the young farmer and the cwb

[TOM4CWB]

Rosco,

I believe you missed the point on WHAT the world price of wheat is.

It is only the countries with "single desk" monopolies that are $40/t behind the rest of the world.

The price is established in the US... for high quality milling wheat... and they have a pool of 49.3mmt. If the wheat flows through the US... so what... the world price remains the same... the supply is just coming from a different supplier... the total volume avaliable has not changed.

I don't know if you have been watching the stats.... but they are VERY positive.

That the CWB is only taking 80% of our wheat is criminal!

http://www.uswheat.org/USWPublicDocs.nsf/a280b21ba0e2ea9385256f3900554e60/d68969a36e92bdbe85257225006aacb9/$FILE/S&D061109B&W.pdf

World Production 06-07 587mmt down 32mmt from last crop year.

US production down 8mmt.
Ausie prod. Down 14mmt.
World ending stocks down 28mmt from last year.
World ending stocks down 55mmt from the 10 year average.

Stocks Use Ratio at 19%

US average wheat farm gate price for 06-07 $US4.15-4.55...

A big chunk of that is soft winters which sell at a big discout to our Hard Red wheats.

In Fact a case should be made for increased CWB returns, if non-graded CDN wheat were sent south..

As the CWB would be able to sell a higher % of its high quality without dilution from lower price markets because of excess supply.

The CDN grower simply adds the CDN wheat to the US pool of grain... it is diluted to US quality instantly.

This shrinks the Canadian pool of grain making it worth more as there is a smaller supply of the special Canadian quality.

[craig]

Rosco you make some valid points about the CWB being in a predicament. The CWB isn't in a position to use commodity markets for risk manangement and that has become abundantly clear when their prices are not reflective of open market prices. While CWB values maybe more reflective of actual export sales over the year, they deny producers the opportunity to participate in higher returns at certain points during the crop year. I have always felt that as a marketer I am in the best situation to make decisions about what is best for my farm. I know what my cash flow needs are and I have some concept of what my actual production costs are.I would also suggest that I don't always make the right decisions but as farmer that comes from the territory.I have thousands of decisions to make every year and they won't all be right. The importance is to learn from the mistakes and do it better next time.
Your viewpoint re Montana prices are different from mine. I have no particular desire to deliver grain to Montana but at the same time their prices are a benchmark with which to compare. If we assume that all grain sold in the world market is done in basically a free market economy,we would assume that market prices in the U.S. are somewhat reflective of those values with basis taken off. Montana prices this year indicate a few different things. One, the market is price sensitive. At low world values there might be a reasonably large market for high quality wheat. At high world values those markets shrink considerably. When there is a volatile futures market, the open market can capture higher values because companies still have the ability to pass risk onto someone else. The CWB does not have that ability or if it does chooses not to exercise that right. The peril of using the Futures market by a single desk has been proven in Australia this year.
The end result is that the CWB's hands are tied and while they maybe doing the best job they can, it is not reflected in the prices you get. The one area that the Board can be criticized on is the producer payment options. The board could have let producers capture the true futures gains in the market and that segment of the producers would have had been reasonably happy. The downside which the CWB seems to think is important is that it might have put pool returns in poor light. Therefore we get the watered down version which basically limits returns and ultimately keeps values in line with the PRO's. Producers are starting to realize that while the PPO's might make you feel warm and fuzzy, in most instances they are not reflective of an open market.
Finally personally I do not like cash advances. They tend to remove you from the market and sometimes give you a sense of having more than you really do. Guess I still come from old school where you make your money when you sell.

[rosco]

Lifer,
yeah I suppose that I am more of a "sell what I have" rather than "grow what I have already sold" kind of marketer. 2002 left a bad taste in may mouth. Everyone who had to buy back barley contracts that year raise their hand! Forward pricing out too far can be pretty dangerous. Look at the AWB. They went and forward priced a big chunk of a typical Aus crop at what they probably thought was a good price, and then mother nature bit them in the ass. They did what the free-market crowd here in Canada wants to have the ability to do, and look what happened. I will be the first to say that forward pricing is a good risk management tool, but for me, only in small doses until the crop is starting to ripen.
Tom,
I have no doubt of your numbers, the wheat market looks good. Yes, the %80 acceptance is not good. Yes, the initial is too low. And yes, the Feds are too slow to approve an increase to the initial. Why don't you phone up your conservative hacks and get them moving on this issue, if they really give a damn about agriculture. On Nov. 3rd the board submitted a notice to increase the initial to the Feds. How much do you think the board asked for? What do you think the Feds will approve?
Craig,
Yes the montana price is a good measuring stick for us. Not every farmer will sell there if they get the opportunity, but the option may be what's needed to get the board to perform. I agree about PPO's. By tying them to the pool, It means that an individual can't make the board look bad by doing a good job. Although, I'm guessing that the fact that the contingency fund is already at $50M means that marketers using the "watered down" PPO's are still making more money than they are losing. Would that be a correct assessment?

[cottonpicken]

Rosco, havent you heard,one month ago selling 7% of nov07 canola was a smart hedge.

[TOM4CWB]

Rosco,

The initials are not a big issue with me. If I need quick cash I can do a EPO, take an interest free advance on my canola...

THe problem is really what is the CWB doing with the pool accounts?

I see a relatively small amount of this years crop sold in the pool... yet such a low price on the PRO... it makes no sense. I am told the CWB is being very self diciplined in selling a set % each month... yet they are sure the present prices cannot last that they are discounting the PRO price?

If these prices cannot last... then more cash prices should be allowed if growers need to make sales at these world prices... allow growers the decision.

The CWB forced many growers into sales with PPO contracts in October... because of the Nov 1 cutoff. This was an arbitrary line in the marketing year... as was the July 22 DPC cutoff. THe whole CWB program is to make the CWB comfortable... and the grower take all the risk.

It is our grain... and our risk and money... we need to operate outside the pool system with pure cash signals to drive price transparency down to the farm gate.

[sawfly]

in regards to ending the board and harvest deliveries of wheat and canola.
and cash flow considerations.

the orderly marketing of wheat has probably improved canola basis, esp. in the fall.

and the cash advance on wheat has probably improved fall canola values, by putting cash in hand so we didnt have to dump canola.

generally we all like to deliver off the combine .

is it not likley that with sept.delivery contracts for wheat and canola, that the system cant handle.
whats gonna happen, basis will widen on both.
we will end up building a larger harvest discount.




any new system had better include a cash advance on wheat.
because come fall, if they know your gonna have to move something. elevators and buyers arnt gonna bid up to get it.

[TOM4CWB]

Swafly'

The Canadian Canola Growers already handle non-CWB wheat cash advances.

I have asked for competition on service providers for years... so that we could have a choice. It is time the new gov. provided some options!

The new gov. has significantly improved the Cash advance system... making it much better than ever before by increasing the interest free portion... and the total loan avaliable.