CWB Flexible Delivery Program?

[charliep]

What are your thoughts on the CWB flexible delivery program? Information can be found at:

http://www.cwb.ca/public/en/news/releases/2006/061906.jsp

I notice only a pilot - applies to Southen Saskatchewan. I also notice ran by the CWB. Will information about the value of a delivery opportunity be posted? If the CWB is willing to go to this level of complexity, why not use more programs like the guaranteed delivery contract, have farmers sign up their grain for specific delivery periods and pay interest and storage? The issues for me are visibility of process and having market forces determine value.

Others thoughts?

[charliep]

The more I think about this program, the more interesting I find it.

1) This contract puts value on a delivery opportunity (similar to quota for supply managed agricultural productss - I think this has been mentioned before) and yet provides no signals around logistics efficiency or customer needs.

2) A move away from currently drawing grain forward as needed to meet sales commitments from contracts/delivery calls to a new world of guaranteed commitment to a farmer to take grain within a quarter and the need to move/clear the market of this same grain. I realize only southern and 15 to 20 % of contract now but where will it go down the road?

3) A question of how these values will be determined and how visible will this process be? In a year of surplus supplies/low delivery opportunity, these delivery may be worth a lot. In a year of tight supplies/full contract calls, they are likely worth less. How will the CWB coordinate the flow of specific classes, grades and proteins? CWB decisions will have a major impact on value and farmers ability to forecast them/know their impact will have influence value.

4) Will the delivery cerificates be specific to the point of grade, class and protein? For example, if the CWB needs 1.2 mln tonnes of 1CWRS 13.5 for the Japanese market, will they divy out 100,000 tonnes a month and then let farmers negotiate as to how they will share this delivery/sales commitment? Someone who needs cash early gets to deliver early on Japanese sales? Someone who can wait delivers later and enjoys a wealth transfer? Can a system like this live along side another process like CWB payments where the amount is the same regardless of when you deliver?

Interesting all the girations farmers are being asking to go through simply for the CWB to say they are meeting farmers needs and therefore hold off the push for a more open market.

[TOM4CWB]

Charlie/Vader;

Where in the CWB Act, do the CWB Board of Directors get the authority to create such a program?

Since the CWB is not a "Commercial" business... ie. it has a monopoly... it can't just dream up whatever it wants... and do it without legislative authority to offer such trading (for profit on the quota trade) delivery opportunities.

It is one thing to switch a basis contract... that has no price attached... and give it back to the CWB who then can give this instrument to whoever it pleases. It is quite another to trade quota when the CWB Act has no such provision that I can see in it to authorise such a tool.

Vader... where legally does the authority come to trade this quota for profit to the farmer who held it... and transfer the compensation from another grower?

I thought this quota was a land specific priviledge that by CWB Act provisions is specific to that specific land on a specific year that it grew a CWB Grain.

CWB Act 2(1)"quota" means the quantity of grain authorized to be delivered from grain
produced on land described in a permit book as fixed from time to time by the
Board, whether expressed as a quantity that may be delivered from a specified
number of acres or otherwise;"

CWB Act "Pricing, Profits and Losses

Sale and disposal of grain

7. (1) Subject to the regulations, the Board shall sell and dispose of grain
acquired by it pursuant to its operations under this Act for such prices as it
considers reasonable with the object of promoting the sale of grain produced in
Canada in world markets."

I don't see any authority to set up trade in CWB quota here do you?

"Profits

(2) Profits realized by the Board from its operations in wheat under this Act
during any crop year, other than from its operations under Part III, with
respect to the disposition of which no provision is made elsewhere in this Act,
shall be paid to the Receiver General for the Consolidated Revenue Fund."

Looks like any "profit" from the sale of CWB Quota must be given back to the Receiver General according to the Act... if it doesn't go into the pool accounts.

Producers may deliver only their proportions of quota

"27. (1) Subject to subsection (2), where two or more producers are entitled to
grain produced on any farm in any crop year, none of those producers may deliver
in that crop year under the permit book for the farm a proportion of the quota
of grain that may be delivered thereunder greater than the proportion that that
producer's share of the grain is of the whole amount thereof."

Here is (2)

"Mortgagor to have priority

(2) Where a producer is a mortgagor or a purchaser under an agreement for sale
of lands comprising a farm and controls the farming operations on that farm, the
producer is entitled to deliver out of his share of the grain produced on the
farm, in priority to any other producer in respect of the farm, such amount of
grain as may be prescribed by order of the Board."

Can't see any authorisation... in fact the opposite... a denial of CWB authority to trade quota in permit books.

So... where did this come from?

[silverback]

It appears that they are only trying to muddy the waters as much as possible to make it appear that they are capable of change.

Failing to find markets for our grain shows me they don't give a rip.

Charlie, Choice Matters? How many more years of waiting? Are they waiting for Ralph to quit?

This can't continue.

[Vader]

Not trading quota tom. Simply exchanging delivery periods. Grain will be under contract for delivery. Will be called in 4 equal portions. Producers can simply trade their delivery opportunites. If there is a problem you can blame me. It was my idea.

[food4u]

Vader,you know that the grain shown as delivered in a producers permit book MUST be grown on the land listed in that book. I know that you have turned a blind eye to this over the years,but rules are rules and you(CWB)must abide by them as well as the producers. PERIOD.

[TOM4CWB]

Vader;

Why just southern SK. if it is simple, doesn't involve any money, is a CWB administrative option that doesn't involve Act revisions?

It smells really fishy when it is offered to your freinds... so they can get elected this fall in southern SK!

DO you realise how bad this looks Vader?

[charliep]

Vader

Just curious as to why this route was selected and not one where you identify the needs of specific customers (eg. Japan, domestic millers) from the sales plan and set up delivery programs around their needs. The next step is to find farmers with this grain in their bin. I guess this tradeable delivery opportunity is one way to sort out the order of delivery on these contracts. Another would be to pay interest and storage on these contracts similar to malt barley and identity preserved programs. A hybrid would be to pay the interest and storage as a part of the contract plus allow farmers to trade. 6 % interest as carry will seem good to a farmer who is a net depositor at the bank but a farmer with 18 % trade credit will be willing to pay to achieve earlier delivery.

As a note, I will note I find the move to guaranteed delivery contracts far more interesting in this new program than the fact they will be tradeable. The insecurity around farmer delivey (you guys) is the biggest fear the CWB has in an open market setting.

[WRAPper]

The tradeable delivery options idea is something that has been discussed in various forms for a number of years, I remember it being brought forth at a farmer transportation meeting hosted by Vic Schapansky that had to have been 6 or 7 years ago. I support the concept and have in various conversations.
I too would have rather seen a tonnage based full area pilot to not have accusations of playing favorites. I understand the issues around having the pilot based on the full geographical area but it would have played "cleaner"and yes the board has a responsibility to act that way. Pool the grain pool the programs it's only right under a tonnage based program it has a cleaner feel.
You may find that the delivery options trade at higher values over a broader geographical areas as well as we Alberta farmers will deliver the grain in the winter while all the Saskatchewan farmers are in Arizona (haha) and for other reasons too.
I'm also surprised Tom doesn't own land in Southern Saskatchewan by now as well. Just think of the varieties and types of crops you could add to your stable Tom.

[Vader]

food4u, you said "Vader,you know that the grain shown as delivered in a producers permit book MUST be grown on the land listed in that book. I know that you have turned a blind eye to this over the years,but rules are rules and you(CWB)must abide by them as well as the producers. PERIOD."

The grain being delivered will be that producers grain and it will have been grown on that producers land. No broken rules and no blind eye.

[Vader]

tom you said

"Vader;

Why just southern SK. if it is simple, doesn't involve any money, is a CWB administrative option that doesn't involve Act revisions?

It smells really fishy when it is offered to your freinds... so they can get elected this fall in southern SK!

DO you realise how bad this looks Vader?"

Everything looks bad to you tom. This happens to be my area here in southern Saskatchewan. This area has a variety of crops and was a reasonable choice of geographical areas in which to run a pilot. And I am not up for election this fall.

[Vader]

Charlie, there are many interesting options out there that remain to be considered, and I am in favor or looking at many of them. I think that any new programs that are added to give producers more flexibility are good. Only those who are vehemently opposed to the CWB in principal will argue that it is getting too complicated. The grain marketing world is a very complicated place regardless if you are talking about board grains or non-board grains.

[TOM4CWB]

Vader;

I am not against a daily cash price... avaliable 52 weeks a year.

SIMPLE Enough...

I am not against the CWB issuing export licenses to anyone who is not under cutting the market place... but is selling for fair market value.

Give me a market signal that I can take to the bank... that is competitive.

Why exactly can't I presell the grain in my bin for a fixed price like I can with any other grain?

ANd this makes me against everything?
Hmmmm. If we don't stand for something... we will fall for anything.

Why should I settle for anything less?

[charliep]

Vader

I might note the work Alberta Agriculture (with CWB farm business represpentitives as partners) in helping farmers understand and use these program in their marketing plans. AAFRD has as good a knowledge of these programs as anyone one in industry outside the CWB themselves.

I note silverbacks comments about the slow pace of change (including Alberta's market choice campaign). I also note the results of the CWB producer survey. Farmers are demanding change. Whether the changes that are being made meet their expectations is something for discussion here.

My point is to move these processes out of the CWB "black box" where processes are done internally and then announced to the world. The CWB has to move to more market oriented and visible pricing/delivery alocation. This will enable the CWB to survive in an open market. The CWB will be dragged there kicking and screaming but that is where it is going.

[TOM4CWB]

Charlie;

I note the CWB is doing exactly the opposite of what I would suggest is needed in the Delivery Program.

The CWB is taking the system we have now; and making it even more complex.

Why shouldn't the CWB be able to offer a cash price for immediate delivery... a deffered delivery contract at a flat price... and start doing back to back pricing.

At our meeting on the 22nd; It was clear Canada's quality is a result of climate, a single cropping system; and a reduced well disciplined pesticide/fertiliser system where we are using minimal inputs compaired to countries who normally produce double or triple the yeild we grow.

THis is not a product of the "single desk" the CWB created... right now wheat from Montana can fill a sale to Japan just as wheat from ALberta can.

Logistics to serve the customer in Japan are paid for... on both sides of the 49th... by paying a premium price to suppliers on both sides of the border.

How well does that premium reflect at the farm gate?

I don't see it north of the 49th more than south... so what exactly are we doing?

Why can't we get a simple cash price?

What is so difficult about cash pricing?