CWB supporters please help me out with something

[chaffmeister]

Jag:

You said "When the price of canary seed is 8 cents/lb I would not want to sell it at that price if I did not have to."

<b>But if the CWB was doing it for you, they might sell it at 8 cents/lb even against your interests.</b>

You said: "If I really needed some money to pay some bills I might sell a minimum amount to cover the bills or sell a crop that has higher price and is more demand."

<b>Sorry, you can’t do that with the CWB controlling everything. They would be telling you what to deliver regardless of your cash needs. </b>

You said: "One thing I like about the CWB is when you haul in the last of your grain in June and July you can watch the pros and read up on the markets and sell your crop into the current crop year or the next crop
year. Quite a few people I know did that in the summer of 2007 carried quite a bit of Durum from the 06-07 to the 07-08 crop year and did they do OK."

<b>That was a no-brainer. The old PRO was $221 and the new crop PRO was $275 at the same time (June 07). You were faced with a choice: Sell everything the CWB would take at $221 or wait a few weeks and sell it for $275 – not a guaranteed $275 mind you but a $54 premium is still very attractive. I think anyone who didn’t do this was asleep or just didn’t understand. Oh yeah – the non-CWB markets do this kind of pricing all the time.

But doesn’t it make you wonder – if the 07-08 crop year was already showing such great promise, why was the CWB so aggressively selling everything it could at the end of 06-07. (They were offering GDCs at the time because their year-end sales were so strong and needed to get the deliveries).

Jag – you still haven’t answered my question about why you accept the CW rhetoric and reject logic.</b>

[Fransisco]

Jag, Charlie asked this question in another thread. Can you answer it?

<blockquote>Just curious if you know how the CWB prices wheat to customers. I am going to suggest that most CWB sales are futures adjusted with basis to achieve a cash price. The wheat basis is not consistent over time (i.e. the simple adjustment you suggest) but rather varies to reflect a lot of different market factors. The difference between the open market and the CWB (at least for grains that are backed by futures markets) and the CWB is that the process is relatively open in the former and invisible/hidden in the pooling system in the case of the CWB. Strangely, the CWB farmer client is the most ignorant of CWB pricing as I suspect most of grain companies have a pretty idea of basis levels being used - particularly if they competing for business as an accredited exporter - there no secrets in the grain business.

Perhaps you can explain the basis levels used in the fixed price contracts. Where do they come from? Are they a market signal? Why aren't CWB FPC basis levels consistent? </blockquote>

[Jagfarms]

Chaff

If the price of canary seed was 8 and you had to market it through the cwb you would have the choice if u wanted to contract it in the a b or c series contract you would not have to contract it if you did not want to. If you did contract it you would end up with the average price that would be more than 8 cents.

With selling durum in july 07 into the new crop year. If durum would have been in the open market at that time the price then was around $7 bu at that time. Farmers would have to sell it to make room for the new crop as it was an early harvest that year. They would have sold it for the $7 price when they got over $13 plus selling it through the cwb. You get the whole next crop year to make gains on the price. A lot can change in one crop year.

[chaffmeister]

JAG:

You say “If…you had to market it through the cwb you would have the choice if u wanted to contract it in the a b or c series contract you would not have to contract it if you did not want to.”

Are you serious? With the CWB, you have a choice to sell it or not!? “You would not have to contract it if you did not want to.” That’s it? So to you, it doesn’t matter if the CWB price is lousy – your solution is just don’t sell. What you’re suggesting is responding to price which is next to impossible with the CWB system since there is no effective price discovery.


How can you say with such certainty “If you did contract it you would end up with the average price that would be more than 8 cents” in a hypothetical argument? Blind faith in the CWB is the only way.


Also – on durum marketing:

You argue for the CWB by saying that if there had been an “open market” in July 07, “Farmers would have to sell it (old crop durum) to make room for the new crop as it was an early harvest that year.”

Such narrow thinking. The guys that sold their 2006 durum in the 2007 crop year with the CWB system, would’ve been forced to store it. Why would he be forced to move it in an open market? Why is it better to be forced to store it than having the flexibility to store, sell spot or sell deferred? Let’s assume the spot price was $7/bu. What would’ve the price for deferred delivery be – hypothetically?

What about the potential to store it (as you would have to under the CWB system) and sell it later for $20/bu or more? What about the potential to sell it (spot or deferred, it doesn’t matter) and buy futures to stay in the market? (I know – there’s no durum futures market. But that’s because of the CWB. Without the CWB, either ICE or MGEX will launch one.)

In support of the CWB, you say “You get the whole next crop year to make gains on the price. A lot can change in one crop year.” Absolutely. But in the CWB system you can’t maximize on that. Have you noticed that the 08-09 durum PRO has dropped $3.02/bu from a high of $12.68/bu. And the CWB’s already making signals that it’ll likely go lower. Using US prices as a guide, you could have locked in over $11/bu last fall – probably more for deferred delivery into winter/spring. But not with the CWB.

You’re still arguing with weak CWB rhetoric as your argument’s only support.

Where’s the objective logic?

[Choice2U]

Sawfly...Is it all that impressive that durum gets a constant premium to it's benchmark CWRS (another CWB crop) if CWRS is dropping in acres because of poorer returns. If my IQ is average but I am in a room full of dummies...I look impressive.