July CWB PRO (Old and New Crop)

[charliep]

On the day of the competing Saskatoon meeting, I note the CWB released their PRO forecasts for both 2005/06 and 2006/07. Interestingly enough, large price increases in new crop and a decline in old crop (wheat ex durum anyway). The reason indicated is you evil guys (and gals) who carry your deliveries unpriced between crop years. Rob old crop/add value to new crop. Is there that much grain being carried between crop years to have this big an impact on price? In years of consecutive tight margins, how are farmers cashflowing this carry over?

I find this a strange comment when there was 0 % 3CWRS acceptance on the "C" series. If there price over the past three months were that good that farmers could speculate between crop years, why wasn't the CWB selling the heck out of this market/accepting all the deliveries they could? I note that inventories (all on farms) will be up somewhere between 500,000 and 1 mln tonnes on July 31.

The 2002/03 crop year still haunts me. Other than helping everyone obtain an average price, someone will have to explain how the CWB helps farm managers manage their risk.

[charliep]

I will also note the change in basis levels (not to farmers favor) on the fixed price contract. As an interesting note, you should book CWB basis levels ahead of PRO forecasts when you expect payments to increase. Similarly, you should hold off on booking basis when PRO forecast s are expected to decline.

In my humble opinion, the CWB should toast the PRO process at set points in time and instead looking at doing adjustments when the market warrants. This would remove some of the risk around basis. The only real forecast a farmer should look at is the price the CWB will put in their pocket with one of the producer pricing options.