hardcore vs soft core

[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!

[TOM4CWB]

Adamsmith,

I made a mistake, on the storage, carry, risk, western "designated area" producers don't visibly get paid either, and the perfect example is that my neighbour who has a unpriced CWB basis contract, for 2001-02, supposedly owes about $27/t to get out of this unpriced contract, just to let it go back to the pooling account...

SO the CWB expects us to pay, and we "designated area" producers pay for storage at the elevators to hold wheat for the millers... through the pooling accounts... NOT like in Ontario... where farmers and brokers/elevators get paid to hold the grain for those who need it later...

Now who is being treated fairly, and who is not?

[AdamSmith]

Tom4;

If your neighbours contract is a CWB Basis contract and he has not yet pulled the trigger on the price, he should be able to get out of the contract with just a nominal charge.

I believe I asked about this and as I recall, either $2/t or $4/t was the charge that the CWB info guy told me back last summer.

But I guess like everything else at the CWB the rule is, there are no rules.

But speaking of CWB pricing options I had the misfortune of trying out that same basis option with my CWRS.

#2 15.5 CWRS will fetch me $4.00/bu give or take a few cents.

I sold most of my CDC Clair winter wheat into the domestic feed market throughout the winter and I recieved $3.85 FOB farm.

I still have a couple of superB's of the stuff and I'm sure I can get $4.25-$4.50/bu FOB farm Manitoba. Unless I hold it back for seed.

Needless to say I won't be using that program again and I would reccommend that others steer clear of the CWB's new pricing options.

So my own real world experience would suggest the CWB system loses my farm money. Under the domestic quasi-free system I made some money and a broker, even made dime.

The CWB and the flour millers call that dysfunctional.

I call it wealth creation!

[Muttley]

I use a hardore JD 430 baler and find the bales great. Good and solid to haul and stand up well in a stack over time rather than going flat.

I do find however the cost of balers getting to high, I think I may go to a softcore in the future but if I do I won't get the real large ones.
I have friends that use 5'x 5' softcore and I like the firmness of the bales. I see the bigger bales getting pretty sloppy.

[TOM4CWB]

Adamsmith,

I may need some winter wheat to seed on my written off canola land, so don't dump it yet! Lots more like me, especially if rain doesn't come real soon...

I see the OWPMB pays $.07/t/day from Sept 1, $2/t/month wouldn't be bad, would it! Maybe the CWB should get the hint!!!

See the string on PPO's, I think the CWB is in a real squeeze, and big problems are coming home to roost...

They don't want big transfers into the 2002 PPO's of 2001 wheat, so they messed everything up to save their own hide... a totally disfunctional system that has no basis in reality...

What else can we expect from folks with such a.... view of marketing???

A person can make money from this PPO system, but it is at the expence of other farmers, and is wrong and immoral, so I agree avoid the PPO contracts....