cwb fixed price ?

[wedino]

Fixed price shows 5.94 with adj. factor .34. Do I add the two to come up with 6.28 - freight & handle to arrive at my net?($4.72) On jul 11 I locked a small amount for net $5.03. I'm unsure what the adj. factor is.

[crusher]

The fixed price is your total payment less freight and handling. The adjustment factor is used to calculate the fixed price. For CWRS: Minneapolis price plus basis less adjustment factor equals fixed price. Adjustment factor is just a new price gouge by the CWB.

They added five dollars to the CPS adjustment factor in the last week, weakening the futures rally considerably.

[charliep]

The basis you will add to your June 11 FPC is $12.48/tonne (34 cents/bu) over the converted MGE December futures. The adjustment factor at the time you signed the contract was zero so no impact here.

You are actually wrong about the basis for someone who signed a fixed price contract today. It is actually $12.48/tonne minus the adjustment factor of $4.75/tonne ($7.73/tonne). What is the $4.75/tonne? It is the adjustment factor for existing sales in the pool (sales to date reduce the value of the pool returns by $4.75/tonne). You lock in the basis on the day you sign a fpc contract (including a converted futures price). Without going into details, current basis levels are at the extreme ugly bad end of the world. You need to look at the fpc versus dpc charts.

As a comment, the CWB needs to look at the way they do the fpc. Move to a daily cash price with market based spreads versus the current goofy process of always relating to the PRO and using the initial payment spreads changed sporatically at best.

[charliep]

Read my first sentence over and doesn't make sense. Should have been you add $12.48 to the converted December futures price if you pulled the trigger today. You would be $4.75/tonne better off than a neighbor who signed an full fpc today (priced wheat).

[wd9]

That is crazy talk Charlie. Why would the CWB make it so most people would understand it or actually know what the price is? Crazy talk I say.

Hey Charlie, any chance of sorting the posts based on new reply date as opposed to when the post was originally made? Most recent reply, top of the list, is how most forums are, actually I think just about all except Agri-ville. Or at least allow the user to save in his cookie the order preferred. What say ye?

[wd9]

Also are we allowed to do stuff like posting links or adding HTML code like this:

http://futures.tradingcharts.com/grains_oilseeds.html

[charliep]

Last post first. Participants are not supposed to use hot links. Don't know what it does but the Major gets crabby when you do it. Have asked the Major you question about sorting.

Don't have an answer to you question about complexity (and it is complex). Perhaps a good question for incumbent CWB directors in the current election.

[charliep]

Oops. Should be be Mayor (not Major).

[wedino]

Actually I signed the fpc on the jul 11 - $238.64. Basis that day was 17.93. Wheat has been delivered, received initial, haven't received paym't from cwb yet.

Oct 09 basis is 12.48 less 4.75 = $7.73. $10 less than jul '06. What's with that? Waited On hold with cwb for 1/2 hr. this AM & still don't understand it. Something to do with the pool.

[melvill]

Again, the adjustment factor only applies to producers who signed a futures-first basis contract - those who want to lock in basis later - after August 1. The adjustment factor doesn't apply to anyone who signed a futures-birst basis contract before the end of July.

There is a lot about the CWB basis contracts that don't quite add up this year - like why are basis levels so weak. However, a hint may come from US interior basis levels. A chart that Charlie and I get weekly from a US-based consulting firm - who cannot be named - shows US interior basis levels have for months been much, much worse than in 2005 and much worse than the previous three-year average. What that tells us is that US wheat futures have not, to this point, necessarily been reflecting the world situation. It'll be interesting to see if US basis levels strengthen or this the recent US wheat futures rally is just the funds having a field day not entirely reflective of the world wheat situation.

Incidently, for the culturally isolated, 'he who cannot be named' is a VERY BAD character in the Harry Potter books. Anyone else reading those to their kids at night? Hey, Winnipeg lurkers, are you listening?

[crusher]

Charlie,

Thanks for suggesting DPC - looks like money in the bank. Pretty wild swings today, brief new high for KC, Minnie still a ways off of previous high. What do you think a producer should do? I've got some uncommitted 2 CPS. What is your call on the grade spread? I've put my #1CPS against my FPC and DPC so far. Can get movement NOW on all the CPS. I'm not a fan of the pool and would fix price or basis all of it, except for ugly basis and adjustment factor.

[melvill]

Rechecked the US interior basis graphs. Kansas area spot basis levels for ordinary protein returned to average levels in late August but have worsened since then. Basis levels for 13% protein strengthened to above average during that period but have weakened to considerabley below average since early Sept. Minnie 14% protein have been away below average since early July.

[charliep]

Crusher

Going to do the civil servant soft shoe and admit to not being able to give good advice. Cottonpicken has called me a bear (which I maybe am but am just encouraging discipline/a plan in a rising market which by the way has ran out of gas in the last couple of days). I do recognize the tighter world wheat supplies (compounded by the Aussie situation) as well as a changing domestic feed market (tighter feed grain supplies and the opening of two ethanol plants). My experience however suggests that a bird in the hand (money in the bank) is worth a bunch of birds in the bush (promise of a higher total payment). If I were to carry CPS wheat, I would do nothing on the contracting side "A" series/pricing and instead hold into the spring with the idea of keeping both the domestic market and CWB pooling ("B" series) open as alternatives through the winter/early spring.

Basis levels are likely to stay ugly (what will change over the next 21 days to improve basis levels). Lee and I get asked these questions (hopefully we provide some useful insite) but the real responsibility lies with your marketing agency to provide answers.

I will note the contingency fund topped out in the 2004/05 crop year at $50 mln. Unless there is a change in regulation/process, all the profits (risk factor from the CWB side) from the producer pricing options in 2005/06 and 2006/07 will get deposited back into the pooling accounts. Farmers have the right to ask questions around the basis calculation for fixed price contracts.

[crusher]

melvill,

So then I can ignore the adjustment factor on my pre August 1 futures first contracts - good news! I was wondering why there wasn't a charge on the basis I locked in last week. Correct me if I'm wrong, but I best be locking in the remainder of my basis before they widen out.

Also if DPC is priced off of interior elevators, is there a reasonable chance basis may narrow once the world starts coming for U.S. wheat. Or is the basis small potatoes compared to the future price?

[TOM4CWB]

WD9;

The Agri-ville Mayor doesn't allow those links; he took one off the other day...