How was grain world? did any one goe from from this forum? TOM4CWB did you get to go?
Jason
Jason
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Jag;
I did go; It as a personal disappointment to me.
Weather:
Supposed to be a good spring... maybe a little warmer and drier than normal. No surprises.
David Boise started by saying:
An Old Spanish saying goes...
Nothing worse (worse disgrace, bankrupt) than a man who has lost his enthusiasm.
In hind sight... how prophetic the CWB should bring it up!
US Winter WHeat;
The Crop is made or broken in the next 2 months... it is in trouble now: but if it starts raining it will come back.
Large Corn stocks Bean stocks over the market... but corn could rally $1/bu, beans the same on weather volatility.
You can look at the 06-07 PRO's yourself. About what I expected.
THe "Act of God" clause is not at all what most of us needed. It does not include weather downgrade on grade; costs $3/t; must fill contracts as they are done first in time, first to be filled.
If just the basis is taken... it is still $3/t.
Some fancy talk about funds and all their money... about volatility etc. was looking for money for big funds... I thought. Might not be a bad strategy if you have lots of spare cash.
THe CWB can't do anything about exchange risk... they say no-one can predict the future... it isn't worth the effort or cost to risk manage the $
They refused to answer my question on hard white wheat. It is toast. CWB wants snowbird gone... IMHO it threatens the monopoly... so it is gone. The win of the Conservatives on Jan 23 is the only major change since the end of Nov. 05... when we were scheduled to go for 2 million acres of Hard White. The 04 crop was no better for quality of Hard White... if not worse than 05... and they didn't complain last spring(05).
CWRS is king.
It is easy to market... cherry pick 4mmt-6mmt... dump the rest at whatever price you can get ... all without too much work. (My read on CWB marketing plan for 06-07)
Other classes of wheat are a distraction and just get in the way... IMHO.
23mmt of all wheat production including durum... I think about 4.3mmt durum.
Dump your durum in the GDC program... if you need to move it. They will be glad to have it... especially if it is a "special" #4...
On the side... I learnt the Italian fiasco on shipments of 4-5 is not over... More to come in future news I am sure...the CWB/CGC aren't fessing up. Not a big surprise.
On Policy;
Summed up:
We are like a bunch of elephants in a room... we have policy constipation.
Fertiliser needs to come in from the west Coast... instead of the Gulf Coast. Savings of $50-100/t... I suggested the CWB use it's cars to reverse producer car fert. to local farmers... got lots of chuckles... and praises from Butch Harder and Art Macklin! Agrium gave the presentation... I don't know if the poor guy knew what he was in for!
Cattle look good for another year... especially if bird flu keeps it up.
If we wanted to, we could process all 700,000 cull cows by Sept 06 in
Canada. We processed 625,000 in 05.
Basis cost to go to the US market now at $13-15/CWT they thought it might be $5 to start with.
Pigs/Litter go up, as the hog farms get larger. Economies of scale primary to hog industry.
Hog slaughter capacity to increase 13% in 06... will be lots of capacity.
10 year volatility $6-68/cwt... even though production is very stable now.
1% change in hogs... means a 5% change in price.
A guy asks his wife if she will still love him if he goes broke... he is about to visit his banker to arrange 06 farm financing.
She says, "Yes dear, but I will miss you."
Oil;
COst now between 45-50/b USD... unlikely it will go below this.
Price: $45-100/bUSD
All spare capacity is in Saudi.
Ethanol:
New plants in Lloyd and Minnidosa $260m to be spent.
250000t of DDGS produced from these plants DDGS better from wheat... but fusarium inf. less than1ppm or it concentrates.
DDGS is weakest link in Ethanol production.
What is Black and Brown and looks good on a Banker?
A DOberman
Why are they thinking about using Lawyers instead of Rats in experiments?
You can get Lawyers to do many things that rats won't do.
A young lady tells her Dad she is very serious about a young guy.
But she tells dad she has a problem, about religion, with the fellow... as he doesn't believe in Heaven or Hell.
He had popped the question... what should she do?
Dad answered... "Between you and your mom... he will soon discover the difference."
Hope this is enough!
Running out of time!
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Jag;
We ourselves are dealing with the CDN$... and thinking about risk management.
Larry Martin, and I agree with him, says use OPTIONs, not futures in a strategy.
THE CDN$ freight train is rummbling along higher... at a high speed...
I don't know if that is a train that will be stopped.
OIL below $40/barrelUSD could slow it down...
All indicators are to me... that we will be at $.92 by Aug 1... especially if US trade deficits continue... and Oil stays over $60/bUSD. CDN interest rates are scheduled to increase to lower CDN inflation... this will drive our $ higher... all things remaining the same.
With China investing in CAnada... in a big way... even the US getting a cold sernerio is unlikely to slow it down.
The CDN$ with the Harper Gov. must be the premium currency would wide... IMHO.
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It saddens me to hear directly the CWB's stance on forex. It probably infuriates Incognito!
Here's a couple real simple strategies for the CWB - a small part of a larger one.
The CWB has said that it only does anything in a plain vanilla fashion; they sell US$5 million in wheat and hedge (forward sell) the USD tey're gonna recieve. Real simple.
1. The CWB could keep a porportion of the USD from anticipated sales covered (hedged) - not the whole book, say half. If the CD moves higher (USD lower) - the hedge comes in handy; if the CD moves lower (USD higher) the unhedged portion still benefits from the move. Basically it reduces the volatility and exposure.
2. Every time the CWB makes a sale of grain, it takes on forex exposure. Rather than book the forward forex rate immediately, the CWB could simply put in a stop order to sell USD in the event that the rate hits a specific rate. So if the USD drops, it would trigger the stop and the CWB would be covered. But if the USD rises following the sale, the CWB would not be locked in and it would trail the stop higher - eventually getting triggered at a more (perhaps much more) favourable rate.
I've done both. They're simple. And they work.
Combined, these two simple strategies would have made/saved millions in the last year alone.
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Re: FOREX - I only have one question
How can farmers expect the CWB to be responsible selling wheat and barley when they are so irresponsible with FOREX.
The only risk the CWB manages is the risk that they will lose the single desk. That they can spend endless amounts of farmer's money on - but nothing on watching farmer's returns shrink over the past 4 years due to an appreciating Canadian dollar.
Doing nothing is still taking a position....duh
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Incognito, Chaffmeister:
This isn't the half of it.
After I asked the AUSIE expert about AWB risk management on forex... and he told everyone the experts should handle the exchange risk... guess what!
Rick Steinke
Conference Chair;
Tells everyone on dismissal just before lunch...
That the CWB handles exchange risk just like the AWB does.
I am confused?
If the CWB is risk manageing the exchange risk... why do they blame our low prices on the exchange problem.
And what am I supposed to do... if the CWB is managing the exchange issue... why would I do it for the second time... and double my risk and cost?
If the CWB is not dealing with the exchange risk... Why insult me in front of 200 plus people with a deception?
Is this the best management signal we can expect from the CWB?
We are never wrong... just right less often.
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posted on Agriville from AWB website:
Incognito posted Apr 22, 2005 9:02
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AWB’s commodity and currency risk management has also generated good results for Pool participants.“ Growers would be well aware of the large swings in the Australian dollar exchange rate over the life of this Pool, and AWB’s currency hedging program has done a good job in managing that risk and generating significant out-performance for participants,” Ms Scales said.
Comments, Vader?
__________________________________________________ ______________________________
CWB PRO
DATE: February 28, 2005
Wheat
Another factor keeping pressure on Canadian farmers' returns for wheat and other grains is the forecast continued strength for the Canadian dollar.
Feed barley
An easing of ocean freight rates would benefit Canadian feed barley export prospects, while strengthening of the Canadian dollar would not.
Designated barley
In addition, high ocean freight rates and a relatively strong Canadian dollar are expected to pressure Canadian malting barley returns in the coming year.
________________________________________
Who has their act together and who does not? I've never seen any form of currency risk management used in the description of the PRO's since I've been watching them.
Who is right, Tractor Tom?
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Regarding forex and the boards duties, what do yo think about of this scenario which is something I've been talking to some people at the board about.
The board would offer the ability to buy a " forex basis" on grains offered to the pool, you would be able to lock in the forex basis in much the same way you lock in a basis with the PPO's.
The basis would be offered daily just like the ppo's and would vary from day to day.
Fixed price and basis contracts in effect have the forex in them ,we can accomplish this in the pools as well but I don't believe I want the board making the exchange decision for me I should be making that myself. By doing this it allows the farmer learn and manage the forex risk without the need to work through a broker.
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225nmillion of sales (PPO) returns were paid from the pool to the PPO program, representing the return on the specific grades and classes of wheat... in turn paid to farmers at the cont. price.
THat helps a little... but obviously annalisis cannot be made on figures released so far.
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Incognito
If what I am told is correct the numbers that use the ppo's are not large, but increasing as producers become more comfortable with the terminologies and the options.
The question should however be what percentage of farmers should be using the ppo's or what percentage of the most profitable farmers use ppo's.
Adding a forex basis to the pool would be like buying crop ins. You could use it or not but I believe it makes sense. Do you believe it makes sense?
Something I have advocated to the CWB when I have had the chance is that here or gone the board has a tacit responsibility to make the tools available in order to educate producers on the marketing of cereals in a world market.
This would be one such tool.
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Of course it makes sense...but without an educational component to it - its useless. The reason the uptake on PPO's is that most do not understand them.
Rather than spending 2 million dollars on a planned media blitz to to maintain the single desk in the next 12 months, why not take that 2 million dollars and educate farmers on the tools that they have before them that way when the dual market is in place, they are not at a disadvantage to the 5% that are already using them.
Take the staff off the "save the CWB campaign" and put them in the country educating farmers...
The CWB's mandate is to "maximize returns" ...
What they have been doing with FOREX, the lack of education, and wrecklessly spending money defending the single desk would put a normal board of directors at risk within their fiduciary responsibilities.
I cannot understand why farmers have not challenged their fiduciary responsibility to protect pool returns and maximize returns to the farmer through FOREX management.
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