Husky, What are we (and the CWB) going to do with them?

[TOM4CWB]

Vader;

On Friday I heard the Husky Ethanol presentation, Again.

700,000t of wheat of good quality; a year, will be needed.

The largest single buyer/consumer of "designated area" wheat and or barley.

Husky has almost unlimited capital funding, just spent $250m on the Minedeosa and Lloyd plants...


NOW

The CWB has an moral obligation to "maximise" our returns on these 2 plants... in an "orderly manner" and since the use of wheat for ethanol is no different than distilling, or brewing malt/beer...

That it goes in a person's car or stomach is not relevant to the CWB Act.

It is being consumed by humans... if that ever did matter... it is certainly not being drunk by our livestock.

The Ethanol exemption is CWB policy...

NOT mandated in the CWB Act specifically.

Now;

If the CWB Act is to be implemented to "maximise" "single desk" returns to all "designated area" wheat and barley growers...

Doesn't the CWB have an obligation to use the "single desk" "Orderly marketing" tool on Husky?

[Vader]

Well Tom, tell us what you think would be best. How much do you think that Husky should pay for the wheat they are buying?

[wmoebis]

I think it will be a good show for all to see what marketing outside the CWB will be like.

Will farmers hold out for more than the CWB offers for same grain/grade or will they sell for offered price? What will that price be? How will it be set? Who will set it buyer/seller?

Maybe farmers could start a cartel to control wheat sold to ethanol plants.

[TOM4CWB]

Vader;

That was certainly not the answer to the question I asked.

Great admission that the CWB "single desk" is a matter of convenience... not of the rule of fact & law.

Vader, we have missed the boat. The ruskies are loading large cargo's of high quality wheat... that will soon knock out the CWB "single desk" from premium Hard Red markets.

So, is your plan to ride the "single desk" pony into oblivion... and take generations of "designated area" farmers into the black hole with you?

Husky should pay a fair competitive price. When we have disposed of the "single desk" issue... I would expect that the CWB could certainly be the best most effective supplier to Husky.

Until then?

We will all lose big time... because a lazy "single desk"... without reason or enthusiasm... is our worst nightmare.

IS the CWB going to be part of the solution, or part of the problem?

[food4u]

Attended an ethanol meeting at Strongfield,Sk. on thursday(16th) and left the meeting with the impression that the CWB would not be involved in the pricing of grain for these ethanol plants because it is considered domestic market.

[agstar77]

There is no guarantee Husky will use wheat. They will use the cheapest grain they can. So you are competing against U.S. corn. That will set the price. This gets us back to the trade challenge on corn. How ironic!!

[charliep]

food4u

My assumption has been the ethanol plants mainly want CPS wheat. Is this what they were asking for? When will the plant open? What prices are they offering? Is Husky offering forward contracts (production and/or price)?

An additional 700,000 tonnes of demand will make things interesting. This will have an interesting impact both on seeding decisions this spring and pricing over the coming years. More reason for visible pricing around mid quality and feed wheats.

[Vader]

Tom, we have a "dual market" in feed wheat. Now to the best of my knowledge Husky did not even ask the CWB for a price for their 6-7 hundred thousand tonnes of grain. My understanding is that Agricore United has provided Husky with some type of supply arrangement.

Now why do you suppose that is? As one of the previous posts suggests Husky will be looking to acquire their feedstock at the lowest possible price. I would assume that Husky knows that the CWB mandate is to maximize revenues for producers. In an open competitive market why would Husky even consider buying grain from the CWB? This is how a "dual/open" market functions. The CWB is completely powerless to add value for producers when someone else is willing to bid lower.

[charliep]

Just curious as to how the CWB would price wheat into a ethanol plant? You highlighted farmer investment opportunities in the ethanol industry. Would the CWB price differently into a farmer owned facility versus one owned by other types of investers/a multi national? Would the ethanol plant be treated the same as members of the Canadian National Millers Association?

Perhaps the best thing for farmers would be to have the CWB move to cash pricing for CPS wheat to provide a viable pricing signal/marketing alternative to an ethanol plant. I think the expression from the movie "Jerry Maquire" was "SHOW ME THE MONEY".

Just out of curiousity, what wheat classes, grades and proteins will be applied to the Iraq sale?

[TOM4CWB]

Vader;

Your logic astounds me.

According to you US Millers would pay the lowest price on the planet for the wheat to supply their mills...

Instead US Millers pay the highest price; because they buy from a competitive market, and a CWB "dual market" at that!

The CWB obviously has a competitive advantage... in that it's cost of sales are less than any other grain buyer on the face of this planet.

Vader, feed wheat the CWB buys, is up to $1/bu less than open market price in the middle of SK. The CWB could clean our clocks... and shut us out in an instant from these Husky plants.

So have the Inland Terminals got a sweatheart deal with the CWB... to switch and cash in mega time on stock swaps Board to non-board feed wheat?

You guys.

[chaffmeister]

Let’s clear the air with some facts about the CWB and the domestic market:

1. In the event that a domestic processor (like an ethanol producer) sells bi-products into the human consumption market, it must purchase from the CWB the volume of wheat required to produce the volumes of these bi-products. The “wheat equivalent” volume refers to the average wheat to flour milling ratio of 1.38 to 1.00 (last time I checked). In other words, for every tonne of flour that a processor sells, it must buy 1.38 tonnes of wheat from the CWB.
2. The CWB’s industrial pricing policy is market based – just like its Domestic Human Consumption (DHC) price.
3. If the plant produces nothing for human consumption, it does NOT need to go through the CWB.

Unless things have changed drastically recently, these are facts – contact the CWB in Winnipeg if you don’t trust me. Jim Thompson is probably your best bet.

So Vader. Puleeeese – stop this misdirection. Let me make it clear – again. The CWB sells domestically at market-based prices. Market-based. No premiums. The CWB’s own policy. No premiums. Your idea that Husky wouldn’t look to the CWB for its feedstocks because “it knows that the CWB’s mandate is to maximize revenues for farmers” is just plain dumb.

So tell me, knowing that the CWB sells at market prices (like everyone else would) why DOESN’T Husky buy from the CWB?


Dumb statement #2: “The CWB is completely powerless to add value for producers when someone else is willing to bid lower.”

So, this “someone else” would be AU. AU goes out and offers (not bids) a real stinker of a price – and of course Husky bites and buys a whole bunch at this really low price. Just so we have a number to refer to, let’s say it was $2.00 a bushel. But other ethanol plants are up and running, and there's a pretty decent domestic feed demand for this wheat. And everyone else is selling to these plants and feeders at $3.00 per bushel. So now AU goes out and tries to buy feed wheat at say $1.85 - to satisfy its sale to Husky and make a little for its troubles. But for some reason, they can’t seem to buy any wheat because the “market” is at $2.85 a bu.

The moral of the story is: don’t offer lower prices than the market.

CWB-huggers really miss the boat on this one. Over and over again they assume that grain merchandisers will compete on price until the price goes to zero. They forget over and over again that these same grain merchandisers also need to go out and buy the stuff as well. But I guess that’s understandable since the CWB has never had to worry about the “buy” side of the ledger.


Vader, you have not described how a "dual/open" market functions, as you think. However, you have made it clear that, without single desk authority the CWB could not compete in the domestic market because it brings absolutely no value or benefit to that market.

[Incognito]

Dumb and Dumber - the threequel:

"The CWB is completely powerless to add value for producers when someone else is willing to bid lower"

"CWB mandate is to maximize revenues for producers"


From Dr. Wilson's report:
"The effect of Canadian offers is to REDUCE the optimal bid by about 50 cents a metric tonne"

See the dichotomy?

[Vader]

Tom, it is the millers responsibility to buy his wheat at the lowest price on the planet. Just ask their buyers. Just ask their shareholders.

[Vader]

Chaff, you are absolutely right. In todays environment Husky is free to purchase 100% of their feedstock from whomever they choose.

You talk about market price. What is todays market price for lentils? Last I heard some were getting down to 3 cents per pound. How many are willing to sell at that "market" price. I think it is like airline tickets or hotel rooms. There are many prices in the market every day.

The CWB does not participate in the domestic feed market because of the tariffs in the system. The CWB takes grain into the export market. AU will probably move much of the grain for Husky directly off farm or will most certainly move it through their own handling facilities without paying tariffs to some 3rd party.

Chaff, you can keep attacking me personally but it does nothing for your credibility. Perhaps you should tell us who you really represent.

[Vader]

Incognito,

Who pays Dr. Wilsons salary? Is it Senator Dorgan? Where does he get his information? From the North Dakota Wheat Commission?

More personal attacks. Ditto.