A question for monopoly supporters

[charliep]

For what its worth, it is interesting to take the methodology used to determine the $563
mln benefit of Canadian farmers/CWB single desk over US ones and apply it to 2008/09.
It this was a valid process a year ago and used in CWB press releases, shouldn't the same
comparison apply this year?

http://www.ers.usda.gov/data/wheat/YBtable18.asp

Weighted average US durum prices (all grades) June to April (not including May and not
converting to this past years lower valued loonie) was $10/bu. I will let everyone compare
this to your last PRO for 1CWAD 13 protein.

[farmboy4]

Charlie,

You asked some good questions and raised some valid points, so I will respond. And let me say this, I don't think the CWB system is perfect, but I do think it is a benefit to me and all other farmers.

I will take your word that the CWB arrived at their $563 million benefit (refresh my memory is that number durum only or all CWB grains?) using the simple method you describe. And I would comment that it was not a valid comparison last crop year when the CWB used it to its benefit, so I don't agree that it is a valid one this year (and I note that you didn't comment on its validity... only asked the question).

But I would argue that it is likely a more valid(but still not a sound one) comparison in years where world durum supplies are tight and both Canada and the US carryout is tight (i.e 2007/08).

[charliep]

The $560 mln came out of the response to the Informa report and you are
right included all wheat including durum. The best table is in the
August/September 2008 Grain Matters. It has been referred to in other
places but not aware of anywhere the table was included or whether the CWB
full analysis was posted.

http://www.cwb.ca/public/en/library/publications/popups/pdf/gmatters/au
gsep08.pdf

You are also right I won't put to much credence in it for an individual year.
Each year will be different and reflect individual circumstances.

It should be over time a performance measure with as many years the CWB
selling for more than the US and vice versa. If the CWB uses this information
in one year to highlight a position that supports them, then they had better
be prepared to also talk about the years that don't work.

To the original posting, US and Canada compete in many of the same export
markets with prices having to be competitive. In many customers eyes, there
is not likely any difference between a US 2 HAD or a Canadian 2CWAD - they
likely buy based on specifications and not grade. Similarly, prices to the
north american milling durum market are not likely to be too far out adjusted
for transportation. The question about whether US prices are higher because
they satisfy a higher percentage of the North American durum market needs
to be questioned and from there, why any organization would make a
conscious decision not to participate in higher priced market (or encourage
its farmer clients to). I will always question the statement the CWB can
manipulate prices by withdrawing from the market (or limiting supplies) and
if this is the case, whether our competitors benefit more than western
Canadian farmers (the higher prices go in their pocket if they sell).


As a final comment, you will have to help me understand the risk
management practices for durum FPC contracts. They seem to me to be
expensive and ineffective ($2/bu discount from a market based forecast). Is
there an effective way to hedge durum? Why not treat the durum milling
markets like malt barley and have a cash plus program that tie individual
sales contract to millers to farmer pricing opportunities?