CWB in the market for some white wash

[Fransisco]

Here is another way to look at it, the $89 million dollar loss in the PPO's works out to $20 a tonne. You tack that $20 onto the final PPO price and they come out well ahead of the pool price.

[charliep]

I have been looking at the same thing and wouldn't come to the same conclusion. The $363.91/tonne is the CWB target price/measure of success to show they have managed the risk around the pooling account - demonstates the accounting process to back this up. Losses on futures both planned and taken care of by farmer contracting/delivery of physical grain for a lower price and unplanned in terms of losses to the contingency (risk the board was not able to cover) need to be removed from this.

Likely too simple but here is the process I worked to come up with a back of cigarette package number. From the annual report, farmer FPC and DPC contracts amounted to about 4.4 mln tonnes. From the yearend report, the CWB tells us 89 % of farmers sold of under $7/bu (I assume local price) or $8.50/bu port: 8 % for $7 to $10/bu (local), and 2 % for $10 to $15 and 1% for over $15. My back of the envelope (maybe better than back of the cigarette package says the weighted average price farmers sold was between $7 to $7.50 local price or about $8.75/bu at port. The CWB is not specific on grade so I am going to assume an average distribution. %8.75/bu port works out to $320/tonne. Long and short of the analysis there is well over a $1/bu that has disappeared somewhere either as a result of planned hedging processes or futures pain (pulled out the contingency fund). Lots of assumptions I know so I look for feedback.

[charliep]

actually the answer to our questions is on page 61. The revenue part shows the transfer to the pooling accounts. The expense side shows the cost of FPC and DPC programs.

contracted amount paid to farmers was $1.26 bln or in dividing by the 4.5 mln tonnes (realizing all grain but weighted to wheat) was about $280/tonne. Hedging losses were $467 mln or close to $100/tonne. Interest and admin were about $14.4 mln or about $3/tonne. The net loss was $20/tonne.

[charliep]

My assumptions were too simple in the first example. also likely price distribution not based on a weighted delivery volumes but rather the contract reference grade. May also only be 1 CWRS 13.5 protein.