How much higher can 3CWRS CPS Wheat prices go?

[TOM4CWB]

In looking at Kansas City futures and seeing that they are at a premium to Minneapolis,I am wondering what Iran and China currencys are compared to the US dollar, vs. 1996 and 1997 averages. Is not $3.64US converted to 1997 US dollar equivelents a high price for both Iran and China? Why is this spread change from $.40US under to $.10US over showing up in the 3CWRS CPS PRO's especially since the CWB has been saving this lower quality wheat, one would think to hold for higher prices for this wheat that competes with Kansas City Hard Winter? Where is the money this Single Desk is supposed to be extracting?

[charliep]

Good questions. I want to comment on your questions about spreads/implications for sales. A couple of things you need to look at are as follows.

The first is to make sure you look at contract specs when you compare different futures prices/spreads. KCBT wheat is for Hard Red Winter Ord. (no protein guarantee) delivered elevator Kansas City/Hutchinson. MGE futures are DNS 13.5 % protein. Differences in type, location, protein and the supply demand balance for each in the US will influence the futures price relationships. This relationship will change year to year/week to week as you have noted.

The second factor is to look at the cash markets for each of these wheats. US HRW wheat 11 % protein was quoted yesterday (US Gulf) at 38 cents/bu over the Mar. KCBT futures or a value of about US $133/t. US hard red spring wheat (14 % protein) on the same day (again loaded ship at the Gulf) was quoted at $1.02 over the Mar. MGE futures contract or a value of US $157/t. KCBT Mar. futures closed at $3.25 1/2. MGE Mar. futures closed at $3.24 1/2. Differences in basis levels/actual cash values reflect differences in protein, transportation costs etc. Maybe putting it more simply, you have to look beyond the futures market and look at the cash market/basis levels.

Finally, there has to a recognition that there are other exporters who are likely offering wheat to a country. You picked on Iran as an example country. Iran would also likely be offered by the EU, Australia and possibly Argentine over the next three months. When you are looking at CWB spreads, you need to look at all pricing relationships between different competing exporters wheats, not just that of the US.

Running out of energy so I'll stop. What I am trying to show is there are lots issues in international wheat pricing (not overwhelming but complicated). The CWB price pooling system has to reflect this.

[TOM4CWB]

Thanks Charlie, but as anyone can see by looking at the Minneapolis Grain Exchange Web site, today, Portland 13% Hard Red Winter v.s. Dark Northern Hard Red Spring (with a falling number over 300), shows that PNW values are almost identical for these different CPS and CWRS qualities of wheat. So why is the spread so high, between CWRS, CWES, and CPS? It looks like it is $40.00/t! Why?

1. The CWB will not pay a fair price that recognizes that I have high protein CPS CWES to start with. This has killed Oslo and Wildcat wheat.
CWES protein premiums are disgusting. One CWES break at 12.5 for a premium of $2/t is not market value, and my farm cannot afford to give this protein away.

15 pro CPS or CWES is worth significantly more to anyone else on the planet, except the CWB. Why?

2. The CWB puts punitive buy-backs($20 to $30/t above the PRO) on CPS and CWES. No one could sell through this abusive buyback system and stay in business, let alone develop higher quality CPS CWES markets. Why is the CWB intentionally doing this?

CPS and CWES Quality are normally pooled, and then discount priced and blown out the door to make sure a cheap domestic feed wheat price is the market result in Alberta! Is this why Charlie, and if not, what else could it be?

Why is protein and falling # not a grading factor for CPS CWES at the CWB, when everyone else in the world demand and use these grading factors?

Could someone do the currency exchange 1997 v.s. 2001 U.S. dollar exchange for the Chineese and Iranians so we can know in Jan 15, 1997 $U.S. dollars what they pay for PNW Hard Red Winter at today's Portland prices for 13% protein wheat?

[TOM4CWB]

Now that our wheat prices are falling apart, it is less important, but I would still appreciate knowing the buying power of middle east and asian buyers of our wheat!

Is it possible to find this info?