The CNMA has stated that it is “very comfortable” with a single desk marketer. Not exactly a resounding endorsement.
As far as I can tell, the millers get from the CWB everything they would get from an open market – supply, quality, service, competitive pricing. They can buy from the CWB using basis contracts (as they would in an open market) and because of the way the Domestic Human Consumption (DHC) pricing policy is set up (which was, by the way, set up by the CNMA and the CWB), the CWB does not have the ability to get a premium.
The one thing that they get from the CWB that may not be available in the open market is the ability to buy very large amounts without having an impact on the market. I’ve been given the impression (by someone at ADM) that they could buy from the CWB 100% of their annual needs in one shot. If they were to try that in the US (open) market, the sellers would be hedgers and they wouldn’t sell unless they could cover their risk – their buying in the pits would drive the price up. This is the way markets are meant to work – buyers show their hand at X price and the market reacts. These higher prices are good for farmers as they can then respond accordingly to the price move.
So here you have a scenario where, the largest miller in North America decides its time to buy. What do you think they do first? I’m going to guess they cover as much as they possibly can from the CWB (without making a ripple in the market) and then step into the markets in the US to cover more – knowing that their activity there will drive prices higher. So, whereas the CWB says their marketing activities support prices (push them higher) in reality, the way the CWB operates could actual mute positive moves in the market price.
What makes this scenario even more remarkable is that the CWB has even taken a discount for large volumes! (So I’ve been told by buyers.)
(This is the kind of stuff you find out for sure only through a forensic audit.)
As far as I can tell, the millers get from the CWB everything they would get from an open market – supply, quality, service, competitive pricing. They can buy from the CWB using basis contracts (as they would in an open market) and because of the way the Domestic Human Consumption (DHC) pricing policy is set up (which was, by the way, set up by the CNMA and the CWB), the CWB does not have the ability to get a premium.
The one thing that they get from the CWB that may not be available in the open market is the ability to buy very large amounts without having an impact on the market. I’ve been given the impression (by someone at ADM) that they could buy from the CWB 100% of their annual needs in one shot. If they were to try that in the US (open) market, the sellers would be hedgers and they wouldn’t sell unless they could cover their risk – their buying in the pits would drive the price up. This is the way markets are meant to work – buyers show their hand at X price and the market reacts. These higher prices are good for farmers as they can then respond accordingly to the price move.
So here you have a scenario where, the largest miller in North America decides its time to buy. What do you think they do first? I’m going to guess they cover as much as they possibly can from the CWB (without making a ripple in the market) and then step into the markets in the US to cover more – knowing that their activity there will drive prices higher. So, whereas the CWB says their marketing activities support prices (push them higher) in reality, the way the CWB operates could actual mute positive moves in the market price.
What makes this scenario even more remarkable is that the CWB has even taken a discount for large volumes! (So I’ve been told by buyers.)
(This is the kind of stuff you find out for sure only through a forensic audit.)
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