The CWB 2001-02 PRICES RIP OFF FIXED PRICED FARMERS!

[TOM4CWB]

PRO does not match Initials!

The spreads the CWB fixes when it approves Initial Prices determines the prices grain farmers get paid when delivering to a Producer Payment Option fixed price contract.

One would have thought the CWB would have at least been smart enough to make the Initial payments and the PRO's the same.

They have not!!!

A #1CWRS 13.5 is $169.20/t initial, and a #2CWRS 12.0 is $151.00/t, or a spread of $18.20

THE PRO spread between these two grades is only $15.00/t

If you have #1CWRS 15.5, you get docked $9.00/t if it is downgraded to a #2.

But if you have a #1CWRS straight grade and it drops to a #2, then you only loose $2.50/t!!!!!!

This protein spread between #1 and #2 grades is unfair.

By changing the protein spreads between the grades, and changing the grades between the proteins, the CWB is going to make everyone in the grain trade crazy when a mis grade occurs!!!

The quality issue vs the protein issue will make this system much more difficult to blend grades and proteins!!!

The really strange thing is that many buyers of our grains now won't even use Canadian grades, they have their own specs that have nothing to do with CWB CGC grades at all!!!

And we thik we are getting any type of market signal on what to grow for our customers??????

[crusher]

Ouch!!! I got stung on the spread to CPS. I was thinking the CWB would think it more important to keep the CPS initial at 75% level like Charlie indicated, but they chose to go with the full spread. Initial is only 68% of PRO and works out to farm gate inital price of about $2.15 for me. I think a few farmers won't be too impressed or will they even notice - time will tell.

Now that all the cards are on the table , what's your thoughts on the FPC. My quality looks a little iffy and I'm nervous about the thoughts of delivering feed wheat against a FPC. One service I receive suggested delivering into the pool because the board has such rosy looking PRO's, and then going long or call options in Minneapolis. We need some quick discussion because the deadline is soon.

[TOM4CWB]

Crusher,

On feed wheat there is a real problem with the CWB, especially if you have CPS to sell!!

Now on the #4CWRS it would appear that the feed wheat extra rip off will not be taken from us, so this is another CWB bias towards growing CWRS!!!

On CPS, the spread is actually better than the PRO in the initials that were approved!!!

CWES is actually only worth $5.50/t more than CPS!!! I guess the CWB doesn't want us to grow CWES any more as the production decrease from CPS plus no storage payments means that a person will actually make less than with Crystal CPS!!!

NOW on domestic Feed Wheat we cannot afford to send it to the CWB, no-way!!!

Even at today's $135/t futures the Winnipeg futures is big time above the CWB PRO!

In Alberta a $5/t premium is paid above this price, and this is added to the Vancouver freight.

So apples to apples the Winnipeg futures for Edmonton actually are at,

$5 premium
$28 Freight
$135 Winnepeg futures =

$168/t comparitive Vancouver in store price.!!!

The CWB is at least $30/t below this, and if you have CPS add another 3-5$/t on top for the CWB rip off feed wheat discount!!!

I guess I need not say more????

[TOM4CWB]

Crusher,

I just went and checked the Initials, and the spread from #1CPS to #1CWRS 13.5 is $48.30.

With the Fixed Price Contract PPO at $208.97 today, and till Monday morning, this equals $160.67 for #1CRS RED!!!

As the frevious input just mentioned the Winnipeg feed wheat futures are trading at $168/t!!!

What do you think are the chances that the Winnipeg feed wheat futures will plunge, when this hits the market????

Does anyone really believe that the CWB does not affect our domestic prices?


In Barley it is already assumed that the CWB won't market feed, so the Lethbridge futures ignores the CWB Feed Barley price offered, or that futures would be down more than $15.00/t too!!!!

The CWB is completely out of the lower grades of wheat and barley, and it is obvious from the prices offered that these feed grains are locked into western Canada, in the "designated area" CWB trap, once again!!!

[charliep]

My thoughts on using the CWB fixed price remain the same with the caveat that you have to be comfortable that your wheat will grade better than feed.

1) Old crop - deliver current year/price into next using fixed price contract. Probably an opportunity to replace with futures or options but think through strategy (my thoughts are to be patient).

2) New crop - I would use the basis alternative with the idea that prices have opportunity for better this fall when you deliver. Your risk factor in the basis contract will be the loonie so if you crystal ball sees a high valued Cdn dollar, that would push me to a fixed price contract/some replacement strategy.

3) Prairie springs - ???? I can't argue with Tom's analysis that you are likely better to shop the domestic feed market with target prices of $3.75/bu plus. Given the rally and then drop in WCE feed wheat futures, I have to admit to still being confused on basis for this contract.

I look forward to other thoughts.

[TOM4CWB]

Charlie,

The Producer Direct Price for the Buy-back is was over $180/t for CPS and over $200/t for CWES a couple of days ago.

The CWB can obviously, according to their own numbers, get much more for these wheats than they are offering on the Fixed Price PPO contracts.

Why are these numbers so much out of kilter???

[TOM4CWB]

Charlie,

In the study the CWB had done by the American economists, the CWB said that they had no ability to price discriminate, more than any other buyer in the international marketplace today.

Doesn't the variable feed wheat discount prove this is not at all the truth?

If the CWB can take their already terrible feed wheat price, and discount it even more, at their whim, what does this say.

And that the federal government agreed to this is a crime!!!

If the ITC takes the CWB apart, it will not be anyones fault but the federal government and the CWB's.

The CWB deals in bad faith with "designated area" grain producers every day, with the Canadian governments approval.

What more can I say?

Go Alberta Government Go, the light is green!!! These turkeys really deserve both barrels!!!!

[charliep]

Tom4cwb

I will provide the quick comments to your questions/leave for others to discuss. The fixed price contracts reflect an average price across all markets/the whole spectrum of customers. Spreads are based on all markets, not just North. Lots of other factors get involved including the freight adjustment factor (how many farm managers remember what this adjustment is/the impact on their payments?). The CWB producer direct price is a north American one for a given day and based on the actual market - at least in theory.

Feed wheat that lacks any type of milling qualities is sold in competition with US - particularly S.E. Asia. When the spread is done normal feed wheat, the CWB looks at the expected relationship between corn and milling wheat. The attempt on the 4CWRS is to separate wheat with at least some domestic flour milling properties. In a year when the latter grade might come into value would be frost year (lots of bran frost).

I will leave the discussion on good or bad to others.

[charliep]

I should actually wake up before I write. The first sentence/second paragraph refers to US corn. The corrected sentence should be "Feed wheat that lacks any type of milling qualities is sold in competition with US CORN - particularly INTO S.E. Asia."

[TOM4CWB]

Charlie,

I think that we should take a close look at CWB brainwashing that many have swallowed without careful scrutiny.

Are you telling me that the US corn comming into Alberta costs much more than it would cost to get to SE Asia?

Otherwise the feed wheat and feed barley prices in Alberta will have already taken this arbitrage into account!

I am told over and over that the US corn comming into Alberta has held down feed barley prices domestically, which in turn holds down feed wheat prices. We also know that corn and wheat are interchangeable in rations as you stated!

When feed wheat interior western prices are $135/t, then how can the comparison CWB Vancouver price only be $105/t after freight is taken off to get it to port!

At todays exchange this is only $67US/t West Coast Port Price, and I am sure this is way under its corn value, isn't it Charlie?

Where else on the planet could you find cheaper high energy feed?

Is the CWB actually giving our wheat away at this price Charlie, and isn't this just an legislated invatation by us to have the CWB undercut everyone in every feed market on the planet?

What ever happened to the CWB extracting a premium?

Dosen't this just prove at the CWB the lowest price is the law?

[charliep]

It is always hard to compare a pooled price to a daily bid. Having said that, the domestic market will remain the best market for feed grains/perhaps the lower end of the wheat complex over the coming year.

Like you Tom4CWB, I like to look at the daily prices in Portland (likely the closest market we would sell against in an open market). Last Friday's Portland export price for corn was US $2.585/bu (US $102/t). US feed barley was offered at US $2.46/bu (US $113/t). Canadian feed wheat would likely would likely be priced off the corn value (Cdn $158/t fob using an exchange conversion of 1.533) to a S.E. Asian country like S.Korea. Deducting costs of $48 for loading the ship, cleaning, elevations, rail, etc would net a price of $110/t basis local elevator.

Our relevant price, however, is the imported cost of product. Given the cost of moving corn from Minnesota/South Dakota is not much different to Portland or Southern Alberta, this is the realistic price for our feed comparison. Based on todays market, if feed barley/feed wheat prices move over $155/t, corn starts to replace our feed. Prices under $150/t and local feedlots/feedmills will use local product. The export market is irrelevant given the $40/discount to the local market.

[TOM4CWB]

Charlie,

Then answer me this,

The CWB SAYS they extract a premium for the grain they market for us.

If the market is really as you say it is, the highest price in the world,(40/t above the US) then why would the CWB be charging $15.00/t above the PRO to buy my feed wheat back?

According to your figures then I would be losing $55/t shipping south to the US!!!

Things don't add up!!!

What good is a marketer that refuses to even consider selling my feed wheat at market value? Is this the trait of a premium marketing expert?

Our customers must laugh at us to create such an absurd system!!!

[charliep]

I don't have an answer to your questions other than differentiating markets/capturing value is the basic premise of the CWB system. You are being charged the theoretical value of what the CWB thinks it can achieve into the US market. My problem with this is I don't know what the feed wheat (or any wheat for matter) that is being quoted in this value. Is it an unlicenced variety or a 52 lb/bu feed wheat?

I always come back to the question of what an open market system (or for that matter dual market system would look like? What quess is it would focus less on grade and more on quality factors. Wheat would float to where is has value to customers and is competitively priced with other grains.