Questions

[silverback]

I have asked a lot of questions on this site and for whatever reason, most go unanswered. I like to think that they are not just rhetorical questions, but a genuine attempt at getting some answers or feedback. If they are too stupid would someone just say so and I will stop asking them.

There is one thing that I would love to know the answer to that I asked several days ago. I acknowledge that this year is a combination of many things gone bad that make marketing a huge crop of poor stuff difficult. Thus prices will suffer. I know this and I will have to suck it up and try and live through it. My question is, in the past, when world grain prices have gone up and hit the highs, has the wheat board been able to capture those record prices and get them to the farmers? I recall a lot of talk of the difference in price between what canadians were getting and what the world was actually paying.

One post said there was all kinds of evidence that the CWB has always been able to get the highest price for us. Is that true or not?? If it is please let me know where I can read it for myself. Thanks.

[carebear300]

I don't know if I have any of the answers,as such, but I don't think that the wheat board system is capable of extracting the highest possible price achieveable because of the system it works under. It basically was set up to attain a reasonably high price through pooling of sales over a twelve month period, so that those that had to sell grain at harvest wouldn't be unfairly disadvantaged over those that could wait till a much later time in the year due to their financial situation. As far as I can gather it is very rarely that the wheat board is able to extract a premium over what could be attained by an individual which had the financial wherewithal and intelligence to do his own marketing. Somebody please correct me if I am wrong. Tom you would likely know.

[Vader]

I will tell you that in 2002 when Canada and the US and Australia had a drought and there were very limited supplies of #1CWRS wheat that the asking price of Canadian wheat was so high that only one customer in the world was willing to pay that price.

Take Robin Hood mills in Saskatoon as an example. Because they are an elevator company they might take deliveries of #1CWRS wheat but because they were unwilling to pay the CWB asking price for that wheat they were not allowed to mill any of it. They had to deliver that stock into the system and accept lower grades instead for their grist.

Did the CWB capture a premium in that tight market. I would say that they did so in spades. People have levelled accusations at the CWB saying that they will give domestic millers preferential treatment to the extent that it hurts producers. It just isn't so.

Can I direct you to where you can read this information? Absolutely not. This is priveledged information based on client confidentiality, and it will remain so forever. A deal is a deal.

[TOM4CWB]

Carebear300;

I would agree with most of what you have said... with a few additions.

1. The CWB uses the principal of constant sales throughout the marketing year... to attempt an average sale price through it's sales program.

2. The CWB uses PPO to allow sales by "designated area" producers that are pooled basis and sort of hedged to minimise risk... but hedged many times against pool sales themselves... in house so to speak.

3. The domestic market human consumption market sales are a simulated open market... claims the CWB because of NAFTA. How close does this simulation come to a true market with choice... we won't know till we actually do the exercise.

4. Performance of the CWB.

Measure the performance and we will find out!

THe CWB did... found out... and burried the findings.

My best honest estimate?

Innovation is the looser.

Specialty produce has a much harder start up under pooling if human consumption benefit is pooled.

There are bound to be winners and losers on both sides. Natural advantages are pooled... a social policy to even out income.

Feed quality is the massive looser in the CWB system as a proactive risk managed system is critical to profitable long term stability... and pooling fails hands down on this front.

Does this help?

[charliep]

I find it strange that 2002/03 would be used as an example of a good pooling year - a deficit if I remember after a fall of some of the highest wheat prices in recent history. The CWB may have protected the Japanese market that year (note that was the first year of reduced sales to Japan by Canada) but at the expense of other markets that that had unfilled contracts for the fall of 2002 which was sold during the spring and summer at lower prices even with the Japanes premium. As was highlighted at that time, it would be interesting to do a review of sales activities/risk management strategies and their impact on prices paid farmers in a reduced volume year.

[Vader]

Charlie, my comments were made in defence of single desk selling, not price pooling. Big difference.

[TOM4CWB]

Vader;

In a perfect world then... who decides to sell the monopoly grain? How? What are the triggers?

I asked before... individual responsibility has massive benefits in making sales decisions.

Instead, who would you propose trigger sales... if not a pool system of average sales?

[parsley]

Silverback:
I think your questions are exactly what every farmer should be asking.

What makes prices go up and down?

World and domestic?

Was 02/03 the year of Director elections?

Was that the year the CWB publically declared they were out of the market in the fall?

Was that the year the initial prices bumped up and down during the campaign?

I just can't recall.

Parsley

[silverback]

I guess what I am struggling to understand, or come to grips with, is whether or not I can ever hope to see a top price for the wheat or malt that I produce? If all I can ever hope to get is a long term average price, I don't know if I can survive for the long term. That sounds bad, but it is true in this area.

Like I said previously, there have been years that we have hit some awesome canola prices that have sure made things easier to survive the lower years, and I know that it has given us a higher return than the long term average. However, if there is no way to hit that in wheat and malt, is the average enough to keep us in business?

Does anyone care? To someone with a comfortable job and pension, who cares? I can hear it now, "the average is good enough for all". Well, someday somebody will look at the way things are being run and they will say "we are spending what? on a government agency that only markets how much grain? Bye, Bye" So much for job security.

[TOM4CWB]

Silverback;

Honestly, some prices for milling wheat CAN be locked in SOME of the time.

PPO's can do this, if you can take the risk before hand of getting feed and loosing the COntract. In 2002 the CWB paid out the hedge profits, and said they wouldn't do it again.

This is on the futures side, now on the basis side it is a different story.
The Basis is a Pooled basis, adjusted for alignment from day to day. DPC further allow Basis, to be adjusted a little more, IF signed up before the end of July. DPC are not directly tied to US export prices... and have fudge factors incorporated into them. But still... another option that adds perspective on CWB performance is useful!

[TOM4CWB]

Sorry that should have been 2004 when the CWB paid out big time against the contracted PPO's.

[TOM4CWB]

Silverback;

Did you see this?

-DTN "Washington Insider: Cooperatives Working Together, An Unusual Program

Cooperatives Working Together is a non-government, voluntary, producer-run milk price stabilization program, the only one of its kind focused on a major U.S. commodity. It is managed by the National Milk Producers Association, a commodity association representing dairymen and cooperatives. The program works to moderate supply and strengthen demand by buying cows and helping members export. It claims coverage on 74 percent of national milk production which experts say would give it a budget of about $70 million."

Hmmm voluntary... no monopoly... still works...

Here are some more comments:

"Recent surveys of dairy producers suggest that cooperators support the program strongly because they believe it increases milk prices -- in amounts ranging from $0.50 per cwt to as much as $1.00 per cwt. Producer responses have been good in recent months, but some producers point to the 30 percent of the milk that does not contribute and worry about the "free rider" problem. Others are concerned that the program might not have the muscle to support prices during periods of rapid production growth -- and, that perhaps the program itself could stimulate production enough to swamp its supply stabilization efforts.

The National Milk Producers Association says the program is working very well, about as it was intended and they expect it to continue to grow in both support and operations. Even critics of its supply management concepts concede that the program model of concerted action by interested producers is a good one -- perhaps even better than the government system which has been in place for more than seven decades and is facing growing pressures for reform from many directions, Washington Insider suggests."

Now, can't we make a voluntary CWB work, if we "designated area" Canadians make up our minds to do so?

[agstar77]

An example of voluntary pooling in western Canada ; the three prairie pools. What has happened to them? They have been caught up in the I have to expand to survive mentality as well as being controlled by people who did not believe in co-operation. Could these be the same people who ran border crossings under the guise of freedom of choice? You expect these people to market together and accept the same return as someone else? I can't survive unless I get a higher price than everyone else! In an ideal world voluntary pooling would work but unfortunately Western Canada is not part of that ideal world.

[TOM4CWB]

Agstarr77

We do it with beans in southern Alberta of all places.

The longer you guys burry your heads in the sand... the more we will all be HURT!

Can't you see your head is in the sand between two tire marks about 8 feet apart... and the rumble of the convoy comming towards us is now shaking the ground?

[TOM4CWB]

Silverback;

DId you see this?

"Winnipeg, MB, Dec 02, 2005 (Resource News International via COMTEX) -- Due to technical difficulties at the Canadian Wheat Board, the listing of Canadian Spring Wheat Domestic/Export Prices is not available today."

WHy didn't the CWB have prices today?