CWB Premium Myth

[Barleyman]

I always chuckle when rabid pro boarders say things like;
"Just see how long the spot price will last, or, just see how quick they'll close the border, or, yeah but you live 20 miles from the border."

It is the system that is wrecked people! I see the spot price hangs around for a while down south. Why would it not here? The point is that the grain won't need to be physically shipped south when the CWB gets lost, it will mean we have our own system just like theirs, where a farmer can have a clue as to the value of their grain, and take advantage on any unsold product. It isn't that we'll ship our grain south, it is that we won't have to because the system will be as theirs is. Open, free, and bankable...

[chaffmeister]

<i>Anyone who believes that "spot price" is the price that we should get is dreaming. The spot price is used to get some supply but does not guarantee this price for ALL producers.</i>

Wilagro – The spot price is THE price. Everything is based on it – deferred prices, futures contract prices, bids, offers, everything.

But not with the CWB.

And to say that it is used to get <i>some</i> supply simply shows you don’t understand. Everyone gets the spot price or some derivative of it.

But not with the CWB.

And yes, the spot price will change based on nearby demand and the amount of supply hitting the market at that time. In addition, the market provides signals to either sell spot or sell and store (spot price plus carrying charges). Either way, you get the spot price plus maybe something to store.

But not with the CWB.

[padron]

Burbert, I'm not clear if you are disputing the statement that 20% of farmers produce 80% of the grain in western Canada but statistically that is very close to being true. Stats Canada report of the 87,388 farms in western Canada 16,897 (19.3%) produce 71.7% of the total revenues ($708 mil of $987 mil).

In fact grain companies are very concerned about the financial well being of farmers. If you aren't successful then neither will they be. The more money you make the more likely you are to avail yourself of their services. Profit margins for grain handling companies are pathetic versus the margins of corporations in any other industry. Try as they might to educate farmers on marketing techniques, contracting alternatives and input recommendations only an enlightened few have advanced into the 20% sector. Interestingly enough that 20% also represents individual farms whose annual revenues exceed $250,000.

[Lifer]

So the "premium" that the CWB offers is equality to all. The confidence that my neighbor is on the same sinking boat as I am. Thanks thats great. I think if no one wants to help fix the boat I'll get on a different boat.

A spot price is a conservative estimate of where the market is at. So this study is actually generous in some regards to the CWB.

[padron]

Thank you for that astute and intellectual response. It says all that needs to be said - about you.

[agstar77]

Believing in Rolf Penner and the tank, is pretty much like believing in the Titanic being unsinkable. Both beliefs require ignorance of reality and a belief in the Fairy Godmother. One price at one elevator for one day used to market the entire wheat crop. This would be funny if it was'nt so pathetic.

[chaffmeister]

No, what is truly pathetic is

one price for one <b>year</b> used to market the entire wheat crop.

[Fransisco]

Gee agstar, you just can't get the point. It's the huge difference in price that is being talked about not the price itself. It is that buck( and then some if you look at the pro) a bushel being left on the table that's the point.

You wish it were a fairy tale but the difference is very real, undeniable in fact. And if memory serves me correctly you are one of the people responsible for it.

[Lifer]

Padron maybe you can help me along a bit. Is not a spot price more negotiable then the fixed price contract? Calling it a conservative estimate may be a bit off. When selling canola the spot price is always negotiable so I assume it is the same for wheat in the states.

I don't get how my statement said all that could be said about me. Your statement may be more telling about you.

At what point do you do something different? I don't like the "premium" the CWB offers. So I reduce the acres of CWB grain on our farm because I can.

[padron]

My apologies Lifer. My response was directed at the scathing response I received from Burbert - not towards you. Your post got caught in between ours.

In response to your question the post from Chaffmeister is on the money. The spot price is true value. It may be negotiable from one buyer to another and from time to time depending on circumstances - supply and demand largely.

Forward prices tend to reflect the spot value plus the cost of carry - storage and interest - generally at commercial rates so their is an opportunity for farmers to get well paid for their on-farm storage.

This description is a truism for most grain traded around the world. The exception is pooled grain whereas the spot price and the forward price are generally the same. I like that the CWB finally started paying barley growers who carry their malt barley until later in the crop year but this premium is not market value and I don't think it is available for wheat (I stand to be corrected).

"Voting" with your seeded acres is one of the most significant things you can do to voice disapproval with a price - CWB or non board. But it's a long cycle and once you decide to plant a specific crop you're die is cast. The trend away from Board grains speaks volumes to me.

Once again I am sorry for the unintended slight.

[padron]

Lifer - as an aside I see Burbert's response has been lifted from the thread so it makes my response look even more inappropriate.

What more can I say? Sorry you took it as directed at you.

[charliep]

There have been a couple of postings removed from this thread. It has affected the flow of the thread and the references in the postings.

I can take the blame for this. Realize we are all adults/have relatively thick skins. There is a limit to what can be said here. That limit was hit here for me. Trying to keep the debates at a higher level/help someone in the middle make informed decisions is difficult and maybe not my job.

[wd9]

Good to be back, I missed all the fun!

Furrow tickler said less than $3 for malt, also after all the increases in un-contracted expenses in elevation and cleaning even 2 row in AB is around $2.80 and since many farmers did not deliver their malt contracts, the final payment is also affected, ie will be lower due to maltster penalties. It is easy to calculate, my cheque over tonnes delivered.

While speculation about whether there is a premium can certainly be made and phillosiphied over, Furrow and I got ripped. Also with the impending Aug 1 reg change, the saga would have continued with the board selling barley under priced to the maltsters to once again rip off malt growers for 08 to the tune of 50 million dollars which they will be sued for. Real numbers, not some belief or speculation.

Sticking to the facts will help this discussion immensely.

[Lifer]

Padron thanks for that. "Voting with the drill" as said by others is not just about a price for me. It's about being valued which price is a part of.

[Lifer]

"Believing in Rolf Penner and the tank, is pretty much like believing in the Titanic being unsinkable. Both beliefs require ignorance of reality and a belief in the Fairy Godmother."

Agstar you are correct in the above statement. Selling or marketing wheat is not about a belief system. Because you believe in the CWB system also does not mean there is more value in that system for all.

Penner points out a simple fact and gives information to back it up. I don't have to believe in him to believe him.