hardcore vs soft core

[TOM4CWB]

Chaffmiester,

I am really confused now...

Isn't the CWB allowed to sell into our premium domestic market, and don't these millers already do substantial CWB buying?

Sounds to me like these Ontario millers want wheat at less than North American and world price, doesn't it, or why wouldn't the CWB just do the business?

[parsley]

CWB Director Art Macklin was on the Jim Fischer show yesterday and he indicated that the CWB was selling a lot more wheat domestically.

Does that mean Ontario gets the open market prices and the Prairies get the Canadian Government price set by Goodale via the Board ? Similar to the WW II days where Canadian farmers got the Canadian Government set price that was set below world prices.
You can bet the Federal Government wants to keep inflation down and you can bet Ontario farmers will want world prices. That leaves the Designated Area patsies.

Parsley

[TOM4CWB]

Charlie,

The question must be asked, does the CWB sell competeing quality wheat and barley against the OWPMB?

If the CWB did, wouldn't the Ontario millers just refuse to buy Ontario wheat if the terms were not to their satisfaction?

So just what is CWB policy when selling wheat into Ontario/Quebec?

Or is our western quality so poor, the CWB can't sell to the Ontario/Quebec millers cause it doesn't have the proper specs?

Any way a person looks at this situation, isn't something wrong... What is the real story here?

And does this situation have anything to do with maximizing returns for "designated area" wheat producers??? ...

[TOM4CWB]

The point that is missing is that because there is a limit on the amount of wheat eligible for the exemption, the millers essentially have to talk to the OWPMB at some point through the year to get their supplies. So once they book with the OWPMB, that's when they are in a tough spot because they then have to have a grain merchant source it. It's a classic opportunist's dream. The miller has a price (regardless if it's track or where it's negotiated at) and then is forced to pay a sourcing cost.

That's why the millers say, have single desk selling, or have an open market - this dual market system doesn't work.

Regarding tom4cwb's comments, the pricing for eastern mills for CWB grain is based off of Mpls, and add freight basis to the mill location. The mill determines when they wish to book the price. They can forward contract, do basis contracts, or hedge swaps. It's competitive and transparent. There is mostly hard wheats shipped to eastern mills as there is very little hard spring wheat grown in Ont.

Tom

[charliep]

Tom4cwb

Just a note Ont. produces mostly soft wheats whereas western Canada is hard red springs. We also sell a little soft white wheat. For the most part, our wheats are complimentary to what Ont. produces in terms of flour mill needs. Not a lot of malt barley grown in Eastern Canada (may be more over time on potato land in Maritimes).

I still have the question on mechanics of the process. When somebody says something doesn't work, I find it interesting to look at the process and ask if there are things that can be changed/barriers removed. Maybe an even more question (not in a judgement fashion) is to ask why they are saying it.

[TOM4CWB]

thalpenny,

I noticed that you forgot about US wheat coming in to supply the Ontario millers, what about this arbitrage issue?

If the broker and OWPMB don't play fair, why wouldn't the majority of the millers who are linked with multinationals... just bring in the supply from a few miles south, just across the US border?

Logic says Competition is the best arbitrage equalizer, or does the OWPMB defy NAFTA and Canadian law, resticting imports of wheat into Ontario and Quebec mills?

[AdamSmith]

Hi all;

Charlie it really is tough to ask questions without judgment unless of course one has no opinion on the subject which is the cause of a question!

Since I do have certain opinions,I will ask a question and then offer up a possible answer.

1. Why do the millers take the position that they want either single desk or total deregulation?

My theory is that the dual system as constucted in Ontario still doesn't give them the ability to manage their needed supplies. As thalpenny says there is a limited exemption in Ontario and that limited exemption is insufficient for them to build a sourcing program that is reliable enough for them.

I wonder what their opinion is, of a system which has no limitations on the amount exempted?

In essense a free market system in which the OWPMB and the CWB are not excluded from participating in, but there would be no minimum requirement of volumes from them. They would only market what they have contracted from farmers.

Would that type of system apease the millers?

Or do they want the OWPMB and the CWB shut down compleatly?

Back to your point about the limited exemption thalpenny, obviously the OWPMB is having trouble getting farmers to commit to them the remaining non exempted grain. It's either that or the OWPMB is making sales commitments without knowing how much wheat they actually have available to them to market? Why else does the OWPMB have to go through the brokers?

It appears to me that if the Ontario system is dysfunctional, it is only because the OWPMB is not responding quick enough to the changing dynamics of the Ontario marketplace and have not freed things up enough.

If there are other factors at play I would like to know what they are. It's just not good enough to say the system is dysfunctional because we have to pay a higher price and leave it at that.

Who else agrees that the millers need to explain their position better and the rational behind that position.

AdamSmith

[AdamSmith]

One other point relating to the above topic;

I am aware that the Grain Growers of Canada have developed a proposal that appears to be loosly modeled after what Ontario has.

The GGC proposal suggests;

1. A deregulated domestic market for all wheat and barley ie. no limits placed on domestic marketing.

2. A 25% of marketable supplies export exemption. ie. if there were 15 mmt of wheat available for export, 3.75 mmt would be allowed exemptions from the current system.

Would the millers accept that type of arrangment?

and to thalpenny, as I'm also aware that this proposal has been shared with the CWB brass, what is the CWB's position on this proposal?

AdamSmith

[parsley]

AdamSmith,

The grain belongs to the farmer when it is grown and the grain must belong to the farmer when it is marketed and there are a whole lot of farmers out there NOT prepared to negotiate a "percentage freedom".

Simply put, when export licenses are applied for, the CWB must be prepared to grant them to all Prairie farmers that apply for them. I do think there will be farmers who will continue to market through the CWB and not even apply for licenses, but for those who do want them, they must become available. No percentages. No backroom diddling.

Absolutely nothing else is acceptable, Adam Smith.

Parsley

[TOM4CWB]

Adamsmith,

Just a little understanding of the Ontario situation, farmers want to dispose of all their wheat before the bean and corn harvest in the fall, as do the commercials generally speaking.

Therefore those who spend the time and effort to store this grain into the new year expect to be paid for the risk of storing this grain, which includes the farmers.

Since the mills don't have sufficient storage, sometimes they get caught and "squeezed", as they would say.

Everyone wants free storage, at no risk, and with no carry, but this isn't how the world works, when it is all said and done, you can't get something for nothing!!!

There is much more to this situation, it would be nice to hear from a broker to hear that side of the story!!!

Again, they, the farmers, brokers, or OWPMB can't charge more than fair market value, or the millers would simply import from the 50mmt pool of wheat that is avaliable each year in the US.

So much for the CWB's theory that only a single desk can extract a premium!!!

Looks like the millers like the single desk, cause they get many services at no cost, if they are shrewd enough negotiators!