Guestimates on the Thursday PRO and Impact on CWB Basis

[charliep]

What are your forecast for Thursday's PRO and the impact on CWB wheat basis levels?

My thoughts. All wheats (including durum) up $15 /tonne. Logic - half the ammount the market has gone up over the past month. See historical pricing section CWB.

http://cwb.ca/public/en/farmers/producer/historical/pdf/2007-08/bpccharts_062507.pdf

No change to basis. Some risk will make even weaker on wheats related to KCBT and CBT.

Others forecasts?

[SASKFARMER3]

I think your high with the 15 increase were taking the CWB their still looking at the Drought that happened in Australia last year and havent even got to the USA's winter wheat problems.

My guess is up 10 a ton across the board. It should be 30.

[kamichel]

I will go with Charlie's 30 dollars up across the board. Anything less puts the pro too low compared to the fixed prices.
The CWB would look incompetent if the pro is too low. Afterall they can always put the pro back down later after delivery.

[kamichel]

Also my guess on the CWSW basis is that it is going to get poorer. I am suspect that most of the local demand that the CWB sells into is getting full from the fixed price contracts. I suspect the daily prices for soft wheat after Aug 1 will be heavily pressured from no more buyers.

[charliep]

kamichel

Agree with your assessment of soft white. Very frustrating system where some portion of the crop is sold at very prices and another portion is sold at discounted prices (based on the assumption of a large Aussie crop). Average high and low prices to come up with a pooled price. At the same time, you have buyers for ethanol that pay cash up front and only have to compete with the mediocre average pooled price (that gets discounted further because of the initial, adjust and final payment cash flow implications). Look forward to the day when the domestic flour post a soft white wheat price like everyone else and compete for product with the ethanol plants.

[melvill]

Interesting thing this year about the CWSW market. Up to this year, Robin Hood Mills in Saskatoon contracted quite a bit of soft wheat from the Brooks and Bow Island, Alberta, areas. They liked the quality, especially the low protein from irrigation cropping. However, this year, Robin Hood - now called Horizon Milling since Cargill bought it - is not contracting any soft wheat from this area or, as I understand it, anywhere else. Horizon openly said they think they can get enough soft wheat from Saskatchewan growers who seeded it hoping to get on the ethanol train. It'll be interesting to see what the outcome is.

Anyone know of anyone who has contracted CWSW with Robin Hood/Horizon, this year?

[kamichel]

I signed the first right of refusal with Cargill for CWSW malt. So I will hold them to it that if it meets spec then they will have to take it. If it is not accepted for malt and I still have a fixed price contract then the CWB and Cargill says they will take it at Clevet. Now if it is number 3 the CWB says they will still take it but to find the delivery location may get harder to find. Kind of a screwy set up as the CWB tell me to find the delivery location. So if this fixed contract goes to Horizon Milling, who knows. I have not talked to the neighbours about how much they are contracting but the CWB is currently a good deal for us at this time as we are too far from ethanol plants. I am contracting fixed price but will not enter a pooled Malt price without a garanteed minimum price.

[kamichel]

Now I just found out local feed wheat is 4.4 per bushel. My CWB contracts do not look so good now. I should have been phoning around.

[melvill]

kamichel, I wonder if we are talking about the same thing? I was talking about CW soft white wheat. You mentioned CWSW malt. What is CWSW malt? Am I missing something?

[just_wondering]

charlie re:
No change to basis. Some risk will make even weaker on wheats related to KCBT and CBT.
I think they will adjust the basis $5.00 tn to take back some of what they are giving up on the pool.

[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