Management Timing... Sales/Purchases=Revenue

[TOM4CWB]

Dear Charlie,

As Chaffmeister and many of us have reminded marketers dozens of times...

Timing is everything in running a business.

It is clear who bought right... in the food industry. (Company Profits are massive)

Therefore it only goes to prove that grain growers through the CWB pooled system of selling... lost us 100's of millions... and is costing us big time today.

I do not sell grain non-board on price alone... when risk of production shortfall becomes less than profit that be hedged... THEN a decision can be considered.

Timing... it is everything that decides the bottom line return for a business!

Selling 1/18th of the production of our farm... on a monthly basis... with 20% WIGGLE ROOM FOR EMOTION... can GET EASILY 70% OF SALES IN THE BOTTOM 1/3 OF THE MARKET!

And this is the CWB plan!

Canada's 'designated area'... where the lowest priced returns... are assured... and our customers can't believe we (grain growers) are this stupid... so, our customers let us hold the stocks for them... for NOTHING (at no cost to them)!

Timing is everything!

Canola beats all other crops... hands down on net profit for 2008. Least market risk... best return.

[charliep]

I'll leave the CWB comments alone but I do find the notion of canola interesting.

Would be interesting to see how many farmers benchmark their sales activities. Take gross sales from canola divided by volume sold and compare to an average price for someone who sold over a 10 or twelve month period. Did they do better or worst than the average?

Even more interesting would be to have a group of farmers (each of who would have sold at different times during the year based on their market outlook and business needs) compare their weighted average price for the year. How much difference would there be between the average price for the individual businesses? I suspect not a lot but could be wrong.

Lets take things one step further and do the same excercise for the group of farmers over 10 years and compare average prices achieved each year. Would the 10 year average between the farmers be much different (maybe/maybe not)? What things/characturistics did the farmers who generally sold at the top end of the range do differently than the ones who consistently sold for below average prices? I suspect the common thread among successful markets marketers is keeping their on the ball and being consistently profitable.

[charliep]

On the CWB side, the board offers a number of pricing products to Canadian flour/millers and export customers that allow them to manage risk (a part of their bragging rights for capturing pricing opportunities this spring). These products (flat price, basis contracts, futures only, etc) are relatively low cost to operate and as long as fits into the CWB process of achieving an average price (page 43 2006/07 annual report) philisophically fit the board model of performance measures.

The producer payment options on the other hand are relatively expensive to run with the entire cost covered by the farmers using them (particularly in 2008/09. There is no matching of sales against farmer pricing.

When the CWB benchmarks succes, they need to move beyond simply looking at the pool returns and include all aspects of operations including producer pricing options.

[TOM4CWB]

Dear Charlie,

I would think reasonable transparency... and responsible marketing benchmarkeing... would publish the basis sold to the consumer trade vs. the basis bought through the PPO programs.

The idea that the CWB does not cross subsidise the pool accounts... from PPO contracters/growers... could soon be settled if these were numbers published a month or so after the trades had occured to prevent 'commercial' information that could skew markets from causing a problem.

However... any info (release) at all... would cause a problem for the CWB... cause all indications are the 'single desk' basis levels offered are skewed only one way... and that is AGAINST the interests of 'designated area' PPO contract growers.

No names need be attached to the info to introduce transparency to the CWB system... just the raw numbers like the CGC puts out.

That this has not been done... shows that there is a very high risk... that CWB PPO contracts are no less than a 'ponzi' scheme... that no one can track... not even the Minister Responsible for the CWB.

INSANITY.

Madoff... move over... you have a friend!

[classicalliberal]

If the CWB is going to be just like the free market with all of their different ways of pricing outside the pool, why not let the competitive market do what it does best and let the socialists at the CWB fill other public service jobs. I mean competitive markets, ones where there is more than just Viterra. I'm sure they will be competitive, it is not like there are too many barriers to entry into the Grain business (CWB, CGC bonding, etc.)

[TOM4CWB]

Classyliber,

In Feb/08 the CWB wanted close to $500/t cost... to buy my own wheat back from them.

This, system we have now, is the exact opposite of a competitive market... the CWB KEEPS in our wheat... to extract it out at far lower value... than a Fair Market Value. This is why the CWB can get away with a basis that is between $60-100/t below fair market basis levels.


The only folks the CWB can extract a premium from... are 'designated area' commercial grain growers... that can't stand the CWB pooling system.

[cottonpicken]

Where is chaffy?

[chaffmeister]

I'm still here - every now and then.

Why?

[parsley]

Guess you are the official blankey, chaff. lol Pars

[charliep]

Will re-ask my question about how farmers benchmark their prices/marketing at the end of
the year. Do farm managers look at an average price for the year relative to their own
average price? Will note from the title, marketing is about contributing to profitability.

Will note the brawl that is occurring in other threads over $5/acre on fertilizer ($50/tonne
difference in 46-0-0 prices, 1000 pounds Nitrogen/tonne, 100 pounds/acre). I know
$25,000 is big money on a 5,000 acre farm but I also suspect that on given day, a farm
manager can improve a canola price by $5/tonne ($5/acre is achieved 44 bu/acre this last
year) with shopping and use of the market contracts at minimum. Could be wrong.

[TOM4CWB]

Charlie,

The VOLITILITY in the market today... means many past habits are no longer the 'Best Management Practice'.

If we are in shorter cycle volatility... then the opportunity to make good margins between cycles increases dramatically.

THis is why it is important to follow the business cycle so closely this time... the shock on the down side Could be followed by a good rebound... where positive returns require decisions.

Production risk... what do we do with it?

Some contracts have Force Majeure clauses... minimum price contracts can do the same risk management... IF the marketer will work through a plan with the consumer... as this is often by far the least expensive way to create this opportunity.

It is really a shame the CWB would not negotiate in good faith for growers... leaving all the risk with the Contingency Fund... really sucks in terms of the coverage... cost... and stability of the program!

If the CWB were to suck it up... and innovate... then other marketers in non-board crops would be much more likely to follow and innovate as well.