frogs the wheat. Merely a ploy by the CWB to discourage producers from putting in too much durum!

[TOM4CWB]

CHARLIE:

I see the 26th 100% EPO 1CWRS 13.5 pays $194/t ($207 - $13) instead of the $188.25/t on Aug 25th ($220 - $31.75).

The 90% EPO@ $182.55 ($186.30 - $3.75) makes much more sense now... an increase in markets might allow the $10/t to be captured from the pool, that was lost before the lowering of the PRO yesterday.

The CWB must become honest and accountable, it is still very obvious the PRO is too high... should be at $198/t not $207 as stated yesterday by the CWB.

Very obvious a hedge program of significance was not implemented in 04 spring for the pools.

A big opportunity lost.

[TOM4CWB]

Lakenheath;

Question, what will milling wheat supplies be for 2004-05?

The CWB knows that wheat volume from the frost/recent rain has dropped by at least 1mmt, and quality is a 5mmt into the feed category.

Where exactly are western Canadian farmers at?

The Canola price increases 10% from the frost... while wheat prices drop, why?

It appears the CWB uses every possible excuse to lower our expectation about what should be a fair price for high quality milling wheat... let alone the frost damaged wheat which the CWB says is not marketable in export markets.

WHAT A COP OUT.

Give us free export licenses like everyone outside the "designated area" and watch us develop PROFITABLE MILLING markets with wheat the CWB claims is not able to be used for human consumption.

The farmers worst hurt, least able to take the disasters of frost and flood... are being devistated by CWB marketing policies.

Have we resigned ourselves to calling the auctioneers to sell out... ?

Why shouldn't we be able to call the auctioneer to sell our wheat for a fair price to start with... so we don't need to sell out in the first place?

Instead we will give our assets to the banks and hide in a hole somewhere, while we wait for a meager gov. handout?

[wd9]

Given the current PRO, a meager government handout might be higher than the net off of an acre of wheat this year .

There are still many issues going on worldwide this year, wet in many areas, frost and wet in the US, very slow harvesting. Hopefully there will be some upside to those who can still get mill grade on wheat this year. Nothing is in the bin yet.

Anyone with some speculation on the upside of milling wheat, Charlie what does your crystal ball say?

[charliep]

I will let others provide thoughts on the relevance of the current EPO.

I like to follow the producer pricing options as well. PRO for 1CWRS 13.5 is $207/tonne (port). The 100 % EPO provides a guaranteed price of $193.25/tonne (port/yesterday) with a premium of $13.75/tonne and the ability to pocket increases over $207/tonne (port). The producer pricing option is $195.28/tonne (port/yesterday) and uses a basis of $25.51/tonne. Price doesn't get me excited but the basis does get my attention (highest in quite some time).

WD9 - Don't know how to answer your question. European crop was good this year. US crop okay. Australia/Argentina? Canada -story still be told but likely lower grade in east prairies/west still to be determined.

My question relates to Tom4cwb question as to how big the market is for the super quality CWRS wheat really is. There have been other years that an optimistic scenario started to build on the world high quality milling wheat side only to see customers move quickly to lower cost wheats/prices collapse.

Looking ahead, I am not really all that bullish short term with the obvious observation not a lot is known about the western Canadian crop. I have an easier time building up a more optimistic scenario looking into the early winter/next spring.

What are others thoughts? Strategies?

[charliep]

Just a note to stimulate more discussion on the CWB contracts is spread risk (could be opportunity as well). The wheat class/grade/protein spreads from the CWB producer pricing options are based off initial payments. These could be different from the final payments. A poor quality crop could see spreads widen for grades and potentially classes. An aspect of the CWB PPO is the ability to lock in spread with the caveat you are at spread risk until you have delivered.

[TOM4CWB]

Charlie;

Expect an initial price adjustment before election time on in the CWB "designated area"... this will change the spreads on the grades no doubt.

The 90% EPO makes the most sense... IF you are sure of a milling grade crop to sell to the CWB.

No doubt we are a very long way from getting the wheat crop in the bin... we need a major weather shift to be able to start harvest.