Fixed Price= Pooled Price?

[charliep]

Of interest, rumors indicate that about 1 mln tonnes of Canadian feed barley have been sold the Saudi for fall shipment. Fits Saudi Arabia's need for crop ahead of Aussie harvest and offsets the Ukraine's decision not to issue export licences. Would this business have been done in single desk - maybe but the CWB/trade would have had to be innovative using fixed price contracts/early payment options. Amazing to me to think about hauling barley across a set of mountains and ship on the ocean half way around the world but that is the case. Would be an interesting excercise to compare the energy used to produce and ship Canadian barley to the energy the camel it is fed to gets. More interesting is the number of malt plants and feedlots it will pass on the way.

Would also highlight the last two annual reports. With an A and B feed barley pool, it is easier to evaluate sales timing. CWB sales (or really farmers decision to contract) picked off the lows both years. Would confirm malleefarmer observation that feed barley deliveries have reflected farmers need to empty bins versus maximize revenue.

[padron]

Good observations and inputs Charlie.

The pooling system is all about "emptying bins" and nothing about "marketing". Right now there are no signals for farmers to capture incremental earnings through forward contracts - priced/basis/futures only/etc. The sheer luxury of having multiple buyers bidding for your production using a variety of contracting options with bids at world values doesn't exist today. Maybe the CWB would have captured this Saudi business but it would have been at discount values (I agree with Mallee's posts) and offer little to the farmer beyond movement. In an open market environment barley producers will be able to capitalize on the full value of contracting options and risk mitigation techniques individually rather than via the blunders of this bureaucratic "good idea gone terribly wrong" called the CWB.

I know, the CWB have introduced new contracting options - mostly due to the pressure of response to the threat of losing their monopoly. But history has shown us these "contracts" suck. Prices too low - volumes too small - options too limited. Their options are a far cry from the creativity and flexibility of contract options for oilseeds and special crops.

I'll be celebrating Barley Freedom Day with some like minded grain producers. A day I've been dreaming of for over 30 years. It's not the whole dream - we still have to free wheat - but it reminds of that old question - What do you call 400 lawyers at the bottom of the ocean? - A great start!

[TOM4CWB]

Padron,

It is sad to see the CWB go backwards in some cases on flexibility on PPO contracts.

There should be no reason growers can't forward contract 06 grain for 07 delivery... like we can with the pool system. For a number of years this was accepted.

The liquidation of these FPC are not fair business practice, and the CWB should be dragged before a securities commission for breach of trust.

Keeping futures profits, while at other times paying them out... like during a CWB election period... shows just how these folks have lost touch with the real world of respect and trust for farmer customers.

The CWB fails to honour their own contracts that say the producer is responsible to "compensate the CWB for its actual losses incurred"... when in fact the CWB instead structured the charges to extract maximum liquidation possible.

Somehow this does not reconcile with maximising the returns to the producer that seeks to do business with the CWB in good faith.

Little wonder... as long as the single minded mangers rule and hurt grain growers as much as possible whenever they can get away with it. This is not Integrety.

Restructuring the Titanic is difficult when single minded managers can't even decide what to do with the deck chairs!

[Fransisco]

<b>Wheat board accused of costing farmers millions in lost revenue<b>

Western Producer: 2007-06-28
By Adrian Ewins
Saskatoon newsroom

A report from a conservative think-tank says the Canadian Wheat Board's single desk marketing system is costing prairie farmers hundreds of millions of dollars a year in lost revenue.

The Frontier Centre for Public Policy report, which was written by Manitoba farmer Rolf Penner, is based on a comparison of spot prices for high protein spring wheat at a North Dakota elevator on one specific day with the CWB's fixed price contract and pool return outlook.

His numbers indicate that the selling price at the Alton Grain Terminal in Bottineau, N.D., July 14 was $6.10 Cdn a bushel.

Meanwhile, for a farmer in Boissevain, Man., the fixed price contract was priced at $5.10 a bu. while the PRO was $4.22.

"The price comparison shows that the CWB does not extract premiums from the marketplace," said Penner. "In fact the opposite is true."

He said allowing grain companies to buy and sell wheat in an open market would "dramatically raise the prices" farmers are now receiving under the single desk system.

Deanna Allen, the board's vice-president of farmer relations and public affairs, dismissed the report as "shoddy analysis" that manipulates figures to support a certain political viewpoint.

"Anybody who looks at it closely and knows what they're looking at will dismiss it out of hand."

<b>Allen said Penner's comparison is meaningless because it compares a single day's spot price with a pooled price that includes returns for the entire year. The fixed price contract has a pooled component, while the PRO is a pooled price.</b>

[Fransisco]

"Allen said Penner's comparison is meaningless because it compares a single day's spot price with a pooled price that includes returns for the entire year. <b>The fixed price contract has a pooled component</b>, while the PRO is a pooled price."

[Fransisco]

Allen seems to be impying that the fixed price contract is not a fixed price contract.

[Zaphod]

It's not a fixed price. The basis used to set the FPC price is the basis for all pooled sales. See the explanation under the FAQs for the PPOs on the CWB web site (whew, that's lots of acronyms).

[TOM4CWB]

BennyHin,

There are a few hogs at the trough... that are not in Penners Barns!

Show us the premium... put up a fair price; or stand aside!

The DPC sellout in less than an hour and a half tells the whole story.

Our CWB wheat marketing system is totally screwed up!

[Fransisco]

I assume the explanation below is what you are talking about Zaphod.

http://www.cwb.ca/public/en/farmers/producer/producer/pdf/07-08/part1_07-08.pdf

Yes the way the CWB comes up with their basis is different from how others generally come up with theirs. But when you're comparing farm gate returns, farm gate prices if you will what does it matter? The price quoted, the price you agreed to is the price you got paid.

How you came to that price is interesting but it is the price that matters. and as far as I can tell the prices quoted on the CWB website are the prices you can lock in until 7:30am the next morning.

Once they are locked they're locked they are fixed.