New Crop Non-Board Winter Wheat Prices?

[AdamSmith]

I grew Winter Wheat in 2000 and again in 2001. The 2000 crop was deliverd to the CWB. I'm reluctant to admit that but they had a 100% call on at harvest and I needed to move it. The NB price had fallen off hard and the CWB looked like the best of two unatractive choices.

For my 2001 crop I want to sell it Non-Board. The problem is I am having a hard time getting New Crop prices from the Gr.Co. And when I do get a price offer I have no way of knowing if that is a good price or a poor price.

New crop KC wheat is trading at par with Minn. wheat. yet the CWB will continue to maintain the traditional spread between CWRS and CWRW wheat where winter wheat is at a deep discount to red spring wheat. Even though the true market signals suggest a huge narrowing should take place.
This illustrates another example of how distorting forced pooling is!

But without going int a long ditribe about the evils of the CWB system, given the current realities of the Canadian System,

1. How does a farmer know what a reasonable price for NB new crop winter wheat is?
2. What is that priced based off of? ie. do they pull it out of thin air? is it based off Wpg Wheat? If so what is the basis and why can't they have prices posted everyday like Canola?
Or is it based off of the CWB 2001 PRO's?
3. Typically winter wheat is sold at a premium to the regular NB wheat price.

4. Without the arbitrage of an open border and a free market in Canada will winter wheat always be under priced in relation to it's true value as a milling wheat?

I would appreciate any and all thoughts on this.

Anyone who has been just reading along and not actively participating maybe you have some thoughts to share as well.

AdamSmith

[Vader]

I had some Pioneer wheat last year and was forced to sell it as NB feed wheat. No matter that it was of milling quality and would find a ready home in the US.

The only premium I could find was at ConAgra but they would only buy it if I sold it the the Board as feed.

I would like to know what was going on there. I believe that they would pull some stock switching deal and end up milling it in their own plants down south.

In this case they would take advantage of the milling quality of my product which I was prevented from doing by our CWB monopoly.

I guess to answer your question there simply is no arbitrage for NB wheat that has additional value over feed. I suspect that even the price of feed wheat is depressed due to the CWB.

[TOM4CWB]

AdamSmith,

I don't know that I would give up on the CWB Fixed Price Contract this quickly.

If the spread between Kansas City and Minneapolis is likely to change back to more normal recent levels of 30-40 cents US, you could extract the difference back by doing a short Kansas City Long Minneapolis spread on the futures.

The fixed price contract will most likely extract a significant premium to the feed market, if you have a reasonable goal in mind and stick with it. If you want to gamble a little, Kansas City even has some call options you could buy! The Canadian Dollar risk is even covered with the Fixed Price Contract, if you think the dollar is headed back up in the fall.

[TOM4CWB]

Well ceresent,

You are right the CWB has lost its vision for a prosperous grain industry.

And it is a good thing when we ask the hard questions!

Jim Stanford the most credible outstanding business manager at the CWB just quit.

I beleive the CWB knows they have a big problem, but does the leadership know how to turn it around? Jim Stanfords actions would say, doubtful.

I really hope the CWB will take the Ontario model of responsible competition and work with it.

There are only really four hardboiled directors at the CWB that are certain to be unreasonable, which leaves 11 that may be persuaded to come back to earth.

Could it be that they might do the right thing for a change, and understand that Rod Flaman's election is a strong signal?

[charliep]

I am having the same trouble you are in finding new crop feed wheat prices. One of the main reasons is that the contract specifications (read delivery location) has changed starting the Oct. 2001 feed wheat contract - moved from Thunder Bay (old contract that applies until the July 2001 futures comes off the board) to a mid point Sask. (Oct. 2001 forward). The contract specifictions are available on the WCE web site (www.wce.mb.ca). The trade has been reluctant to offer new crop basis until they are more comfortable with the contract/have seen what their competition/buyers is going to do with it (a standoff in the old corral so to speak).

Your question about where feed wheat prices come can be answered in a couple of ways. The first is that local cash prices are quoted as WCE feed wheat futures minus basis. As an example, Oct. and Dec. feed wheat futures closed at $120.50/t and $123.50 respectively. I can get into the mechanics if requested but Alberta basis levels for the new contract should be around $10 under(with a range of $5 to $15 depending on location and regional supply demand factors) delivered elevator - about $112/t or around $3/bu. A delivered feed mill price suould be closer to par (actual futures) or $3.25/bu.

The other factor with feed wheat is the price of competitive feed grains. Feed wheat should be worth more than barley based on a nutrient basis but feed lots are reluctant to pay (too hot a feed or so they say). Where feed wheat has the best fit is into sow rations, pig starter rations and poultry - animals that have high energy needs.

Impliciaton of the above is that feed prices will float around barley with years of lots feed wheat supplies pushing prices to a discount (have to push feed wheat into feedlot rations when they don't necessarly want to) to substantial premiums (tight supplies of medium quality wheat and/or high quality CWRS crop and/or high expected CWB wheat total payments).

I can't say I have seen premiums for winter wheat in the feed market other than the fact that it is harvested in August and quite often this crop can be sold early ahead of the main harvest at old crop prices.

Should farm managers be booking new crop feed wheat at $3 to $3.25/bu? What factors should you be looking at in this decision? Can you make money growing mid quality wheats at these prices?

Charlie P.

[Vader]

Does the CWB legislation have the flexibility to address the question of farmers surviving. Can the corporate mission statement of "maximizing producer returns" be supported under the existing legislation.

The CWB lawyers have been to court defending their lack of accountability to maximize producer returns. Jake Hoeppner charged the CWB with underselling his grain. The CWB defended saying that they had no obligation to return a profit to farmers.

Could the CWB be doing more in the way of reducing input costs? Could the CWB negotiate a bulk purchase of roundup for Canadian Farmers? Could the CWB negotiate diesel fuel prices for Canadian Farmers? Certainly it could be argued that they would have the numbers to give them this clout but it is doubtful that the existing legislation would allow for this type of thinking.

What about on the selling end. Who has some good ideas how the CWB mandate could be changed and what could then be done to actually address the profitability of any given grain sale from the producers perspective?

[parsley]

The Canadian Grain Commision has their legislation written "in the interest of" producers. The New CWB Act could have reflected the same language, but the Minister, who is ultimately in charge, chose not to incorporate "in the interest of farmers". That says it all Vader.

The Directors can screech and beat their tail feathers on the ground, all for show and bravado. Ultimately.... They'll do as the Minister tells them. That is what the Act legally states.
No sense trying to stroke a bill designed by and made for government.
Parsley

[parsley]

I want to get back to you cresent. You have asked a very good question:

"The current situation with the CWB monopoly begs the question: What will the single desk do to help me survive as a grain farmer in Western Canada over the next few years? "

The CWB should start to issue no-cost export licenses to farmers

Vader asked, " Who has some good ideas how the CWB mandate
could be changed and what could then be done to actually address the profitability of any given grain sale from the producers perspective? .

Sell all grain FOB farm. The buyer pays for the freight and the farmers quits worrying about transportation. Period.

You asked!
Parsley

[TOM4CWB]

Services,

If the CWB provides services that are less expensive and better co-ordinated than other service providers, then the CWB will florish and strengthen.

If the CWB starts understanding that the customer who they provide service to is the farmer, and the farmer is responsible to provide the products that our grain customers need, then we just might get this whole industry back into perspective.

If the CWB continues to believe they are Gods gift to the world, and are not responsible to each farmer in western Canada, then the CWB will self destruct!

We need sensitive and responsive service providers that can accomidate needs, not rigid control command inflexible structures that spoil the little bit of profit that does exist!

Can the CWB meet this challenge?

[TOM4CWB]

The CWB is governed by a majority of elected farmers. They are sensitive to farmers economic pressures. They also know that the business relationship with farmers has to present value, along with the economic bebefit of single desk selling. That's why you're seeing some modifications on the ability to take price risk and reward, and get better cash flow.

If the Directors don't act in the way farmers think they should, farmers will turf them out.

Tom

[wedino]

Thalpenny,
I'll argue with you that your statement is false. Landlords are allowed a vote & landlords are not farmers.

Thalpenny, lets correct this wrong & let farmers & only farmers elect the CWB board of directors, let's remove landlords from the voters list.

Later..........Cam

[TOM4CWB]

Thalpenny and the CWB,

What % of Art Macklin's income comes through grain sales to the CWB?

Then I ask, what percentage of net income (or losses) can therefore be attributed to the CWB?

Same goes to all the rest of the CWB directors.

I understand some directors are now renting out large sections of their farms, as CWB "part time" positions have become full time jobs, by any definition that is reasonable. This is breaking the CWB Act, and the purpose of having these elected directors!

I know just watching and working with you CWB guys has become a full time job for me personally!

The board of directors are so out of kilter and misdirected that they make it against the law to use the Producer Payment Options themselves!

When will they force directors to put their grain farms in blind trusts, so they won’t have any conflict of interest at all?

How can directors actually feel and know what CWB programs do to a farm when they can't even use them for themselves?

Learn by doing is obviously why the CWB elected directors, by statute, are supposed to be grain producers who sell wheat and barley through the CWB.

The whole elected director process has become a farce, as the directors as a whole don’t even understand why they are in Winnipeg!

Isn't it time for the directors to do some soul searching and make some changes at the CWB?

Taking the Oath of allegiance to the CWB pooling accounts, (the Code of Conduct) was never part of the CWB Act, but the CWB Lawyers and Staff are about to try to make it part now!

How absurd do things at the CWB have to become, before the CWB understands what they are doing is wrong?