CWRS BPC

[ado089]

I haven't been following this as close as I should and without checking it daily back through it's hard to track. What does a good basis look like for this year? What do you expect going forward. Looks like Dec is about $35.

[charliep]

The CWB has good historical charts to help with your decision.

[URL="http://www.cwb.ca/public/en/farmers/producer/historical/#basis"]historical basis charts[/URL]

Is the basis good or bad? Don't know given the basis reflects the relationship between the most recent PRO and the current futures market.

I can comment in an open market because the basis can be compared to futures and a number of cash bids in domestic and international markets.

Having said that, the basis is historically very strong. You can look at the graphs. Suspect is a good decision to pocket at least some of this. Perhaps a bit of a pre-election special.

[charliep]

Current crop year is available at (starting chart 13):

<a href="http://www.cwb.ca/public/en/farmers/producer/historical/pdf/2010-11/2010-11fpcbpccharts.pdf">2010 11 basis charts<?a>

Updated to Monday.

[ado089]

So when the higher PRO is than the futures the narrower the basis gets?

New question...Is the same freight and handling charge deducted from VIP deliveries as exported product?

[charliep]

You have got me into an area a good friend and former likes to take about. I like to use stronger and weaker basis cause narrower and wider gets confusing as you highlight. The comment is the basis is offering a better/more advantageous relationship (stronger if you like).

On your other question which I assume is Value Added Initiative Program, you have the same deductions as everyone else. Everyones payments are related to a port position in some form. Your fpc is simply a way of collecting your payment up front.

[ado089]

Was that a yes on the basis being stronger (more adventatious for me) When the future get weaker than the PRO?

That's great, I get to pay an extra 2000km of freight. Who pockets that difference?

[charliep]

Sorry for using the lingo. Occupational hazard.

Yes $36 over futures is strong basis relative to history. Larger in over futures values is good.

On the question of why the $2000, you are not paid relative to where you deliver or the price paid there by that processor to the CWB but rather the over pooled price at Vancouver minus freight. Your VIP payment is meant to offset this to some extent. You can also working on trucking premiums/other things to that plant. But the basics of a pooled price is port minus costs.

To be fair, the domestic crusher price is not the same as Vancouver. Crushers pay less than Vancouver but you have to realize they pay freight on canola and meal. The crusher will also create its own demand price mountain. Dr. Derek Brewin at U. of M. did an interesting study looking at the impact of crushing plants on regional pricing. They are definitely benefiting Saskatchewan farmers - more competition between each other and the export market.

sorry for getting off but get your question all the time from farmers.

[charliep]

second last sentence "pay freight on oil and meal". Other words left out but hopefully makes sense. Should read more before I hit the send.

[TOM4CWB]

Charlie,

If the PRO goes UP $20/t... this would mean the basis would DROP $20/t in one day. Thursday... Oct 27.

THis PPO system is totally absurd.

[TOM4CWB]

Charlie,

Am I wrong?

Dec 10 futures plus basis equals Fixed Price for Oct 27 ($318.27/t CWRS).

$318.27 minus (Oct 27 Dec 10 futures) 287.72 is $30.55 plus negative $5.13... equals $35.68 Positive basis for Dec 10 FPC!

So... perhaps the PRO has nothing to do with the FPC basis?

I am confused... please help... my head is spinning!

Soooo... if I have CWRS feed wheat... after the discount for feed I get $300/t... minus the spread between 1CWRS 13.5 and feed ($134.20 minus $78/t) is $56.20/t off... for a total of $243./t. With my Handling of $55/t; I net $188/t or $5.12/bu.

I see on feed barley GDC contracts the CWB locks in the EPO.

"Note: A Guaranteed Delivery Contract must first be in place before you can apply to receive the Early Payment Option value, paid within 10 business days of delivery. Sign-up forms are available from the participating stations. You can also call the CWB to sign-up the EPO after your GDC is accepted by the grain company. The Early Payment Value and EPO discount will remain constant throughout the GDC sign-up period."

If complex is good... the CWB is the best!!!