CWB supporters please help me out with something

[chaffmeister]

A voluntary CWB needs physical assets?

Wrong.

[chaffmeister]

Here's why.

Grain handling business is a high fixed cost business (about 90% of costs are fixed - you got 'em whether you handle grain or not). The marginal cost of handling the next tonne of grain is effectively zero.

This applies to both primaries and terminals.

There exists an over capacity of grain handling capacity just about everywhere - in the country, T Bay, Vancouver, Prince Rupert.

Terminal operators compete for grain shipments from smaller grain companies that don't have terminals. They pay as much as $5/tonne "Diversion Fees" to the smaller companies for the pleasure of handling their grain.

A voluntary CWB would have grain companies competing for their handle - they would do this by giving the CWB cut rates on elevations or pay it Diversion Fees.

A voluntary CWB would just need to go out to its best offshore customers (the ones that aren't pissed off at them) and ask to represent them in Canada. They strike that kind of deal and then they could go to farmers and write up contracts.

They could also strike up partnerships with the smaller grain companies that don't have the export reach - the voluntary CWB could be their export arm.

Or they go to the grain companies and negotiate for the handling of the grain they are buying from farmers on behalf of their offshore clients.

If you don't think that would work, you don't understand the business.

[sawfly]

the boards infulence in HRS priceing may be small , but i don;t know if you can say the same for durum

.
how do you explain the price differance between durum and HRS over the last ten years.
9times out of ten that the durum carry out stocks have been large or extremly large,a lot bigger % wise than HRS . durum sold for atleast 1$ more than HRS.

I don't grow durum , and this is just a general observation.
some years there were huge durum carry outs , like 40%, price was somewhat maintained.
the 40% sitting in farmeras bins was the market signal to cut acres.

now go through those same years in an open market. the market knows theres a 30% surplus ,(farmers have to sell something because nothing is paying) whats gonna happen to price. your gonna get 1/2 the price for the same 60% moved, maybe 80% because its so cheap ,but not much more because , durum dosent have many other homes (feed etc.)

. you still have 20%-30% Cary Over and have got 60% of the $

admittedly under this system between poor returns and high carry over , acres would tank. and prices should improve.

you say that there would be forward contracts, where you could lock in acceptable prices, maybe but where are the good 09 pea contracts.

its a lot easyier for farmers to have market disipline when they have money in thier pockets.

[Fransisco]

One would think that would be the case since the board controls about 50% of all of the durum in the world. But according to the informa report...

"The situation for durum is similar to HRS wheat. In 2001/02, the final payment for 1CWAD 13.0% protein was slightly higher than the average US elevator bid, but lower in each of the successive crop years. The final payment for 1CWAD 11.5% protein was lower in all of the years presented. Final payments for two Canadian protein levels are presented, since elevator bids for durum in the US are not typically based on protein levels but on a threshold level of hard vitreous kernels. For the crop years of 2001/02 to 2006/07, Canadian farmers delivering 1CWAD 13.0% have received an average of $12.29 per tonne less than US farmers and 1CWAD 11.5% has been an average of $20.32 per tonne lower."

Apparently all of Jags neighbors just love not being able to deliver all of their durum every year while getting $20 a tonne less than the guys south of the border who get to deliver all of theirs. That's how they became so rich, by selling less tonnage while at the same time getting less per tonne.

[cropduster]

Jag,like your description of No.32 as a highway............last time I was over there it was more like a GOAT trail!!If there`s all that money out there you`re talking about, where`s it going??Those successful farmers you`re talking about are now 10-12 miles apart where they used to be less than five.You`ve been looking up a bulldogs backside waayyyy too long!!Probably on a rubber block suspension at that!!

[Jay-mo]

I also have to echo Silverbacks comments on the variety of crops a guy can grow.
I grow hrs wheat, canola, and barley. There's a small amount of peas grown in my area and that's it. We dont have 11 crop options in my area.
Jagfarms needs to be commended for sticking around and defending his viewpoint but I still dont get why he thinks the cwb monopoly is worth making such a defense for.
If cwb crops are #11 on his list, is it really going to affect your bottom line if you had to market that #11 crop yourself?

[vvalk]

JAG. Maybe take a drive around southern Alberta to see progress in farming. Sure a lot of it is hutterites but take a look. Lots and lots of young farmers and this progress is from maybe at best 25% board grains and shrinking. In most areas south of Calgary board grains are a rotation, something you have to grow every 3 or 4 years. Not sure that the swiftcurrent/leader area is the flagship of farming. What about csh flow and my original question from up top. Still no answers.

[stubblejumper]

cropduster Altario may not be the A****** of the world but you can smell it.

[chaffmeister]

Sawfly:

You ask: “how do you explain the price differance between durum and HRS over the last ten years.”

From 98-99 to 06-07 the durum pool return for 1CWAD 13 averaged $0.62/bu over 1CWRS 13.5. In 07-08 it was $3.80 over CWRS (a remarkable year by any account). I’d go with the $0.62/bu as a good idea of what the spread typically is.

In 05-06 the durum pool return was actually lower than HRS.

You say: “some years there were huge durum carry outs, like 40%, price was somewhat maintained.”

Each year’s durum carry-out as a % of production and the durum pool premium over the HRS pool:
98-99……………32%.................$0.05
99-00……………41%.................$0.89
00-01……………50%.................$1.57
01-02……………51%.................$1.31
02-03……………42%.................$0.75
03-04……………42%.................$0.45
04-05……………52%.................$0.26
05-06……………55%................($0.05)
06-07……………37%.................$0.33
07-08……………23%.................$3.80

In the years where durum carry-out was 40% or greater, the durum spread to HRS ranged from $0.05 under to $1.57 over.

The highest carryout produced the lowest spread to HRS (in 05-06) - as you might expect. Also, the lowest carry-outs produced some of the lowest spreads - not what you'd expect. I think it’s safe to say there is no correlation and price was not “maintained”.

You say: “the 40% sitting in farmer’s bins was the market signal to cut acres.”

That would be in 7 out of the last 10 years. But year-over-year acreage dropped only 4 times - in 1999, 2001, 2004, and 2006. In 2001 acreage dropped following the best premium over HRS. Go figure.

You say that in an open market “your gonna get 1/2 the price for the same 60% moved, maybe 80% because its so cheap"

Beyond the obvious hyperbole, what calculation are you using? Durum carry out tends to hover around 40% or higher but prices are all over the map. When it had the best premium, carry out was at 50%; when it was the worst it was at 55%.

So holding stocks back seems to do nothing that can be measured in terms of price.

If the CWB was actually able to boost durum prices by holding back half the crop, other producers like the EU would increase production to take advantage of the higher prices. Their increased production would do just what you said – depress prices.


Like I’ve said over and over – the CWB can’t manipulate prices through holding grain off the market. It’s all slick self-promotion to keep you believing the fairy tale.

[cropduster]

Good one Stubble!!That`s a real answer!

[TOM4CWB]

Chaff;

Durum is not blended into CWRS in Canada... but CWRS/DNS is blended into Durum at pasta mills.

07-08 Durum/DNS spreads are so high... because DNS was not avaliable to blend... to arbitrage DOWN durum prices... when customers bought the durum/DNS for pasta production.

$25/bu DNS... plus basis running $3-5/bu over the MGE futures.... and then when DNS ran out... Durum maintained $30/bu... cause of Desert Durum and pockets of remaining stocks saved for sales...

Does the CWB actually claim to take credit... for the consistant high ($30-35/bu) durum prices... US growers got?

[Fransisco]

Those are some impressive numbers chaff!