What is a commodity?

[TOM4CWB]

WD9, Vader;

I see this on DTN:

"As a niche becomes commoditized, the small producer who sought refuge in the niche must do one of two things: Either get big himself, or abandon the niche and find a new one. Either way, the producer is on a treadmill, says Michael Boehlje, an ag economist at Purdue University.

"In commodity production, it's the technology treadmill. You have to adopt more efficient technology to be a low-cost producer and the risk is choosing the right technology," Boehlje says. "In differentiated production, you have a second treadmill. You have to continually look to new differentiated products or attributes because over time, those differentiated attributes become commoditized."

Now Vader, what do you expect to happen if a artificial hold back of a product keeps the market higher than if all the commodity was avaliable?

SOme One else will grow more.

Or does the CWB believe the HRS and Durum markets are not commodities yet?

What do you think WD9?

[Vader]

Tom, you are correct that over a period of time others will produce more, however in the case of durum wheat the geographical areas that are adapted to producing high quality durum are somewhat limited. This is why Canada plays such a large role in durum production.

The biggest problem is the fact that holding back durum from the market has created a fairly stable premium for durum wheat over spring wheat and the growing area in Canada has been expanding. Canadian farmers continue to produce larger and larger crops of durum.

One solution to the problem would be lower prices, which is a reality I do not relish. This reality is readily accomplished by simply selling the entire crop. Shall we have another vote?

[wedino]

I don't see the premium for durum over spring at this time.

[TOM4CWB]

Vader;

I note that the US had a big crop of Durum as well... and none of the folks down there need hold back any durum... yet they participate and benefit from the CWB holding back CDN Durum...

free of Charge...

plus they have Uncle Sams cheque book open to top them up!

Same goes for Durum producers in the EU... especially the new producers that have just recently joined the EU.

And then there are the Ausies... that I understand are going to 50mmt of wheat over the next 10yrs... double today's production... cause there is obviously a profit to be made... and they have all summer to harvest when it drys up... as they use winter to grow their wheat/durum.

What about Brazil/Argentina?

DO CDN "designated area" Durum producers have so much wealth... that they can absorb all these folks expansions... into "our" market?

[wd9]

Hmmmm. Raw materials and agricultural products traded principally on the basis of price which eventually limits the number of producers to a maximum of 4. Farming will be profitable when there is only 4 farmers or less.

All I can add is a thought from a different angle. Take using oilseeds for bioproducts. Does using commodities for other uses actually help the farmer by sucking up supply for alternate uses, or as in the case of biodiesel, replace a grain commodity for an even more competitive energy commodity. Something that is being studied as I write with the results hopefully in Feb. Should be a good study. What history has shown is supply is ramped up and fills that need almost immediately. Brazil and Argentina see it as a door to growing more, Canada sees it as a way of ensuring price and guaranteeing demand. Gee, I wonder who has been right on that one! Throw in some unfair trade tarifs and non-trade tarifs and Canada no longer competes further commoditizing the issue.

Should the US make a decision to stop funding the premium cost of ethanol production, what would that do to the price of corn? Fibreoptic cable manufacturing and use dramatically affected the price of commodity copper. South American production of g****juice daunts any production of juice here in Canada, but, put it in a nice bottle and sell romance not juice, and you no longer have a commodity.

Differentiation and innovation should be the key to getting away from commodities. Look at the progress of the record, then the 8 track tape, then cassette, then CD, then DVD. The bag phone, cell phone, Blackberry.... Unfortunately good science based regulation like what is here in Canada is seldom around the world. Biosafety protocol and the precautionary principal govern trade with socio-political factors, not science, which has effectively shut down Canada's innovation in Ag. Nothing is getting approved. The genes on the shelf for canola would absolutely blow your mind - genes that have been on the shelf for years. Varieties are being reverse engineered by utilizing GM and gene markers, taken back to conventional breeding and then painfully getting the desired trait. Takes 3 times as long, cost 4 times as much. This hurts true innovation.

So what are we left with, bulk commodities that compete with huge foreign treasuries and innovative new products not being able to be registered. These are the 2 biggest issues affecting Canadian Ag.

Put that in perspective with holding back some durum in todays quick adapting protectionistic and production focused engine, and well, is it sustainable? Don't think so.

[Vader]

Tom, I might have a second look at todays S&D for durum. If I advocate that we blow the rest of our durum into the market and it backfires, I am going to blame it all on you.

[TOM4CWB]

Vader,

Interesting the way the CDN CWB system works, no buyer knows how much durum was contracted on the A Series.

50% of what? No one knows.

Since the CDN$ is the biggest factor to this markets lower trend... just like tarrifs we cannot give up market share... we must adapt!

If I want to speculate any of my grains are going higher... let me buy paper and not hold the physical product.

AS a smart man once said... we must sell the majority of the product... SO THAT THE PRICE CAN go HIGHER.

IF we collectively hold, and have all bins full, substitution will occur and we lose our market share... and must start from square one all over again in that market.

Many times a market will never be regained... like with US HRS WHeat.... we are out and will likely not get back in during this generation.