Dual Marketing

[jensend]

i know that very well. i was just pointing out that the grain companies have more profit centres than just the physical facilities for handling grain.

[chaffmeister]

jensend:
I was writing a reply to your basis comment but now I don;t know what you're talking about.

You sound like you think they widen basis to capture more money:

"they are masters at working cash against futures".

Are you in the camp that thinks when the basis is $50 under, that the grain companies are making $50?

[lornegreene]

If the cwb is such a bad idea then why is it being constantly threatened by the USA? With dual marketing the wheat board will be made weaker and that is going the opposite direction for the well being of most wheat and barley producers. I am for the canadian wheat board also.

[jensend]

chaff i know that basis is to cover normal costs. if that were the only reason the basis would not vary much over the period of a year but we all know it does vary. grain companies will capture extra profit when producers are in a cash bind if grains are not moving or if the board isn't calling for deliveries.

[Fransisco]

Think about it, do you really think there would be trade challenges against the CWB if it actually raised the world price of grain? Or does it maybe have to do with the fact that more often than not it undercuts the market to make the sale? A really easy thing to do when Canadian farmers have no choice but to take the CWB prices.

[chaffmeister]

lornegreene:

Can you explain why a dual market (voluntary CWB) would be "going the opposite direction for the well being of most wheat and barley producers"?

And I'm looking for concrete reasons - not just that you think so, or believe it to be so. Why do you believe it?

I sincerely want to know....

[charliep]

jensend

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.

If you are basis, 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?

[chaffmeister]

jensend:

This may surprise you but grain companies make more per tonne when prices are high.

Even so, the variation in the basis is a reflection of supply and demand - not the grain companies trying to squeeze out a few extra bucks.

[jensend]

and the tooth fairy really does exist. charlie i don't know how the wheat board adjusts its basis. the only reasoning i can come up with is that it is self insuring and is not fully hedged. maybe when the wheat board is gone more people will have to acknowledge how the markets really work. first clue - it's not really free enterprise when dwayne andreas says the competition is our friend and the customer is our enemy.

[Hopperbin]

"the competition is our friend and the customer is our enemy."

When did he say that?

http://www.brainyquote.com/quotes/authors/d/dwayne_andreas.html