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    This from the Farm and Ranch Guide

    Take note of the very last paragragh in the article.

    For those of you who still don't understand why the Americans have been fighting the CWB for all these years, the last paragraph explains all you really need to know.

    The Americans know the prices that wheat business gets done at. The prices of wheat deals are not stae secrets in the states like they are up here in Canada, and the Americans have seen too many times the CWB use it's monopoly powers to undercut the market and stall any wheat price rallies from happening. They want us to sell for higher prices, they are not envious if we do because if the cwb gets good prices, world prices stay up, but when the cwb undercuts, thats the trigger for world wheat prices to stall and then fall to the cwbs lowball prices.


    Wheat market exhibits post harvest price rally

    By MARK CONLON, Editor
    Thursday, October 12, 2006 1:05 PM CDT

    The U.S. spring wheat market rallied in late September and early October following this year's harvest. The question is how long will it last.

    “The market continues to show a propensity to rally off of the harvest lows,” said Jim Peterson, marketing director for the North Dakota Wheat Commission. “The big question though, is how much staying power does it have?”

    Peterson said there are a lot of bullish factors supporting the market, including a small world wheat crop and tight U.S. wheat stocks. Also, competing commodities such as corn are helping to boost wheat prices in deferred positions.

    “Much of the recent uptick in prices is due to renewed speculative buying,” he said. “(The speculators) look at the big picture, the overall wheat situation, which is drawing their interest.”

    Weighing against that and causing some volatility in the market is a slow U.S. export pace, according to Peterson. Higher prices in the U.S. were creating export opportunities for competing countries, but a tightening world situation is bringing world prices up as well.

    “We were gapping against world prices, but now we're pulling world prices with us,” Peterson said.

    Also weighing against the market is 2007 crop prospects. Already there is lots of talk in the industry of increased winter wheat planting taking place in the U.S. and European Union. India, China and Russia will likely increase plantings as well, Peterson said.

    Some analysts are also forecasting ahead to next spring and what spring wheat acres will be.

    “At this point, though, it's all just conjecture,” Peterson said.

    Nearby prices for spring wheat in the region were ranging from $4.05 to $4.50 with an average around $4.30. That's up about 35 cents per bushel from the mid September lows following harvest. The price is still below the peak in July, but the market still shows good strength, according to Peterson.

    New crop bids for 2007 have come in between $4.20 and $4.50.

    “A lot of that is being pushed by bids for corn acres in 2007 as many are anticipating more corn acres for ethanol production,” Peterson noted.

    Peterson said corn and wheat are traditionally linked together. Wheat, he said, usually is $.80-$1.20 higher than corn, but premiums on the futures market are currently over $2.

    “There's a lot of debate about what's causing that,” he said. “Some feel the spread can't stay that wide that long and feel corn will have to move higher in the short run. What happens long-term is what's raising more questions. If corn moves higher to compete - will that be even more beneficial to wheat?”

    December 2007 corn is presently at $3.10 and December 2007 wheat is $4.80. Since mid September Chicago has had the most price grain at more than a dollar for December futures while Minneapolis and Kansas City have increased about 75-80 cents. Peterson said more speculative buying in the Chicago market and strengthening world prices is why that market is doing better.

    “Deferred wheat futures are unusually high and it's being pushed by ethanol's demand for corn,” Peterson said. “Wheat is getting a carryover benefit from that - not so much on nearby, but on deferred futures.”

    Analysts are also speculating that wheat acres will be up significantly in 2007, but there needs to be evidence of demand to move some of the crop from this year andsupport nearby prices, Peterson noted.

    U.S. export sales of all wheat classes as of Sept. 28 stood at 387 million bushels - down 23 percent from last year's pace of 505 million bushels at this time. USDA<p>had projected only an 11 percent decline.

    The U.S. recently captured an 11 million bushel sale of hard red winter wheat to Iraq. Last year at this time the U.S. had already sold Iraq 37 million bushels. Egypt also bought 4 million bushels of soft red winter wheat unexpectedly.

    “Prices are getting competitive in the world market,” Peterson said. “The fact that they're buying while prices have rallied is a positive sign that stocks are tightening.”

    Stats Canada's latest crop estimate was right in line with estimates, coming in at 966 million bushels. Early July estimates were at 955 million. Australia's wheat crop is expected to be about 250 million bushels less than last year with this year's estimates below 650 million bushels with some analysts projecting production could go as low as 450 million. Last year Australia produced a 900 million bushel wheat crop. The EU crop is also projected lower - 4.4 billion bushels compared to 4.5 billion a year ago.

    Combine that with total wheat production in the U.S. at 1.812 billion bushels compared to 2.1 billion last year and you have world wheat stocks tightening.

    Looking at exports, U.S. sales of hard red spring wheat are off 19 percent from 2005 with 120 million bushels sold compared to 148 million at this time last year. USDA had only forecast a 6 percent decline.

    Still, hard red spring is doing better than hard red winter which is off 60 percent from last year with 95 million bushels sold to date compared to 227 million bushels at this time last year.

    “Overall producers are pleased to see the current market rally,” Peterson said. “We'll have to wait and see how much staying power it has. Some feel it can still gain a significant amount.

    “For hard red spring wheat Canada is the big question mark,” he continued. “Their crop is a little higher grading this year so hopefully the (Canadian Wheat Board) tries to get some higher prices as well and keeps pressure off the market.”

    #2
    And if it is true that the CWB undercuts the U.S. sellers why did they not win any of the trade challenges? Maybe they don't like losing sales to quality and customer service!!

    Comment


      #3
      Well Agstar your right they didn't win any challenges but then again I think they were trying to prove that the cwb was selling wheat ito their market "for a price lower than the cost of production" or aquisition I not sure which ie. dumping. That couldn't be proven because the cwb's cost of aquisition are the super low initial prices. And production well I think every kernel sold by every seller world wide was lower than the cost of production.

      I don't think they ever tried to prove that the cwb undercut in what would occur normally with in a competitive enviroment.

      The point is in a competitive environment everyones cost of aquisition should be within a reasonable range ie. within a few cents per bushel, but the cwb's aquistion price is $1.5 a bushel below the amricans (the initial) but as was rightfully judged it wasn't below the cost of aquisition.

      So just because the cwb was not found guilty on the charges doesn't mean the cwb doesn't do what the americans claim, it just means it is well within the rules and the trade agreement laws for the cwb to conduct business the way it does.

      But as a Canadian Farmer I don't like the fact either, that the cwb isn't disiplined by way of real aquisition costs and real risks. Not one job is on the line because of poor preformance, the only thing that seems to matter is, are your politics correct.

      I've wanted the sales book to be open for all to see, no more secrets, just show us the sales info, all sales info and then we're actually talking facts and actual preformance but the cwb refuses to do that, for canadian and american farmers alike.

      So without real data to debate we just keep on debating theory, but hopefully the era of a neverending debate over political theory is comming to an end and farmers will be allowed to consider real facts (prices and sales preformance) not theory.

      Comment


        #4
        Farmer elected directors do see the sales figures. There might even be one that wants to see an end to the monopoly. None say that CWB undercuts the U.S. Short of having you take an oath of secrecy and showing you the numbers, you don't seem to believe those farmer directors. In an ideal world that would happen. Why don't you run for a director position since you believe you could do so much better?

        Comment


          #5
          Good question Agstar, don't think I haven't been asked to run. But I'm not a politician, it's not for me.

          By the way I don't think I could do any better, but when I screw up, I only screw myself up and I can live with that, I couln't deal with having my screwups adversly affecting others. That's why I will never run for anything. I know I'm not perfect or falable, politicians need big egos and little conscience. I'm not saying I don't have confidence in my abilities but that only applies to living my own life and making personal decisions only.

          Irregardless, I believe it's a flawed system not flawed people.

          You a director?

          Comment


            #6
            Agstar, in what context are sales info given to the directors. Do you also have comparable knowledge of competitive offers? Are you shown the terms odf sales agreements and compare what was actually shipped. I mean do you know if #1 14.5 wheat was shipped for a sale of # 2 13 wheat?

            What about the accredited agents? Do they buy from the cwb and then sell internationaly in which case you may not have that info or do they arrange a deal subject only to the approval of who? Sales staff? Directors?

            I'm just trying to understand how Directors make their judgements as to whether sales performance is poor, just ok, good or great?

            Comment


              #7
              Any fool can export grain confiscated from producers at dictated, proceeds-minus prices. That is not today's world. From the agri-week newsletter 10-13-06
              I'll ask you Adam-Smith will you run for Director of the CWB.
              This is not a political position this should be a corporate one its the present management that have made it politicaly one sided
              Even after Chuck Strahl gets done with the CWB and offers real market choice for western farmers, the CWB will need competant directors to steer the ship.
              As for making bad decisions you will be making them for those who choose to belong , I feel that for the first year or so the board will have quite a strong support base simply because that is what farmers know the grain giants of the world cannot afford to bid up the price of wheat, and cut into their profits simply to show up the CWB.
              Grain has a world price you can find it on your futures exchange the difference back to the farmer is freight and basis.
              I know that you know all the above everything after the invitation is for others.
              for information on the election www.cwbelection.ca or talk to Blair Rutter at the WCWGA
              thanks

              Comment


                #8
                Agstar77;

                I think we ALL should be DIRECTORS.

                Directors of our marketing and sales of human consumption wheat and barley.

                IF, for some reason YOU would like to pass the responsibility for marketing your production from your farm... TO THE CWB... God bless you be my guest.

                BUT PLEASE don't tell my family and I we must deal with your pet political charity. Support the CWB if you must.

                AS for me and my farm... we will serve the LORD our God... not the CWB!

                As good stewards of the blessings the Good Lord has given our family... We need the opportunity to find the best marketing partner who is honest and faithful, and fair.

                Unfortunately, the CWB has been neither... and will have to work hard to gain our trust back.

                We partner with; Cargill, Agricore United, Bunge, Agpro, LDC, Providence, JRI, and anyone else who is caring and fair with us.

                I hope the CWB Directors are up to the challenge of being responsible for their actions... for to this point they have proven to be irresponsible as a whole. If they DON"T get their collective butts sued off... I would be surprised.

                Comment


                  #9
                  There’s so much more to grain trading than price.

                  By virtue of how the single desk is operated, the CWB can have a huge impact on wheat markets. For example, let’s say ADM or ConAgra – two of the CWB’s biggest North American customers – negotiate with the CWB for a large proportion of their North American wheat needs for the upcoming year. A huge amount of demand showing up at one point in time. The CWB has been known to say, ok, here’s the price. Done deal. These companies just love this about the CWB – they are able to tie up huge amounts of grain in one fell swoop – without making a ripple on the market.

                  But what’s good about the CWB to the processor is not so good if you’re a farmer; a huge chunk of demand has just been satisfied but the market didn’t feel a thing. In a properly functioning market, when the demand shows up, the market reacts by moving higher – in other words, you want it, pay up for it. The CWB wouldn’t buy futures against this sale (as a hedge) since they are a natural long anyway and selling wheat is what they are meant to do; since they do nothing in the futures or cash markets, the market sits. So they pat themselves on the back and show the directors the contracts to show what a great job they did. When in reality they just screwed the farmer out of a decent rally.

                  It has also been said (by the buyers) that the CWB doesn’t usually demand higher prices for these sales (which it should, of course) and I’ve been told that in fact, the CWB has been known to discount spot market prices to “get volume”.

                  So, Agstar77 -

                  It may not be so much that the CWB “undercuts” the US sellers on a spot basis, it’s more that its trade tactics can mute demand driven rallies – and its willing to sell in deferred positions at prices that no one else would (and then it doesn’t allow the trade to have market-impact). Re-read the last paragraph of AdamSmith’s first posting on this thread. What I am saying here is another way of saying what the American’s are feeling. You don’t have to undercut prices to take the “bloom” off a market.

                  When the directors see the CWB sales contracts and they appear to be competitive, are they sure that they fully understand the whole picture? For what its worth, I’ve seen CWB contracts and I’ve been involved in the private grain trade as well – it would be real easy – I mean REAL easy – to miss the many nuances that make up a particular grain trade or sale. (This is not an insult to the farmer/directors; I don’t understand every nuance of farming – I wouldn’t expect farmers / CWB directors to understand the nuances and subtleties of international grain trading.)

                  When the directors see the CWB sales, are they ever compared to prices that the CWB could have gotten if it had gone through an Accredited Exporter? I’ve posted here before about this; the CWB has been known to offer wheat to offshore buyers at dollars below where the same business could have been done via an AE (simply to cut-out the AE from the deal?). Do the directors see this information?

                  Notwithstanding AdamSmith’s comments about the ITC trade challenge process (which I agree with), I wonder how many CWB sales that the ITC looked at could really be compared equitably with open market sales (which would not have the “benefit” of booking huge amounts at one time – unhedged).

                  Like I said; there’s so much more to grain trading than price.

                  Comment


                    #10
                    Agstar, just the term slow farmer selling or disciplined selling has dramatic effect to carry a rally much further. Canola this past week is a great example. A mandate to dump, sorry, get a premium for the farmer as the CWB calls it, X tonnes monthly does not a rally make. The effect of such sales is dramatic.

                    Comment


                      #11
                      Most farmers are slow, selling that is. LOL.

                      Comment


                        #12
                        So am I the only one out here who thinks Agstar77 just took a shot at the intelligence of most farmers?

                        And if he is a CWB Director as I suspect, doesn't that speak volumes to what the mindset is around that board table?

                        Comment


                          #13
                          AdamSmith;

                          I understand your region is up for the CWB election.

                          I would appreciate you taking that challenge... and running in this CWB Election!

                          We need some people who are willing to stand up against the "single desk" directors who are busy destroying the CWB...

                          Simply to prove they were right... (of which there is plenty of evidence to prove otherwise)

                          That grain growers in western Canada are not smart enough to (stupid to)work together unless the NDP (including Bob Rae) and NFU are leading them.

                          Please, run!

                          Comment


                            #14
                            I don’t get it – I really don’t.

                            Is it just me or has Agstar77 dropped the ball.

                            The future of the CWB is a serious issue that needs serious answers. To simply throw out rhetorical comments without substance just doesn’t cut it. I was sincerely hoping that we’d get some sort of answer to our questions and comments. Not just “LOL”! Agstar77 – are you taking this discussion seriously at all?

                            I don’t know who you are Agstar77, but it’s clear that you’re championing the “preserve the CWB” side of the discussion. I don’t know if you are a CWB director but you have taken on the role of defender of the CWB and its directors. As such I expect much more than the insipid rhetoric we get – and I expect to get responses to my comments. (Maybe I’m naïve.)

                            I’d like to settle this once and for all – do the directors really know what they are looking at? Are they getting the full story? If they aren’t asking these same questions, then they shouldn’t be sitting where they are.

                            Many months ago I asked Vader the same question (and others like it). At that time I at least got “I’ll look into it and get back to you.” But that’s all I got – he never got back to me – no answer and no further discussion.

                            This is how the CWB debate goes on Agriville: open-market-supporter makes comment in favour of open market; CWB-supporter responds with something like “CWB directors see the sales numbers” – suggesting the CWB is doing a great job; open-market-supporter questions whether the directors are really seeing everything they need to, and whether they understand what they are seeing, and gives a valid example of how the directors may not get the whole picture; CWB-supporter disappears from the discussion; open-market-supporter is left to assume the CWB-supporter can’t respond intelligently (because he would if he could) and feels like he’s wasting his time.

                            If you can’t answer the pointed questions, how can you in good conscience continue to argue for the status quo? There is so much about the CWB that we just don’t know. How can you argue in favour of it without getting some good answers first? That's ther first thing you should do before opening your mouth in support - ask some questions and get some answers.

                            Ignoring these questions won’t make them go away nor will it help your argument to preserve the CWB. Diverting attention by making a joke (LOL) is something I get from my 6-year old; believe me, I expect much more from my contemporaries.

                            Comment


                              #15
                              I was making a little humour, but it seems some of us can't poke fun at ourselves. On a more serious note Minister Strahl told the ag committee, there was no need for a vote on marketing because no decision has been made, hmm... Maybe we won't see any action until after the spring election.

                              Comment

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