CWB Presentations at Crop Production Week

[charliep]

Just noting the CWB presentations at the Crop Production days are on line.

I found Ian White's graph on producer payment use so far 2008/09 very interesting in that in a year of high prices this spring (at least in hindsght) farmers have not used the programs.

Use of basis price contracts was up this year (just over 1 MMT versus 500,000 ish tonnes 2007/08). Fixed payment contracts were way down at 650,000 tonnes versus just under 3.5 MMT in 2007/08. Flexpro at 200,000 tonnes versus 650,000 tonnes daily price contract.

I will leave early payment contracts alone (still more time to use) but interesting that farmers didn't use the CWB payment programs in a year of high new crop prices during the spring (at least in hind sight) whereas they jumped all over them the year before.

I also note the comments on open market basis levels. I suspect most farmers know a good basis and how to react when these opportunities present themselves. Do farmers understand CWB basis levels? How much of this uncertainty impacts a farmers willingness to sign CWB contracts? More to the point, why the major drop in PPO use this year?

[charliep]

http://www.cropweek.com/presentations/2009/2009-jan16-cwb-white.pdf

[charliep]

Will note the political discussion in another thread.

What is needed in the mean time of no change on the open market front is to work with the CWB to make current contracts work better for farmers who chose to use them and lower the risk management costs (ultimately your costs) of the programs.

A route there for the CWB in the interim is clearer market signals about real cash prices.

Example is feed barley. The CWB provides the western producer with a Portland feed barley prices every week. Currently USD $175/tonne FOB (loaded ship). Likely Canadian price - Cdn $220/tonne (FOB). Port costs $15/tonne about. Vancouver to local elevator deduction for the example $60/tonne. Local equivalent about $135/tonne. don't know if business could be done but the price equivalent would be about $3/bu - competitive with local feed markets. Another potential customer.

Malt barley - Indications are that off shore malt barley business could be done today at about USD $240/tonne CIF (delivered to customers port). Ocean freight $25/tonne. FOB Vancouver $215/tonne or Cdn $270/tonne. Terminal costs $15 /tonne. Port to local elevator - $60/tonne. Money in pocket of the farmer who delivered on this contract $195/tonne or $4.25/bu. Well below the current PRO of $5.50 to $5.70/bu but above the current feed barley prices which depending on where you live is plus or minus $3/bu.

Do the current CWB barley contracts work? Why doesn't the CWB go to daily pricing on both malt and feed barley (they already treat barley differently on the delivery in terms of selection to a sale in the case of malt and guaranteed delivery contracts on specific sales in the case of feed barley. I heard some suggestion that the CWB would do a cash plus on old crop malt barley but no uptake.

[furrowtickler]

malt barley pro's will fall below $5 before long. P&H put out a program in late Nov/early Dec for $4.30 cash on delivery (copeland), we took the deal knowing the pro's were going to drop like a stone and the cwb had/has no sales for copeland what-so-ever. We will be ahead of the game with the barley gone before the snow, 100% delivery and 100% pd. The pro's mean nothing anymore.

[charliep]

Just curious is a cashplus malt program/there is room for what ever they call the last 10 % of the cashplus? First I have heard of an elevator based cashplus program by the way. Maybe how the CWB plans to meet its target of 1.6 MMT.

[classicalliberal]

Two words: "Free markets" that is the best way. Willing to hire ex-CWB wheat traders!