CWB the3 super-seller

[agriman]

Can't believe no one has picked up on the CWB announcement today that it plans to export the same amount of wheat in 2008-09 as 2007-08 and less durum and barley despite huge crops and big supply. Carryover will soar, most stored on farms for nothing. Delivery chances and contract acceptances will be drastically limited compared to what has been harvested. Up to now it has been about price. Then the Board sets ridiculously low export targets and no one else is allowed to try to do better. This is an outrage worse than poor prices. Sounds more and more like medicare: the system won't treat you and doesn't let anyone else help you.

[furrowtickler]

Reminds me of the Titanic, only the captin is ordering that all crewmates and passingers go down with him!
Thank God for open market grains and oilseeds or the entire western canadian farm economy would be broke by spring!

[poorboy]

Perhaps there is a large credit risk in dealing with some of these countries, and it is not possible to sell any more grain. The Canadian gov't guarantees payment to the pool account on default by purchasers, but I am sure that they do not just accept anyone who wants to purchase wheat. The CWB has to have some due dilegance in deciding who to sell to.

Lots of stores locally would like to sell product at the "going price", but you still have to get the buyer out of walmart and into your store. Having product to sell and finding someone to buy it when there is a surplus is not as easy as it sounds.

I am not pro CWB by any means, but I did realize that seeing a price posted and being able to sell all of the grain in western canada at that price is not realistic. Just look at the fertilizer price. Prices were high early on and some farmers bought. Now prices have had to drop and more farmers have bought. Any fertilizer dealer would have liked to sell all of his inventory at the high prices, but there were not enough buyers. What could these fertilizer dealers have done to convince more of their customers to buy at the high price? The CWB is in the same situation. It is real easy for us as farmers to bitch and complain, but how do you sell more product at the high price if their are no buyers.

[Hopperbin]

The gov't guarantees sales into the pool account? Can you verify this? I thought the Gov't guarantees the initial payment to producers.

[SASKFARMER3]

In the great NLDW (NDP LIBERAL DESTROYED WEST) The farmers are forced to hold back produce so as to both guarantee a low price to our buyers plus a guaranteed supply.
WHAT A WOUNDERFUL CWB WE HAVE. HA HA

[dave4441]

Poorboy-I do agree with your asessment but at the same time, if wheat and durum where an open market, we would have seen more agreesive selling at profitable prices. I would not carry over a bushel. I realize the industry may not be able to do that, but not everyone even wants to sell all their stocks each year. Canola market is a perfect example. No matter what the price, some product naturally stays in bins, allowing those that wish to hold to hold. Being forced to carry product when you do not wish to is criminal. Just so the board can report an average higher price. Who can run a business under this senerio?

[chaffmeister]

agriman - where are you seeing this?

The CWB announced a 1.4 MT increase in wheat exports over last year and a record malt barley export nbr of 1.4 MT. I saw nothing on durum.

For what its worth, I don't believe any of it.

[broker]

I too am not a CWB supporter. However, everyone could not have sold all of their grain at the highest price! What happens when your local elevator has a $10 canola price out in the morning? They buy only what they need at that price, then they drop it...how do you think that an open market for wheat and durum would be any different? It is still a supply and demand game, and when supply is larger than demand, which it is this year, prices go down. Maybe the US prices are higher than ours, but not everyone would even be able to access those markets. Do you think it feasible for a farmer from Barrhead Alberta to load up his truck, or a custom truck, and haul a load of wheat to Montana? I know it sounds like I am defending the board, I am NOT. But, the reality of it is that no CWB would be just that, NO CWB. I am not sure if it is still in place, but when I was buying grain near the ND/MB border and we had farmers doing buybacks to haul to the US, there was a tonnage export limit in place between the two governments. I would assume that it still is in place, meaning that the US markets would only be there for a limited time in the fall, and likely only would benefit those farmers within maybe 60 miles of the border. Then what?! Then the rest of the farmers in western Canada sit at the mercy of the great grain Co's we have up here...are they looking out for your best interests? NOT A CHANCE! They are all responsible to a BOD and shareholders to make money. And the only way they can make money is to buy your grain cheaper than they can sell it for....hmmmm....
Again, not to defend the board, but at least they are somewhat trying to do something positive for you. They are NOT doing a good job of it, but they are starting to learn. Take malt barley this year for example. They made high priced early sales, but when the world price collapsed, they stopped selling. This is a new thing to them, as usually they keep selling even when the price drops to get all of the wheat durum and barley sold that they can. There are some malt growers that are pissed about this, and maybe they have reason to be, but think about this...If the CWB was to accept more barley and sell more barley, then everyone else in the malt pool loses....isn't this what all you open marketers are trying to avoid?
It seems to me that this is the actual first time that the CWB has done the right thing! In an open market, the earlier contracted guys would get a higher price, and the guys that were trying to contract later (like the malt growers in western Canada that want a malt contract now) would have missed the boat and had to take less, or not get malt because the market is full.
I hate to ramble on about this, but I read the same things on here, over and over, from the same guys, over and over. Just thought I would put my thoughts in here and see what they have to say....

[wade]

Wouldn't you benefit if the guys within 50 miles of the border could sell their grain south? With a voluntary CWB "X" amount of tonnage contracted (for the people who prefer)and the rest for grain co's to sell. Yeah they want to take care of their bottom line but they want good business relations also. Piss me off and I'm out the door and the next one get's the elevation/handling money. They are a little bit accountable to me- I SHOULD GET TO MAKE THE DESISSION!

[craig]

Broker
While you might make some valid comments, you also highlight the fact that the Board makes decisions that often are opposite the decisions you might make on your own farm. This also brings to light the fact that the board often acts on what is good for the board and that's not always neccesarily what's good for farmers.The current board structure seems to provide both no transparency and seldom any accountability. If I hire a private marketing consultant his or her's livelyhood is dependent on providing what the board doesn't.My business succeeds by working with those who share common goals and ideals. The board has never shown that common ground.

[broker]

I agree Craig. Like I said, I am not a board supporter, but they finally have made one good move I believe. They need to make monumental changes to survive, and I do believe that if they are as good as they say they are at marketing, then they could survive in an open market as a voluntary board/grain buyer.

[classicalliberal]

Broker, why does everyone believe that if someone or some organization, who has no profit motive, has your best interest in mind. No one but yourself has your best interest in mind and the profit motive helps everyone in the business provided there is competition. The wheat that is traded to North Dakota evevators is either going to Minneapolis or to the west coast and we could do the same up here for the same prices with a very small freight spread between the two towns.

Just because the CWB is supposedly farmer owned and operated, but won't show thier books or compare thier sales with the open market and the traders don't have any profit motivation or incentive, doesn't mean that they would do the best job. Under very few circumstances, and I can name a few like public goods such as road systems and the military, is it better to have central planning and control versus a market system with competition.

[agriman]

CWB PROPOSED EXPORTS '08-09:
NON-DURUM WHEAT 12.7
DURUM 3.35
BARLEY 1.60

ACTUAL CWB EXPORTS '07-08
NON-DURUM MWHEAT 12.68
DURUM 3.175
BARLEY 3.91

'08 PRODUCTION:
NON-DURUM WHEAT 33%
DURUM 50%

POSSIBLE '08-09 CARRYOVER:
NON-DURUM WHEAT 7.3
DURUM 2.05

'07-08 CARRYOVER
NON-DURUM WHEAT 3.98
DURUM 842,000

[chaffmeister]

Agriman:
Found it.

Looks like you’re using Ag Canada numbers for 07-08 exports which include exports of flour and malt. Exports of just grain were:

Non-durum wheat 14.6 mmt

Barley 2.9 mmt

[chaffmeister]

Broker:
I agree – we seem to go over the same stuff over and over again. But I have to say, I saw some of it in your post.

Let me explain a few things.

The price an elevator bids for your grain is made up of two things:
1. The market price of the grain as determined in one or more consumptive markets
2. The amount the elevator thinks it needs to cover costs and a return on investment.

The market price is the market price – the elevator can’t change that. The rest of it – call it the basis if you want – is what the elevator is offering his service for. If he is short and really needs the grain, he’ll adjust his basis to attract the grain – at that point it may have no reflection of the consumptive market at all. If he’s not short, his price will reflect the market plus costs plus maybe something to reflect that the stuff won’t move for a while. If he really doesn’t want it, because he’s busy handling something else and doesn’t have the space or time for it, then his price will reflect that – he’ll offer a lousy basis to try to turn the tap off or get compensated for additional headaches. This will happen regardless of the market price going higher or lower.

That’s supply/demand at a local setting.


This idea of not everyone being able to access the US markets is a total red herring. The prices in the US are a good reflection of “the market” – not just in the US, but offshore as well. So when we look to the US with jealousy, it’s because we see that’s what we could have here – real offshore markets reflected in our street prices – if it weren’t for the CWB being in the way.

Broker, when you ask “Do you think it feasible for a farmer from Barrhead Alberta to load up his truck, or a custom truck, and haul a load of wheat to Montana?” The answer is obviously, not likely – but so what. Get rid of the CWB and Canadian street prices would reflect offshore prices worked back to your farmgate. In fact, you won't want to haul to Montana because the price would be about the same up here. Even in Barrhead.

Also – the ONLY reason there was a limit set on western Canadian wheat sales into the US is because of the CWB. No limits on canola. No limits on oats. No limits on wheat from eastern Canada. Just wheat from the CWB.

Oh yeah – the evil grain companies. All this crap about them not looking out for your best interests and only for their own shareholders. Think about it. If you crap all over your customers, will they come back? Probably not. But if you take care of your customers, you get them coming back. Trust me – grain companies (any company for that matter) wants to do business with someone that they can work with, they can trust, who pays bills and stands behind contracts. The best thing in the world for a grain company is a farmer customer in good financial condition. The best way to take care of their own shareholders is to do what they can to make sure their customers are successful as well.

Will they pay you more than the market will reasonably allow? No. This is a business after all - it's not up to them to coddle you. but they aren't the enemy either.

Broker, you say “the only way they can make money is to buy your grain cheaper than they can sell it for....hmmmm....”

Yes, but remember – they deal with the market price as well. The only thing they’ve got working for them is the basis. Grain companies can make money when canola is $4/bu or $15/bu. Don’t blame them for low prices.


You think the CWB is doing the right thing on malt barley? There’s 4 mmt of malt quality barley out there. The CWB is saying they expect to sell 1.4 mmt. I say they’ll be closer to 1.0 mmt. (maybe less) but let’s say they’re right and they sell 1.4 mmt. What about the other 2.6 mmt they could’ve sold? Tell the guys that only get $2.60 for barley (as feed) that’s really worth $4.35 (as malt) that the CWB is doing a good job for them. If the CWB has stopped selling it’s because they don’t want to dilute the $5.75/bu pool. They can sell outside the pool (CashPlus) or even close down the pool and start another if they want to protect the pool. But to avoid making decent sales at premiums over feed because it may dilute the pool is just plain criminal.