CWB Producer Pricing Options - Implications

[charliep]

Just a note to get everyone to look at the producer pricing options and the returns they will provide.

Picking on 1CWRS 13.5, the most recent PRO is $201/tonne (Port) versus a FPC of $199.33/tonne, a daily pricing contract of $197.73/tonne (if you signed) and a 100 % EPO of $189.75/tonne.

Protein spreads are also interesting to look at. Picking on 1CWRS, the premium for 14.5 % protein relative to 13.5 is $16/tonne in the case of the PRO, $12/tonne in the case of initial payments (spreads used in the FPC/EPO) and $11.57/tonne in the case of the DPC.

The 11.5 % protein discount to 13.5 is $12/tonne in the case of the PRO, $12.50/tonne in the case of the FPC and $22.47/tonne in the case of the DPC.

The reason I go through the above is there will be strategy in determining how to allocate your grades/proteins to the different CWB pricing alternatives. You will have to work the numbers. Using today as an example, higher protein (above 13.5)should likely go to the pool whereas lower protein should be priced using an FPC (lock in the initial payment spread).

It is also a good way to compare the daily pricing contract (US based price and spreads) to the fixed price contract (tied to overall pool returns) for reference down the road.

[crusher]

Thanks for spreading the news. I don't have time right now to do the research, but adding a few $$ here and there will make a big difference.

[charliep]

Just as follow up, the CWB has posted this years fixed price contracts values and basis levels to August 16 (will try to get them to update.

http://www.cwb.ca/en/contracts/ppo_workbook/pdf/2005-06fpcbpccharts.pdf

As a note, the CWRS 13.5 basis has varied from about $18 over to current levels of $38 over (relative to MGE Dec. futures). CPSR basis levels have held a tight range of $2 to $6 under.

Fixed price contracts have for the most part been well under the PRO - particularly for CWRS/CWHW.

I will ask the CWB to update. It might also be usefull to include the daily pricing contracts values on the charts. A final wish list item would be a chart comparing grade/protein spreads for the PRO (stay in the pool), initial payments (fixed price/early payment contracts) and the US values used in the daily price contract.