CWB the3 super-seller

[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.

[TOM4CWB]

Chaff/broker,

The Informa study we just went through at WCWGA in Winnipeg brought up a good point... which I have been saying for some time.

The DNS Red wheat from the US... is 60% destined for the export market.

That means the CWB claim is bogus that the US domestic market creates a premium for US growers ABOVE what the global export market is. There is obvious ARBITRAGE in a cash market.

iT IS PURE FOOLISHNESS THAT WE CAN'T GET A DAILY CASH MARKET FOR OUR EXPORT MILLING WHEAT. THERE SHOULD BE AN EAST AND WEST COAST CDN DAILY PRICE... 12 MONTHS OF THE YEAR.

It is like saying there is a premium for domestic Canola in western Canada... OVER the export market for Canola.

The CWB is simply WRONG... as the Informa study, the CD Howe study... and any other study that has been peer reviewed proves!

The worst part of it all... is that CWB pools (lack of transparent price signals... $50-100/t EPO premiums)distort the whole grain sector gross value DOWN... no matter what grain crop we grow. The Informa/CD Howe studies proves that we are short $30/t/yr on CWB pool prices...

The 'designated area'grain grower is simply short many $$$billions in the past 10 years... and our outstanding loans are a grim reminder of this reality!

tHERE COULD BE NOTHING MORE FRUSTRATING... THAN THIS STUPID US BORDER ARGUMENT... THE BORDER ONLY MEANS SOMETHING... BECAUSE THE CWB UNDERVALUES OUR WHEAT... AND AT THIS MOMENT... THE CLOSEST US ELEVATOR (TO YOUR CDN FARM) IS THE EASIEST ARBITRAGE POINT TO SEE!

IN PRACTICAL REALITY... THIS WOULD NOT MEAN ANYTHING AT ALL... IN A TRANSPARENT 'FREELY' OPERATING MARKET...

IN FACT

THAT WOULD VERY LIKELY BE THE LAST PLACE CANADIAN WHEAT WOULD GO... FROM THE CDN 'DESIGNATED AREA' FARM GATE!

[chaffmeister]

Tom:
You've got it! This is what I'm saying.

Here's a real life example.

Let’s say the current offshore price for wheat is C$250/tonne at the port.

Back off freight to Edmonton and you get roughly $213/t.

Back off freight to Great Falls and you get roughly $213/t.

I’ve left out elevation, fobbing etc on purpose. And I used today’s exchange rate to convert the US prices/rates to Canadian.

(Edmonton to Vancouver rate is roughly $36.80/tonne. Great Falls to Portland is roughly US$31.25/tonne, or C$36.88/tonne.)

So assume you’re up around Edmonton and we have an open market (or a voluntary CWB), so you have a choice – you can sell your wheat to whomever you want – including buyers in the US. You check the local price and its $213. You check the Great Falls price and it works out to $213 as well.

Where do you think the grain is going to be sold and delivered to? If you still think grain is going to flow south to the US, you need to go to the back of the class and then sign up for one of Brenda Tjaden-Lepp's marketing courses.

Now - using these real life FACTS, does anyone still believe that the whole idea of a voluntary CWB is so that we can sell into the US?

US prices simply give us a window to world values.

Let's please stop this stupid rhetoric about shipping to the US and all the other stupid arguments about US trade actions and what would happen if the CWB wasn't there to stop the flow into the US.