Incognito:
Think about it - everything the CWB does is aimed at protecting the institution. There is the belief within the CWB community that without the single desk – without pooling – the CWB is toast. So protect the pool, protect the desk – at virtually any cost.
When you look at everything the CWB does in terms of forward contracts with farmers, every one of those programs is designed to protect the pool – first and foremost. These contracts are sub-optimal, costly, and a far cry from what is really needed. Perhaps the CWB is only offering these contracts to satisfy those that asked for options.
I think this may be the answer to the question about the lack of training on these contracts provided by the CWB. It makes you think the CWB doesn’t want to see them succeed. If they did and the PPO contracts showed better returns than the pool, they may weaken the support for pooling.
Also – think of this. Sales are made by the CWB in a way to average out the year. They don’t want to have PROs weaken substantially throughout the crop year – or risk a deficit. That weakens the support for pooling.
Forex is not managed. What would happen if they took their foot off base, locked in some FX rates and had that market go against them? They’d likely have to admit to “speculating” on forex and that would weaken support for the CWB’s single desk.
What I don’t get is this. Why is it the CWB says it can’t or won’t manage forex risk but is selling more grain on a CIF basis (that is, delivered rather than FOB), thereby taking on more risk? In fact, at the peak of the ocean freight market spike a year or two ago, they were even talking about needing to get more involved in the ocean freight market – in order to manage the risk of these rates moving higher. Rumour was that they were talking about locking in rates on a long term basis – in order to manage the risk. (It would have been the ultimate in bad timing.) But they won’t touch forex (supposedly) – because, according to the CWB via Tom “THe CWB can't do anything about exchange risk... they say no-one can predict the future”.
Go figure.
Think about it - everything the CWB does is aimed at protecting the institution. There is the belief within the CWB community that without the single desk – without pooling – the CWB is toast. So protect the pool, protect the desk – at virtually any cost.
When you look at everything the CWB does in terms of forward contracts with farmers, every one of those programs is designed to protect the pool – first and foremost. These contracts are sub-optimal, costly, and a far cry from what is really needed. Perhaps the CWB is only offering these contracts to satisfy those that asked for options.
I think this may be the answer to the question about the lack of training on these contracts provided by the CWB. It makes you think the CWB doesn’t want to see them succeed. If they did and the PPO contracts showed better returns than the pool, they may weaken the support for pooling.
Also – think of this. Sales are made by the CWB in a way to average out the year. They don’t want to have PROs weaken substantially throughout the crop year – or risk a deficit. That weakens the support for pooling.
Forex is not managed. What would happen if they took their foot off base, locked in some FX rates and had that market go against them? They’d likely have to admit to “speculating” on forex and that would weaken support for the CWB’s single desk.
What I don’t get is this. Why is it the CWB says it can’t or won’t manage forex risk but is selling more grain on a CIF basis (that is, delivered rather than FOB), thereby taking on more risk? In fact, at the peak of the ocean freight market spike a year or two ago, they were even talking about needing to get more involved in the ocean freight market – in order to manage the risk of these rates moving higher. Rumour was that they were talking about locking in rates on a long term basis – in order to manage the risk. (It would have been the ultimate in bad timing.) But they won’t touch forex (supposedly) – because, according to the CWB via Tom “THe CWB can't do anything about exchange risk... they say no-one can predict the future”.
Go figure.
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