Daily Price Contract

[craig]

I was unable to attend any accountability meetings for the CWB and am wondering if they gave us any more information on the new Daily Price Contracts. The press releases were short on substance and my efforts to get more detail makes me wonder if they don't have the details worked out yet. I don't understand how a blended elevator price in the U.S correlates to a canadian price. I also don't understand how they will address wheat types and differences. My requests to the Board have fallen on deaf ears.

[Vader]

Have you contacted your local Farm Business Rep or called the 1-800 number?

[TOM4CWB]

Craig;

I attended the Edmonton UNACCOUNTABILITY CWB Meeting... they were certainly more interested in catching planes than answering our questions on these contracts.

I left with at least 6 unanswered questions.

Liquidation Damages are the biggest problem with all PPO's.

The daily price contracts (DPC) will be priced out on July 31st 2006... if you have not delivered all the tonnes you contracted.

Question: Why would the CWB not simply cancel the DPC unused tonnes at no/minimal charge?

Because the pool must be protected... and something about the pool being hedged when you take out a tonnage on the DPC... and depending on the position of this CWB hedge... this will determine your liquidation damages cost.


In other words Craig it is impossible up front to know what it will cost to liquidate this DPC, because this is a ficticious hedge in the first place.

If you are a single desk supporter... better for you... if a "CWB detractor" watch out!

The "phantom" elevators in the US, using phantom US grade equivelents, with a CWB remanufactured CWB Port price will probably come close to the buy-back charge at times. IF you have high quality wheat... then you probably will not lose a huge amount... $10-20/t is our estimation... and at times you could be ahead a little.

The ISSUE IS RISK.

AND THE CWB is forcing you to sign on to this quality risk before you know what you have... and in essence pay you nothing for taking the quality risk involved in this DPC.

If this quality risk doesn't bother you... give it a try!

But if you end up with low quality... don't be surprised if it costs $20-30/t to liquidate the DPC.

Now there is the little charge of about $8.00/t for the CWB to do business on our behalf that came out at the last second before they were off to the Airport!

$8/t times 20mmt is about $160m for the CWB to watch and control us. WOW.

We were told in no uncertain terms that were were going to PAY to be out side CWB POOL marketing. THe basis will be awful... as always... and don't expect this to change.

If you like to speculate... play the Minneapolis futures and CDN$ your self... you will be miles ahead of trying to hedge through the CWB.

The new DTN MGE Index on the US DNS elevator basis will be of interest to many... as it will end being another way around the CWB monopoly... and still deliver to the local western CDN elevator.

If any one has this figured out... could you share with us how it works? Please!