Do you want to know a secret?

[mbratrud]

Seems like everything turns into a CWB debate on hear so I will wade in!

Was it Hedging "costs" or discresionary futures transactions? very big difference!

[TOM4CWB]

mbratrud,

It really appears that the CWB risk management dept. is saying they lost more money... every time they had to roll the long positions forward... because of the (adverse)inverse market(dropping).

Yet the CWB picks the months it wants to do the actual hedges... and charges growers the roll cost... to extend their own position... so I still don't see how PPO pricings cost/lost so much (it had to be pool positions then... by deduction)! Basis still had more revenues than these losses... so exactly how much did the CWB make on the basis... and if this revenue is created by PPO's... and the losses by the pools... why charge PPO contractors??

[Hopperbin]

Married to you may not be so bad, well at least you explain yourself parsley. meanwhile I dig holes for myself.

[mbratrud]

Tom4cwb

It is not at all surprising the CWB lost all this money on the PPO's. For people that are supposed to be so smart, and an asset for the Canadian Farmer they do not have clue.

In my view PPO pricing should be done during trading hours. Do you see any grain companies out there letting you lock in a futures price against your Basis after the Market closes. We all know the Market drops a lot faster than it goes up. How many mornings would the traders at the CWB been facing huge futures losses because the PPO's that came in from the day before had to be hedged after 2 or 3 days of limit down losses. It doesnt take long for the numbers to baloon. This is just bad policy and if they were a private company competing for the Grain they would be broke!

I would like to hear CWB Management explain the rational around a hedge risk strategy with most of the "risk" transactions being done when the futures market is closed.

[mbratrud]

Oh and before I get labelled a CWB basher. Not the case I am simply a concerened farmer that thinks things could be done different. I believe the single desk can have its place if managed properly and there is no accountablity when pooling is involved.

[charliep]

You can add the risk of trading across up to 5 futures months and 3 markets. This adds a whole new level of spread risk. If they back to back PPO (in this case legitimately called producer price options) against either actual or individual futures months, they would eliminate much of this risk.

Have thought long and hard about how the CWB actually does this. To look at discretionary trading using canola, lets assume you have 500 tonnes of canola for sale. You market plan is to market this crop over a 12 month period of equal deliveries (deliver and price 40 tonnes each month or a "B" train). some months you may get ahead of or behind this delivery because of poor basis, road bans, holidays, whatever so you use the futures to either forward price if you behind your expected pace or get long futures if are ahead of your planned marketings/pricing.

Sounds simple here but gets a lot more complicated when the CWB does this. They are driven as much by buyer decisions (your customers) and by logistics as any other factor. So the CWB uses the futures market to even this pricing pace out through the whole year. This happens in a dynamic market and as highlighted in multiple futures months and markets. The CWB may at different points in time have market opinions and my trade this well (get long in a rising market and short in a falling one). If I was talking about a grain company, that would be what discretionary trading would mean.

Way off topic on the secret.

[charliep]

first paragraph last sentence would be match against actual cash sales. Sell grain to a domestic processor/importer and match the farmer price against this with the difference being cost.

[GrainBeetle]

Franny: How much phosphorus will you be personally contributing into Lake Winnipeg this year?

http://www.ndsu.nodak.edu/fargoflood/

Who is going to pay for the clean up, I sure hope it's not taxpayers, people who put in a hard-days work each and every workday of the year.

[classicalliberal]

You do not want to be long cash grain (which the CWB is always long confiscated cash grain) and they were likely short futures for those that did the Fixed price or whatever the hell they call their open market things. They could have rolled their position to the may futures however it was at a major inverse and if a long hedger rolls their position in an inverse market, they have to buy back the higher futures month and sell the next lower month which would have cost a lot of money or own the wheat in a warehouse that delivery warrants can be issued against which the CWB doesn't have. I can't think of any other reason that they could lose that much money using futures unless they were speculating. Although any unsold wheat that they have confiscated and are waiting on a higher price, using futures or not, they are speculating.

[stubblejumper]

I'm amazed that some contributors to this site are still farming as they are smarter than anyone else in the world.

[charliep]

stubblejumper

Have you read the annual report. Only two answers - yes or no.

[parsley]

I'm interested in this answer!