Guestimates on the Thursday PRO and Impact on CWB Basis

[charliep]

As an interesting but likely useless note is the fact the 2007/08 CWB initial payments are mostly based on the June PRO. By the time the CWB releases PRO, AAFC market analysis branch in Winnipeg reviews/provides recommendations and the federal government puts through the order in council to approve, the process needs about a month.

This is important to you as a farmer in that the initial payment is normally set at 60 to 70 % of the June PRO (could mean $10 to $20/tonne in terms of cash flow from initial payments). Not that the PRO is politically driven but there should be incentive to ensure the PRO is high/encourage high initial payments. Thursday will be interesting.

[kamichel]

Melville some malt is made from CWSW wheat. A small market, An additional payment of 10 dollars per ton will be paid if it is accepted for malt, and picked up in the yard. but I also expect picked up in the yard anyway. If my CWSW meets spec then they must take it. Plumpness, protien, moisture, and germination. How I price it is my choice, fixed, pooled, or daily. Cargill contracted only 5000 acres of CWSW malt.

[lakenheath]

What the CWB has done with the basis in the past has been a mystery. I am going to guess that it is going down tomorrow. They do this to protect themselves from too many farmers using the fixed price contract. This is ridiculous though, because if you look at how much money they have made off the fixed price contract pool over the last few year, you wonder why they had to push back so hard on the basis (maybe to subsidize the pools that they made marketing mistakes on). Who knows, the CWB is farmer controlled, but yet the farmer has little insight in the internal operations of the place. Try to get a straight answer from a CWB representative and you will see how much insight you will get.

[Zaphod]

The CWB will have to hammer the basis again tomorrow unless they can bring the PRO all the way up to the FPC price -- not likely. The basis has no logic to it any more.

I talked to the Biggar malt guy in Stoon in January. They were contracting AC Andrew for their malt. Said they had been doing it for a few years. Was a surprise to me too.

[charliep]

Part 1 released (PRO forecasts). Wheat up $18/tonne. Durum up $10 to$18/tonne.

http://cwb.ca/dom/db/contracts/pool_return/pro.nsf/WebPRPub/2007_20070628.html?OpenDocument&CropYr=2007-08

[melvill]

Canuck Buck is hitting us hard here. It's up roughly 8 cents since the first PRO came out in February. Argh!!!!

[charliep]

I neglected to mention that "B" series barley is up $5/tonne at $195/tonne basis west coast. This price is $3/tonne over the April 18 2 row standard select malt barley. Neither one are competitive with the local feed market.

[charliep]

Did widen the discount (refuse to call basis any more) on the fixed price contracts. December 1CWRS discount (okay I know is a plus) is 2 cents/tonne versus being $3.15 over yesterday. 1 CPS red has been weakened by $6.60/tonne (now $25.25/tonne under Dec KCBT versus $18.65 yesterday). SWS took it on the nose the hardest - weakened basis by $8.18/tonne ($22.69/tonne under Dec. CBT today versus $14.08 yesterday.

Perhaps someone can help me understand the logic of the wider basis.

[charliep]

May June 28 SWS basis should have been $22.26/tonne - I wrote down the March basis.

Also should not have called wider basis (Lee will lecture me for this error) and rather used the correct term weaker basis or better yet, bigger discount for using the program.

[lakenheath]

Charlie,

Do you know Mel Polluck (speeling could be off). He oversees the FPC at the CWB. Just had a 15 minutes discussion with him asking why the basis has moved down again and he basically talked in circles with no concrete answer.

I asked him to post the numbers used in the basis forumla that is posted on the internet to give us some insight into how the predict the movement of the basis. He said they could not do this as they would be giving out confidential numbers to their buyers.