Open and Transparent:

[charliep]

Just curious to know the quality specification of the US HRW wheat (mainly protein) would be applied against this sale? What type, grade and protein is the CWB likely to apply to this sale?

The reason I am asking is because of the current interesting relationship between KCBT and MGE (Tom4cwb has raised the issue before). I am also curious as to whether some of the newer/better CPS and CWRW varieties that approach and perhaps better US hard red winter could be applied against a sale like this. Likely irelevant in the current crop year because of lack of high quality CPS/CWRW supplies but is an important market signal down the road. Is the $35 per tonne 2006/07 discount between 1CWRS 12.5 ($194/tonne port) and 1CPSR ($159/tonne port) a fair reflection of these two crops relative value?

[chaffmeister]

Incognito:

I'll bite. The price of wheat at any given time or any given place is a function of supply and demand at that time and in that place. World prices are a function of exportable surpluses (in the exporting countries) vs import needs (in the importing countries).

In an open market, no one "sets" prices. But the bigger players (suppliers and buyers) have a bigger impact. The bigger the stick, the bigger the impact - on either side. Since the US is the largest exporter of wheat in the world, the US carries a big stick. So the fact that the US has three wheat futures contracts does not mean that they set the price - fact is that these contracts are relevant for just about anybody in the world (just about) because the US is so dominant as an exporter.

More to the topic of this thread - Canada has about 16% share of world wheat (export) trade, so our production levels can have an important impact. But the CWB itself doesn't. The only way the CWB could have a positive impact on prices is to withhold selling wheat for a while. The market may start to rise as other supplies are eaten away, but as soon as the CWB came back into the market to sell, the market would react (lower).

In futures markets that are being squeezed it's called "burying the corpse". To squeeze a market you need to take control of a lot of grain - but later on you also need to dispose of that grain somehow. It seldom works - and the CWB, even with its market "potency", could never pull it off in world markets.

I guess the question is - if we assume the world wheat market is highly influenced by the US market - to the point that the US market "sets" world prices, why would the CWB sell below the US market by $10?

As Charlie intimated, it could have something to do with ocean freight rates - or it could be that the CWB goofed. (It happens.)

[chaffmeister]

Perhaps I’m getting mixed up by how things are being expressed. Sawfly – you say (1) the WCE sets the price of canola and (2) the only way to control price is to control supply.

“Setting” prices implies a certain amount of control, doesn’t it? But the WCE doesn’t exercise any form of control over canola prices.

Interestingly, the CWB sets prices to farmers in Western Canada but not anywhere else – the market does that and the CWB simply is a price taker. The CWB doesn’t control price because ultimately it doesn’t control supply.

[sawfly]

chaffmiester
my comparison to WCE canola was to show that the three US wheat Exchanges didnt necessarly set the price either. As they dont have total supply control.
But there are times when the boards little share of world market can control/influnce some prices in certian markets.
Eg. a few years ago how much Durham could the board have sold into the US milling market. certianly enough to remove any preimuims over the world price.

[wmoebis]

So if we were to all grow US varieties of HRS or equivalant and still keep our grading standards, less the non reg. veriaties factor, Stll clean to export standards, bin by protien, keep moisture levels constant, would the CWB or any grain company, be able to extract a priemium or compete with world markets?

I have always said the premium is not in the board it is in the quality. We are selling rolls royce into a chevy market and calling it a premium. Now if we could get the rolls price for a chevy that would be a premium and the value would be in the marketing not the quality.

I don't care who is selling on our behalf, CWB or grain companies. I think the level playing field has to start in quality then decide on monopoly or not.

[chaffmeister]

Sawfly –

I agree – exchanges do not set prices, nor do they control supply (see my first of two postings above – the longer one).

But neither does the CWB. It doesn’t set prices nor control supply. And I disagree that the CWB’s “little share” of world markets can control/influence prices. Any influence that Canadian wheat production has on prices is not because of the CWB – more appropriate to say “Canada’s little share” can have an impact.

And wmoebis – well put.

[parsley]

I kept this on the computer to remind myself farmers should care and tend their own affairs.



" Copyright 2004 AllAfrica, Inc.
Africa News

September 16, 2004 Thursday

Zimbabwe;
Roadblocks Set-Up to Search for Maize

UN Integrated Regional Information Networks

Police in Zimbabwe have set up roadblocks on major roads in a bid to prevent privately acquired maize from reaching urban centres.

Farmers are required to sell all their maize stocks to the state's Grain Marketing Board (GMB), which, by law, is the sole purchaser of maize and wheat grown in the country. The GMB also has a monopoly on the distribution of maize.

The police, in conjunction with officials from the GMB, began conducting maize searches at roadblocks at the start of the harvest season in the middle of the year.

All commuters from rural areas are ordered to disembark and their possessions searched. Any bags of maize confiscated at roadblocks are forfeit to the state.

Despite the slow-down in official inflation - the annualised inflation rate stood at 314 percent in August, down from 362 percent in July - prices of basic commodities have not stopped rising.

This has prompted urban residents to try to purchase maize from rural areas, rather than pay the higher prices demanded in city shops. However, they must run the gauntlet of police checks.

"The police took all my bags of maize. It is expensive to buy mealie-meal [maize-meal] in Harare, and I decided to take maize bags from my rural area," a disgruntled James Shumba told IRIN.

Another Harare resident, civil servant John Daudi, said he could not afford to buy maize-meal from the shops. "At the end of every month I visit my village and collect maize from there, but I travel at night to avoid the police," he said.

Police spokesman Oliver Mandipaka refused to comment on the issue.
A GMB official, who spoke on condition of anonymity, confirmed that the GMB had asked the police to set up roadblocks in order catch "illegal marketers" of maize, as this could "sabotage" government efforts to feed the country.

The Minister of Social Welfare, Paul Mangwana, told IRIN the government was distributing food in needy areas and would make sure nobody starved.

September 16, 2004 "


Parsley

[Incognito]

Thank you Chaff:

For years farmers were told that the price of wheat was set in Canada. That was my point.

Whatever changes the Government decides to enact, (I will keep repeating this forever)the farmer's ability to get further up the value chain must be paramount to the direction taken.

After 5 years of an appreciating Canadian dollar and the CWB doing nothing to be proactive as witnessed today in the 2006/07 PRO's - if they are looking after farmer's export interest in the same manner, farmers should be really uneasy.

[sawfly]

incognito
what do you mean by proactive.
should the board be selling dec wheat or what else do you mean.

[furrowtickler]

Good find parsley!