WHT/Bly CWB Adjustment Factors this week...COntingency FUnd!

[TOM4CWB]

Charlie;

How, on CWRS; can the CWB charge an adjustment factor when the FPC is BELOW the PRO? (PRO is at $218/t)

EG. 1CWRS 13.5 Oct 27 is $213.78/t with a -$3.50/t adjustment factor.

"Adjustment Factor" is the value that adjusts the basis to reflect the sales position of the pool account with respect to the spot futures value as specified in the pricing scedule" [quote from FPC definitions http://www.cwb.ca/en/contracts/forms/fpc/2006-07/tcwheat_feb272006.pdf]

The Oct 27 06 basis is $8.65/t over the MGE Dec 06 which is $208.63/t (CWB Conversion)CDN or US$5.08.

The DTN Oct 26 06 Portland grain report quotes a DNS 14 wheat (equivelent to a CWRS 13.5) as being worth US$5.84/bu, up on the week from US$5.80/bu last week.

Barley is down US$5/t from the peek in this past week... according to this Oct 26th DTN report from US$162/t on Oct 19th to US160/t on the 26th.

Is any basis or Adjustment pricing signal the CWB sending logical?

Especially when all the West Coast boats that are being filled with wheat for India right now...

ALL the wheat classes are paid at the same price... any wheat (non-durum) below a 2CWRS quality is dumped in the holds of these ships and returns the exact same value to the pool accounts!

The market distortion caused by the CWB pool accounts/PPO's have never been this bad before... in recent history!

Even the election period in 2002 didn't look as distorted as the CWB signals sent right now!

Is it possible... the CWB is going to use up the contingency fund during this election period?

[TOM4CWB]

Charlie;

Isn't the CWB caught red handed... when I read this in the Oct 26th DTN Report?

"Improved demand has helped firm-up west coast red spring wheat basis, which remains about 20 cents below the 10-year average"

Especially when the CWB west coast basis is being widened... not improved?

[charliep]

Good questions I don't have answers to except to remind you that the fixed price contract is not a price but rather the ability to lock in a relationship with the most recent PRO. The adjustment factor is supposed to take into consideration the impact of sales already on the books - a negative adjustment factor shows a rising market where existing sales are tending to pull market prices down.

I can't explain the change in adjustment factors either after the October PRO - particularly barley. Good questions for the encumbent directors/the CWB.

[charliep]

Should watch my teminology. This sentence should read as follows.

a negative adjustment factor shows a rising market where existing sales are tending to pull CWB payments (not market prices) down.

[chaffmeister]

go to:
http://www.cwb.ca/public/en/about/annual_report/

page 15 of the Annual Report has what I think you want

[craig]

Thanks chaffmeister

[craig]

Thanks chaffmeister

[craig]

The following is information from the annual report that might be of interest to those producers who use FPC's and BPC's. From the annual report 2005-2005.
Fix Price Contract's Contracted tonnage 948,985 Tonnes Wheat,388 Tonnes Durum,46 tonne designated barley, and 109 Tonnes feed Barley. Basis Price Contracts 222,376 Total tonnes. One time payment for commodity price increase to producers unable to fill there contracts about 5 Million. Net surplus from FPC and DPC ,sabout $35 Million. Transfer to contingency $27.5 million to Pool accounts about $7.5 million. Net result If producers who used the FPC and DPC had access to the net surplus( 35 millon) it would have represented about a $.80 bushel increase they would receive on grain sold or close to $30.00 per tonne. If they had access to the $7.5 Million moved in to the pool account it would represent about $6.40 a tonne or $.17 bushel( using wheat). Points to consider. Contingency fund is currently shown at $48 million and cannot exceed 50 Million. The books also show this as a liability.How can you show contingency as a liability. The surplus we are building with the high basis levels this year will likely all go into the pool accounts. Please check my numbers to see if I am reading this correctly.

[charliep]

Information on the FPC and BPC is in today's CWB release.

News release
Popularity soars among farmers for CWB market-based options: sign-up increases 600 per cent
Winnipeg -- More than 20,000 Prairie farmers chose to participate in market-based CWB Producer Payment Options this year, taking advantage of their ability to lock in prices based on futures markets or U.S. elevator prices for 3.5 million tonnes of grain.
The farmer sign-up for 2006-07 represents a six-fold increase over last year, with a 500-per-cent increase in grain tonnage committed for the CWB Fixed Price Contract (FPC), Basis Payment Contract (BPC) and Daily Price Contract (DPC) programs. The sign-up period for the FPC and BPC ended October 31.
"Farmers are gaining awareness and comfort with these innovative programs, introduced in 2000-01 specifically in response to their business needs," CWB president and CEO Adrian Measner said. "When the wheat markets rallied this year, many farmers recognized they had the ability to access those prices if they chose, while pooled returns remain an excellent alternative as well.
"There is now a full range of options to suit any farmers' business needs. It provides Prairie producers with the best of both worlds."
A total of 20,175 producers committed 3 541 655 tonnes of grain to the three programs in 2006-07. This compares to 3,181 farmers who signed up 710 590 tonnes last year. In 2004-05, 6,782 producers committed 1.2 million tonnes.
The FPC was the most popular option this year, with over 15,000 farmers choosing to lock in a futures value. The BPC, which provides an ability to lock in a basis level or futures value at different times, attracted over 2,000 producers and a 57-per-cent increase in grain committed compared to last year. The DPC, using values based on U.S. elevator prices, had reached its maximum program sign-up of 500 000 tonnes by July 31. To date, more than half of that grain has been committed and paid out.
The prices in these programs fairly reflect market values. The CWB offers daily values for the FPCs and BPCs, establishing a basis from the reference grade Pool Return Outlook (PRO), less forecasted futures, less a discount for risk, time value of money and administration. The FPC is calculated by combining the December basis to the futures each day. The DPC is offered as a flat price contract that is responsive to daily movements in the cash markets.
"These three programs – combined with our Early Payment Options, Guaranteed Delivery Contracts and our new pilot Delivery Exchange Contract – are all designed to give farmers the flexibility they need to run their businesses," Measner said. "Many farmers have expressed their support for these innovative additions to the CWB."

[silverback]

Choice, options, ... ha ha ha

So we had a choice between the pro or the fixed price contracts that were of a higher value than the pro. Hmmm, what should I do, hmmm...

I can sell through the board or through the board, I love this country.