How Many Farmers Understand the Mechanics of Price Pooling

[charliep]

The question of why the adjustment factor on feed barley got me thinking and there is a logical reason for the adjustment factor but you have to understand pooling.

Lets say the CWB had sold 100,000 tonnes of feed barley at $150/tonne port. This barley could have been sold in a couple of ways. First is feed barley carried in inventory from 2005/06. Second could be sales the CWB has made on behalf of farmers (note this sale could be made without a farmer contract - CWB has the right to make sales on your behalf even though you have not contracted with them).

In early pools, the assumption might be that all the feed barley the CWB will get is the 100,000 tonnes. Voila, average price - $150/tonne.

World feed barley markets rally. The international price for additional business is now $200/tonne (situation today). Lets assume the CWB thinks it can make 100,000 tonnes worth of additional business at this value. I'll let you work the math but the new PRO/average price is $175/tonne port. 200,000 tonnes and the new PRO is $187.50/tonne etc.

The price signal a farmer would get from an open market would be $200/tonne in this scenario.

Same comments would apply to malt barley these days.

From a technical standpoint, I get more and more frustrated with PRO releases on set dates when the real driver should be signicant market price changes.

Issues around how inventory is valued between crop years also come into play as well how the interest earning from old sales.

[TOM4CWB]

Charlie;

Further to your issues, there is the policy the CWB uses to price the pool sales. What is the marketing plan, and what are the "what if" scenarios in the acquisition and pricing stages of the plan for a particular pool.

Does the CWB have a plan for each pool; or one overall strategy?

As growers stuck with the "single desk" it needs to be more than just "trust me" marketing... for it is our money (grain) and decisions being taken directly affect our bank accounts!

[charliep]

I can't remember those things because of the operation the CWB gave me on the day I left.

The answer is in terms of the sales program. The sales program is separate for each pool except for the decisions that are made with utilizing port capacity. What the port capacity blend is/impact is a question for the CWB.

I also highlight the question as to why the CWB carries unsold feed barley inventory between crop years (will have an impact)? Also I highlight changes to the CWB policy over the last couple of years (guaranteed delivery contracts and separating the crop year into 2 pooling periods) has impacting CWB feed barley policy. Why is a pooled price for export feed barley necessary/a benefit to farmers?

[charliep]

On the issue of unpriced inventory, I refer everyone to page 68 of the 2004/05 annual report. The CWB carried 208,805 tonnes worth $28.84 mln dollars on July 31, 2005. No idea the carryover from July 2006 - have to wait for the annual report.

[Incognito]

Charlie:

THe 200,000 mt of barley carried over was probably stocks borrowed from the trade and not paid back yet. Yes they borrow tonnes from the big bad multinationals.

If you remember in 2005 they were having trouble sourcing barley and all of sudden 2 or 3 companies had unreal trucking premiums on CWB barley.