CWB DPC Feed wheat Spreads

[TOM4CWB]

Charlie;

I was looking at the spreads between grades today:

http://www.cwb.ca/db/contracts/ppo/ppo_prices.nsf/daily_price/dpc-spreads-wheat-2005-20060213.html

Why would the Discount on Red Winter Feed wheat be $45/t;

And Hard Red Spring Feed wheat be over $90/t... for a difference of over $45/t on the DPC?

[TOM4CWB]

Charlie;

I note that on DTN the Feb 13 CWB price was (one price only quoted);

The following are the Canadian Wheat Board's Thunder Bay domestic prices, in Canadian dollars per metric ton, instore.

Cda Fd $150.92/t

[charliep]

Not sure your question. The price of feed wheat in both cases is $113/tonne. This compares to the feed wheat PRO of $116/tonne. Your issue is likely the spread between CWRS and CWRW.

The price of corn at Portland is US $3/bu and at the Gulf US $2.70/bu (Cdn $140 and $127/tonne respectively).

[TOM4CWB]

Charlie;

So the 1CWRS is worth $45/t more than the 1CWRW?

Strange... I thought Winter wheat was worth more than Spring wheat right now?

[melvill]

This morning (Feb 14) March KC wheat last quoted at US$4.10 1/4 per bushel and March MPLS at$3.93 1/2 which is 16.75 cent spread.

Yesterday Kansas HRW spot cash bids at four locations varied between $3.78 to $3.90/bu. and spot North Dakota spot HRS cash bids at two locations were $3.67 and $3.86. Based on really limited info , high spot price spreads were only 4 cents per bushel and 11 cents at the low end. Point being is that sometimes futures spreads between markets don't always tell the full story especially if investment and index funds have been moving the markets.

[TOM4CWB]

Lee;

The CWB ThunderBay price for feed wheat does not reflect market value, or does it?

Why such a spread?

[melvill]

Don't know, Tom. Anyone else got any ideas?

[TOM4CWB]

Charlie/Lee;

Does the CWB sell feed wheat into the domestic market?

If it does not, why not (It's only allowed to go out the west coast)?

Does the CWB actually get any of this feed wheat... or is it all switched back to the non-board market by grain companies... so the CWB has vertually no feed wheat to export that they own(buying support from agents for the single desk)?

With the Corn Tariffs on the US border... I note the shipments east of western Canadian feed grains are less now than last year, why?

How can this happen? What have I missed?

[charliep]

Again Tom, not sure of the answer you are looking for. The current system pays farmers based on their share of overall wheat sales, adjusted for grade, class and location - not an actual market price. To look for some connection is like looking for the tooth fairy - neither one exist. To answer the questions you pose on the movement/competitive pricing opportunities, Lee/I would have to be at a sales desk in the CWB or with a grain company. We can only highlight public information both sides of the border.

I am not surprised about feed wheat movement east. Lots of corn in Ontario. A very long distance and expense to move prairie wheat past Thunder Bay. With the excemptions on corn fed to livestock destined for US markets, a weak corn tariff at best.

Have suggested cash pricing export feed wheat and barley several times (including having the CWB offer this service) but no uptake. I can only assume farmers are happy with the existing situation and/or this would cause so much damage to the CWB it would immediately fold.

[TOM4CWB]

Charlie;

Is it possible to know how much swap between board and non-board happens on feed wheat? What price the CWB does the swap at?

[charliep]

Answer first question - no. Lots of games played with inventory on both sides. Would check with the trade but most swaps would be for the freight spreads.

Can be unofficial - I'll loan you inventory now to be repaid later. Happens going both directions - CWB and grain companies. I won't call this a bad thing as it makes the system workable/allows grain stocks to move. It can also add excitement to the market. A grain company borrows stocks from the CWB when export sales are slow and one month later the CWB asks for their inventory to make a sales. There is a short in the market that is scrambling for supplies and the prices respond.