CWB supporters please help me out with something

[charliep]

On your comment that the ones who are well enough financed to wait also has me curious. Was on a conference call where it was highlighted the size of canola crop will mean big carryovers on July 31 even with the strong export pace to date and from there lower price (no one would have been happy with the soybean forecast). As a note, the open market has been able to provide signals from good Chinese export opportunities with 3.2 mln tonnes exported to date in total, up 32 % from last year (January 4 CGC). Wheat ex durum and durum exports are running 2 and 24 % behind last years pace in spite of this years larger crop and the CWB own recent forecast exports being 10 % above 2007/08.

[furrowtickler]

Jag, do you actually beleive everyone would sell wheat all at the same time? The system works well for all other commodities - canola(large crop) still at $9.5 -$10/bus. Why, b/c not all is sold at once. It may have been an issue 30 years ago when all that was grown was wheat, but with so many crop options now, price will dictate crop movement, not the other way around.

[TOM4CWB]

Jag,

Not only do we get a substandard price on what we do sell... ( which is less than EU and US prices...) we also get to DUMP the rest... and pay the other countries growers to produce much more barley... around and around in a circle... we dump half our barley... they sell out and grow more next year.

There is NO WAY to balance this market... when the CWB forces us to hold stocks and dump grain at below fair market value and below the cost of production on top of it all!

[vvalk]

JAG amazing the ignorance. Canola crop this year 12.5 million tonnes. Largest canola crop ever before is 9.6 million tonnes. Yet the system still works and the prices are rising over the past 12 months. Able to get $10 again. I still need some help understanding. Again what if all your crops were only called 60%. No matter how much you love the CWB you have to admit this would not work on your farm so why is it OK for board grains?

[vvalk]

Either CWB supporters are all on holidays or they don't want to talk about this. Tough to justify I think. We need to demand that whatever they do not call for is free for the farmer to sell.
I can't believe I am trying to argue that I should be free to sell 40% of my own property.

[chaffmeister]

The CWB dictates how much wheat and malt barley is sold. The arguments are obvious. Voluntary-CWB supporters respond with “it doesn’t happen in other crops – why would you expect it in CWB crops?” Compulsory-CWB supporters say the CWB is doing the right thing holding back sales because if everyone could sell willy-nilly whenever they wanted it would drive the price down.

Jagfarms made the compulsory-CWB point this way: “You can sell 100 percent without the cwb and get the same price you would get for selling 60 percent with the cwb”. I think he’s arguing that we shouldn’t complain about the CWB holding sales back because if they didn’t the price would drop a lot.

But how much is the right amount to sell? How much do you hold back? What sales should be forsaken in the interests of managing the price this way? Which customers should be forced to go elsewhere?

If the CWB is truly attempting to maximize farmers’ returns by holding back on sales (to keep the price higher as Jagfarms is suggesting), then they need to know the “tonnes x price” calculation that will give the biggest return.

But it’s not easy. For example:

1.0 mmt x $300 = $300 million total return
2.0 mmt x $150 = $300 million total return
3.0 mmt x $100 = $300 million total return

These calcs are what Jagfarms is talking about. Why sell 3 mmt to gross $300 million when you can sell 1 mmt and gross the same $300 million in the pool account?

There is no way on God’s Green Earth that anybody knows the exact impact of each new incremental sale on overall price. In economic terms, you would need to know the exact price elasticity of each market – what the price would be at different levels of supply. In other words, you would need to know the exact slope of the demand curve for each market. Not only that, you would need to know exactly where the demand curve meets the supply curve at that specific time. Not only is the demand slope different at different supply levels, it’ll also be different at different times of the year and will depend on the level of competition, the price elasticity of competitors, availability of substitutions, weather, freight rates, relative FX markets, macro economic trends, etc, etc. And the CWB sells into 64 different markets with 64 different scenarios. They would need to factor in these price elasticities in a way that they could formulate unique prices on that basis for each market. On each and every business day. Do you really think so highly of the CWB that you honestly believe that they could do that?!

Question for all you compulsory-CWB types: If the CWB sells 100,000 more tonnes into say, China, what will that do to the Chinese market price for say the next 100,000 tonnes? Probably not much, but at what point do increased sales change the price? How much could they sell without having a negative impact? And also, what will that 100,000 tonnes going to China do to the price in Indonesia? Less supply available for Indonesia should spell higher prices there – but how much higher? And how will Australia (as a competing suppler) react to those higher prices? There's no way of knowing, let alone calculating it exactly.

Another query: You’re the CWB wheat marketing guru. And you have 1 million tonnes of wheat to sell but you want to minimize negative price impact. Which country do you sell it into? The right answer would be the one with the lowest price elasticity (supply can increase the most with the least price impact). I can guarantee you that nobody at the CWB knows price elasticities by market. If the CWB is holding back sales to support prices, it has no way of knowing or calculating the price and volume impact on other sales. It has no way of knowing whether prices firmed up at all, let alone enough to compensate for lower sales volumes.

It’s all just a crap shoot.

With your money and livelihood, by the way.

To complicate things even further, there’s the whole timing issue – the impact on pool returns due simply to timing the sale during the crop year. One slight error in judgment here (selling too early in a rally) and “poof” go all the gains from your "econometric-modeling-of-relative-global-price-elasticities-telling-you-when-and-what-to-sell-to-whom" thingy.


How would you feel if you knew the CWB was passing on decent grain sales because they thought making the sale might push prices lower?

[chaffmeister]

One more thought.

If the CWB has the legislative mandate to market your grain, does it also have the right to NOT sell it?

[TOM4CWB]

vvalk,

It is time we stopped talking about this... and DO something.

If WCWGA members... paid a variable membership... 10,000ac $1000... 25,000ac $2500... then Chuckchuck would have a valid point...

ON CWB services... IT DOES work this way... if our farm sells 2500t of wheat through the CWB... we spend this year close to $150,000 on the single desk' services.

Since this cost is out of pocket... monopoly money... our family has MUCH more at stake than the producer that sells the CWB 250t.

SO Chuckchuck... and CWB supporters... if you insist on the 'single desk' 'membership' fee being so high... EXPECT me to fight like furry to get costs down... and better value for the very limited financial resourses our farm manages.

By the way... Chuckchuck... the $150K the CWB cost our family... is about 50% of our total families farm profit.

vvalk... the comparison with WCWGA member dues... is illogical, unreasonable... but it is an idea!

For every $1000 a grower donates to the WCWGA... we get 4 votes on policy issues and director elections!

GRIN

< ( > :{

[Jagfarms]

Sell 100 percent of your grain at 6$ bu or 60 percent at 8$ and still have 40 percent of your grain left to sell. There is still the b and c series contract left as well. If you have cash flow problems u can get the cwb cash advance. Hard to type on this bb.

[Jagfarms]

Sell 100 percent of your grain at 6$ bu or 60 percent at 8$ and still have 40 percent of your grain left to sell. There is still the b and c series contract left as well. If you have cash flow problems u can get the cwb cash advance. Hard to type on this bb.

[bucket]

Jag
60% of $8 is 4.80. And where do you sell the 40% of the remaining crop? To the durum feed market at 4.50. This means you and the cwb averaged your crop to 4.65. Nice return on a crop the cwb in february of 2008 said would be worth 9 bucks. Meanwhile those dumb americans are delivering 13buck durum signed up in february 08.

Take the fact that you have 40% of your durum in the bin to the bank. He might ask - what is it worth? My answer is nothing - its technically unmarketable. The cwb still has its hands on it if they call 100% later. But lets say you sell it in the feed market - not much of a return. And if you decide to hold it to the next crop year - what is it worth. Nobody knows. But the storage to the cwb is free so they don't care.

You gotta start thinking differently about the cost to farmers the cwb forces on us.

[Fransisco]

Chaff asked "If the CWB has the legislative mandate to market your grain, does it also have the right to NOT sell it?"

I guessing that it does have the right not to sell your grain. I don't think they have ever sold 100% of the malt crop in western Canada so why should it be any different with wheat or durum?

This is one of the big risks in growing board crops. You will get lower than average prices and you may not be able to sell everything that you've grown.

Why do you think guys are pushing their rotations so hard, growing back to back canola, peas or whatever? They may take an agronomic hit by doing this but at least they can get their bins empty and get paid for their crop.