Attention CWB PRO Day - Guesses PRO Increase/Basis

[charliep]

Pay attention to today's PRO. Both the amount of the increase/change in basis (likely weakening) will be interesting.

Need to think about more but another issue to consider will be the adjustment factor that will start to be applied to Fixed Price Contracts August 1. Basis adjustments will be negative in a rising market (existing sales are a drag on pool returns) and positive in a falling market (existing sales are a plus to returns). Hopefully I have this right.

[kamichel]

I was thinking the same thing Charlie.
Also interesting will be the price of daily prices compared to fixed in Aug.

[charliep]

kamichel

Could also add some speculation around initial payments. A little birdie whispered in my ear that the recommendations went forward to the federal government based on the May PRO (won't include the $12 to $18/tonne increase in the June PRO let alone what happens today). This may have been updated but interesting needs negotiations between the federal government and the CWB.

I am going to guess the 2007/08 initial payment for 1CWRS 13.5 at about $160/tonne port ($3/bu here in Alberta). CPS at $140/tonne ($2.50/bu). 1CWAD 13 protein - same as 1CWRS 13.5 ($160/tonne port or $3/bu Alberta).

[charliep]

Part I of the answers to our questions. Let the telephone begin ringing as farmers ask the which crop year question.

CWB 2007-08 Durum, Wheat PRO Higher as World Supplies Tighten
Winnipeg -- The CWB today released its Pool Return Outlook (PRO) for wheat and durum in the 2007-08 crop year. World wheat supply has tightened significantly in the past month due to weather and production problems in major growing regions, including intense heat in Western Canada. As a result, the CWB wheat PROs have increased $9 per tonne for all milling grades compared to last month. Milling durum PROs are up $40 a tonne from the June PRO. The strong Canadian dollar, now at 30-year highs to the U.S. dollar, is offsetting bullish futures market prices, which have also reached 30-year highs.

[charliep]

Part 2

2006/07 PRO estimates (should be close to finals) down by $5/tonne for wheat excluding durum, down $2/tonne for durum and up $2 to $3/tonne on barley.

For those of you who helped the CWB meet their sales commitments (and your financial commitments), 15 cents/bu has been taken out of pocket and deposited in the pockets of farmers who are wealthy enough to store crop till the next summer and speculate on crop years.

The lucky few who played the daily price contract telephone and fax lottery and won as well as those with 1CWRS 14.5 and higher, you have at least an extra buck a bushel in your pocket with money in your bank faster than any of your neighbors. Congratulations.

[charliep]

Should have put the above quote with Part 2 - Title says it all.

2006-07 CWB Wheat PRO Down as Farmers Carry Crop to New Pool
Winnipeg -- The CWB today released its July Pool Return Outlook (PRO) for the 2006-07 crop year. Wheat PROs are $5 per tonne lower relative to the May 2007 PRO, while milling durum PROs are down $2 from the May PRO. The Pool B feed barley PRO is $3 per tonne higher than it was in June, while designated barley PROs are $2 per tonne higher compared to the May PRO.

[rook]

"Wheat prices have strengthened dramatically since May as a result of production problems in a number of exporting countries." CWB 06-07 PRO wheat commentary

Charlie help me understand how prices have steadily improved (even to CWB's own admission) since May yet the CWB lowers the July PRO? Especially since in the same paragraph it admits that it is currently selling wheat at strong prices?

[charliep]

Part 3 of the Saga

Fixed price contract basis. You soon are going to have the same smile that Burbert and Wilagro have because you just got bent over.

Interesting, the basis for all wheat got weakened by about $7/tonne. CWRS wheat $6.86/tonne under versus $0.02 over yesterday. CPS $32.11 under versus $25.25/t under yesterday. CWRW $19.12 under versus $12.23 yesterday. CWSWS $29.10 under today versus $22.26 yesterday.

Durum - You guys who have been complaining about not having access to US durum prices are under an illusion. Durum prices are only posted on the 4th Thursday of every month. Look, the new durum fixed price is $252.14/tonne, up from $214.57 yesterday. Still a $23.86/tonne discount from the PRO and well under current US prices but that is the price you pay for the privelege of participation/the CWB allowing you to manage your risk.

If you are a user of the programs and some from the CWB side asks "Was it good for you", I will expect you will have an appropriate answer.

Look forward to upcoming chapters including initial payments and the first round of 2007/08 daily price contracts.

[charliep]

Just to add spice to the debate, forecast goes up by $9/tonne. Real price that is bankable goes up by $2/tonne.

And no rook - I can't explain it.

[charliep]

Just curious as to why no discussion here. Apologize for monopolizing the thread but the announcement today on 2006/07 pulled about $70 million out of wheat revenues (about 14 million tonnes of wheat exports times $5/tonne) and close to $9 mln out of durum (4.5 of exports and domestic milling). I note the CWB is blaming farmers for this (all you guys who play the which pooling year). That is that actual answer to your question rook.

Help me understand why the CWB has not advanced with better end of crop year pricing tools. Do they really need to do more consultations/program development?

[charliep]

By the way, if you grew 1000 acres of wheat which yielded 36.7 bu/acre (1 tonne/acre), your revenue in crop year 2006/07 has just been reduced by $5,000.

[btjadenlepp]

...IF you kept it in the pool.

if you marketed all of last year's crop via the ppo's and non-board market you should have done substantially better, and you don't care much what the board does at this point. that's my position anyway.

but i just got off the phone with a reporter who had been speaking the board about this, who had given the impression that it doesn't matter if old-crop returns go down because farmers can just market that wheat in the new crop year at the higher price.

As if it's that easy! just because they come out with this high protein storage program and jimmy with the old-crop/new-crop spreads it's not like farmers can or should just re-arrange their delivery plans. we've been looking at the premium in the 07/08 fpc over the 06/07 pro for months trying to find a way to carry over supplies for the higher price (plus the better premium in the intials), but few individuals can manage or justify it given limited storage space, big yields on the way and better upside potential in other crop markets.

to be clear, it's the 20% delivery quota - if we're lucky - that's bunging things up. can matter a lot more to returns than the pro's.

[silverback]

How much high protein wheat is actually left in the bins to take advantage of this "gift" from the board?

Around here, the elevators clean out the high pro stuff first (when they can).