Wheat Sales Options

[crusher]

Still have some hard red spring wheat left in the bin, #2, 13.5. Should I move it on the "C" Series and sell 06/07 pool, 07/08 pool, 07/08 DPC or FPC or just sell nonboard?

[btjadenlepp]

if you deliver it, even if you don't take payment, you probably won't have the option to move it under the dpc or the fpc. they are changing the rules this year about applying old-crop inventories to the new-crop dpc, which has been allowed in the past and which a lot of cwb area reps are saying still will be. don't be fooled, they've already moved back the commitment window start time by 2 weeks.

otherwise think the answer depends on where you are and what's the best non-board price you can get. at this time of year i'd factor in $4-5/t or so in interest and hassle to wait for the final payment(i.e. the non-board price can be less than the pro by this amount and you're still better off), plus whatever the value of the dockage deal is you can get.

[charliep]

Brenda

Just checking on the DPC/new crop pricing. From my understanding, the alternative to use a DPC on old crop deliveries has always been been there. Fixed price contracts are another matter. Is the change coming here?

Hopefully you are wrong about the delay in announcing the full details of the daily pricing contracts for 2007/08. I guess politics trumps business.

I would look at the numbers starting with the analysis Brenda suggested on the domestic feed market. The 2006/07 PRO for 2CWRS 13.5 is $216/tonne (port) versus $204/tonne ($12/tonne difference). On the fpc/dpc, I would look at the historical charts (http://www.cwb.ca/public/en/farmers/producer/historical/). Their downward trend looks like a ski hill with a few moguls in it. I am not negative longer term but will this market turn around in the next 3 months (unless supported by corn/a summer weather market)?

If the CWB is a farmers marketing choice (after comparing to the non board), then I would take the $12/tonne advantage in the old crop PRO and sign the C series. If you are bullish, I would take some of this $12/tonne and invest in some calls at appropriate times during the summer.

[btjadenlepp]

not sure why i'm explaining the cwb's programs for them, but since this is a big pitfall that has been poorly communicated, here goes...

yes, this is a change to the old rules where you could apply old-crop deliveries to the new-crop dpc. they are considering closing this loophole so that you can't price it under the dpc or the fpc (the latter loophole was closed 2 years ago, after we all did so well applying old-crop wheat inventories to the new-crop fpc in the may 04 soybean-driven rally). it is not 100% for sure going to change, but my impression is it's at least 50/50, based on a conversation i had a couple months ago with the guy in charge of the ppo's in wpg.

with respect to the delay in dpc sign-up this year, check the cwb web site under dpc, and you'll note it's pending a board meeting deliberation of dpc contract terms for 07/08 at the end of this month.

basically, they have heard us all complain about the poor risk management aspect of not being able to price and commit wheat at the same time under this program, so they're considering extending the dpc commitment window into the new-crop pricing window. this creates new risk for them in allowing old-crop deliveries to be applied to the contract after the new pooling period, similar to the fpc.

in other words, to respond to complaints that the dpc is a poor risk management tool due to the strict timelines, they'd have to extend the pricing window beyond aug1, which would create too much risk for the pools to bear, leading them to remove what some consider a good pricing opportunity on old-crop.

back to my first point: note everyone that our marketing advisors, who are workign in local markets all across the designated area, have encountered many elevator buyers and cwb area reps spreading misinformation about this situation. the people in the country are telling farmers that old-crop deliveries can definitely be applied to the new-crop dpc, when the cwb's higher-ups have assured me they can't.

anyone who isn't following my explanation of this cluster-f$%@#, or is looking for more info can give us a call at 204 832-2133 and we'll put you in touch with a local marketing advisor who can explain the risks/opportunities better verbally, only taking up a tiny amount of your time with a sales pitch in the process...

[charliep]

Thanks for straightening me out.

Bottom line - don't sign a daily pricing contract under the assumption you can deliver old crop/price out using this contract. Wait for the official announcement on 2007/08 DPC rules. I understand this leaves you in the dark when you are signing your "C" series but you can address this issue with the CWB.

[crusher]

06/07 PRO and nonboard are about the same for me, kinda hoped to capture some of the DPC premium we have seen over the last couple of years. Unfortunately my track record trying to guess which way the board is going to go has usually left me in the red. I could right a book or at least washed down a few beers retelling all the board screwups I've encountered with FPC, DPC and even pool payments. I highly recommend all producer triple check any settlements they receive from the board. My last settlement was $2,500 short.

[just_wondering]

What can be said for new crop CPSR?
I am thinking of putting 50% of expected production DPC as soon as the sign up times are announced and if I need to make changes or cancel all I'm out is the $15.00 admin fee. That way I can still cancel and go non board if that seems prudent later on , or am I wrong in my thinking?

[charliep]

Would be a good strategy under old rules but need to see the new ones before commenting. Volume maximums and deadlines will be what I am watching for. Also whether there is the goofy process of the adjustment factor that is applied to the FPC (likely to happen if they extend deadlines into the fall).

Will also note the DPC prices have crashed in recent weeks. I don't know whether DPC will have the big premiums over the PRO/FPC that have been witnessed over the past 2 years.

I sure wish this process was more visible and related directly to a US market price. That would mean having the CWB pricing outside the pooling system with no connection to it but so be it.

[just_wondering]

charlie
What kind of changes do you think might happen?
how quickly do you think signup might go I'have heard one week at most , if there are 500 farms out their at 1000 tonnes each that kicks the hell out of their DPC acerage.
or
Do I leave it all out and try domestic feed $4.50 Lloyd. is very good historically and less problems with CWB deliveries and cash flow?
So many questions thanks

[TOM4CWB]

Charlie & Just_wondering...

This shows the very real need for us to have the CWB take leadership and set up a WCE milling wheat exchange contract... one for Red and one for White.

We need to induce the AWB to join with us... and together we could make a very useful risk management tool.

I know the chances of this happening are slim... but one could always HOPE logic will prevail over Political Intolerance/incompetance @ the CWB Stategic Management level!

WE MUST DEMAND BETTER Leadership FROM THE CWB! They are still in charge!