Change - What will you get?

[craig]

Follow up to the Montana prices. We have been tracking winter wheat, Lethbridge, Great Falls and even before the run up in wheat prices we seem to be about $.80 a bushel lower in Lethbridge. We can also argue that in terms of a consistant product we produce both better spring and winter wheat. That does not seem to be reflected in the market place.

[chaffmeister]

More on CWB charts comparing PRO to Mpls futures:

Looking for something unrelated to this, I happened to find on the MGEX website a basis chart showing the cash basis for 14% spring wheat in Mpls. In the 2004-2005 period that the CWB chart covered, the cash basis ranged from 11.5 cents per bu OVER the futures to 142 cents per bu OVER. The mid-point of these is 77 cents OVER – this works out to about C$32 per tonne premium to futures. I can’t think of a reason why this shouldn’t be what we compare the CWB PRO to.

So, as my previous post showed, the PRO (instore Vancouver) in that year was about $19 over the mid-point of the futures that year. This works back to mid-Sask at about $30 under Mpls ftrs. This is about $62 per tonne under Mpls cash.

So ..... The CWB’s total sales to all destinations that year netted you about $62 per tonne less than the mid-point Mpls cash price. Of course the CVD on Canadian wheat would likely have had an impact on this relationship – so we can’t blame the CWB solely.

The point here is not to show the CWB did a lousy job – we still don't have enough information to say that (or to support the CWB's efforts). The point here is - be careful how you interpret those charts, or any charts for that matter.

[TOM4CWB]

Chaff;

HAd VERY interesting chats with endusers that buy/bought grain from the CWB "single desk".


Why do the ADM's of the world LOVE the CWB SIngle desk? Especially in the domestic market?

Why has the CWB facilitated the buying out of our Canadian milling industry by ADM?

By the way I understand ADM mills about 50% of the flour in Canada now.

Why would these factors happen?

[chaffmeister]

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.)

[TOM4CWB]

Chaff;

Exactly the points that were made to me... and that I made to Allen Oberg.

I believe Jim Chatenay and Dwayne Andersen already were aware of this issue.

[ALLFARMER]

Incognito Thanks for the chuckle!
your 7 of 9 bit cracked me up! Most people are way too serious.