Cash and Pooled CWB prices

[ianben]

Steve
Thanks for trying to answer my question.

I have seen a disaster with change at MMB.

In a dual market we thought we had a competative buyer when if we looked we clearly did not.

The best example I can think of is the auction system to decribe the sevice our MMB provided.

Like the auction system MMB/CWB allows you to sell all you can produce and risk manages debt.

Like the auctioneer price is of little significance to them, and what happens to the product immaterial.

Now a buyer who pays cash is different he now has an interest in price even the guy who just buys and sells wants to sell for more than he paid.
There is a greater debt risk here though something some people forgot about postMMB.
Pooling not only averages premiums but shares debt. OUch!!!

Lastly what I call a marketer.

This guy will search out new markets for my products and provide a service to my existing customers.

In our hast to be free of MMB we thought we had a marketer when we didnt even have a buyer just an auctioneer.

It doesnt matter what the law says what actually happen in practice.

What best describes your CWB?

It appears to me your grevances with CWB are that they do not buy or market.

Competing with a seller who has no interest in price is bad news believe me

Take a good look at your CWB if you are to run a dual market try to leave a marketer or at least a buyer even recognising a competative seller would help.

[ianben]

Line missing
A marketer will cash buy or pool offer me a service based on my needs. This guy/etc

[parsley]

Charliep, your questions are really interesting ones!

1. "Does the CWB ever take ownership of wheat/barley for export or domestic human food use or does it always belong to the farmer who produced it?"

When the Praire farmer moves 'wheat/barley for export or domestic human food use' to another province or into another country, the farmer ALWAYS loses ownership because he must sell to the Board.


2. "One factor I always look for in ownership is risk. Who carries the price risk of CWB transactions"

This is an important one. Look at demurrage, charliep. The CWB has both ownership and possession. They don't get the boats loaded, but the farmer gets the demurrage bill! Just one example.

Parsley

[Steve]

In the CWB pooling system or any other pooling of products falls under the gray area of ownership.

The CWB would pay the marketing expenses out of the selling price if the board paid the producer cash for his grain.

The CWB pools the grain and asks for delivered when they make a sale and the initial price is lower to accommodate the price risk factor.

The grain buyer estimates and incorporates price risk and marketing cost into the cash price offered to the producer.

A cash sale the producer pays the marketing cost up front and in the pooling system it is deducted after all costs are known and it reflects on your final payment. Yes demurrage charges are a part of the marketing system.

It doesn’t really mater how you interpret the CWB act, but that is what happens in the real world.

[parsley]

Steve,
In the real world:

The farmers who want to market on their own will be granted licenses. They will bypass the Board and market their own grain directly. It is what is already happening now, only this time, ordinary farmer applicants will be allowed to get a license. An extension of privilege, so to speak.

The Board will continue as is with a little less grain to sell. The farmers who really want the Board to market for them will continue having the Board as their single desk.

No Parliamentary change. No referendums. No Act revisions.

Parsley

[Steve]

Parsley

I agree with you as a second choice, for the CWB to issue free export licenses but we need something better.

Steve

[parsley]

Steve,

I'd really like to sell wheat like I sell flax. It's my first choice, too, and we sure are on the same page here.

But the only way to do that is to either get the CWB Act erased or modified. Do you have any concerns with doing that? The political route, including plebiscites, could take years. Have to get the Liberals on side! Do you have lots of influence there? I don't get Christmans cards from Jean Chretien.

Cheers,
Parsley

[ianben]

Parsley
Here is a story from the real world useing names from this site to make the point. No offence intended!!!!

Tom and Parsley have the licences they require. They meet eatmorewheat and find they can supply his needs. They will grow exactly what he wants and deliver just in time etc. A fair price is agreed. Everything goes well. Eatmore wheat decides to invest in some new plant.

Now BigmultinationalNo1 notices he is loosing market share to Eatmorewheat.
He put a very low bid into CWB. Sales at CWB have been poor and price does not matter that much to them after all.
CWB accepts bid.
Before Eatmorewheat knows about this BigmultinationalNO1 has taken most of his customers with a special offer deal.

Eatmorewheat goes broke and Tom and Parsely are badly hurt.

Bigmultinational1 sees another opertunity to take market share from Bigmultinational2.

He slashes the price of bread.

Bigmultinational2 aproaches Tom and Parsley and offers an even lower price. They are in no position to argue and accept.

About now Vader finds out what price CWB sold his grain at.
He is apalled.
He sets up Vader and Co but who does he blame for this low price.

Using Vader logic it is not the CWB but Tom and
Parsley who are the cause of his problems.

So Bigmultinational1 and Bigmultination2
fight for market share offering less and less to Tom Parsley and Vader.

The hatred the Vaders have for the Toms and Parsleys means working together is totally out of the question.

This is a simplified version of what happened with MMB in UK.

Remember the real world will not stop while you change the CWB and you cant press the rewind button either.

You will have one chance to get it right!!!

[ianben]

Just a further point I am not sure I made clear.
In UK everybody who offers a pool price option also offers a real cash price 365 days a year.

[Steve]

Ianben

Your question: What describes your CWB?

A Government with a very large majority of the seats occupied by arrogant politicians is the best way to describe the CWB or a bully in a schoolyard that doesn’t care what the smaller kids say.

We need change to the CWB that respects all farmers regardless where they live in Canada and don’t rob Farmer Peter to pay farmer Paul.

Steve

[parsley]

Steve,

With that comment, you're not going to be on Jean Chretien's Christmas card list either!

Parsley

[TOM4CWB]

Ianben;

Multinational #1 goes to the CWB today...

The CWB is asked for a discount price against Multinational #2...

The CWB gives #1 the cheaper price, as the #2 price looks legit...

What you say can happen without the "single desk" already can easily happen...

In fact it can get worse...

#1 can create a legit appearing lower market... because #1 is so big... and the CWB feels it has an obligation under law to give lower price to #1.

The only way to stop the price from sliding is to have "designated area" producers say no to the CWB sale... and with pooling this cannot happen.

With Canola... you should have heard our domestic Canola crushers schemeing to put Canola under the CWB...

They said it was unfair that they had to bid against the higher export premium market... where if the had the CWB to supply them... they would always get supply... at the lower price...

The open bid transparent system may not be perfect... but it sure beats letting someone else sell my grain...

We can go around in circles all day... but because the CWB does not offer cash prices transparently... they are going to loose this battle.

And I guess the CWB would rather dismantle itself... than allow itself to be subjected to ridicule over past "monopoly" theories it has stated as truth, which are in reality fabrications!

[TOM4CWB]

Charlie;

Just a question...

WHY exactly would the CWB prevent our domestic industry from bidding a good price for our high quality wheat... and consuming it inside Canada?

Would this not be the most profitable and best for everyone?

Why exactly would the CWB force our domestic wheat consumers to use substandard grain products, which will in turn create substandard milled products... completing the circle of uncompetitive products... while US processors have access to whatever they want?

Or is the CWB giving a deal on lower quality grain... so these processors can actually make money on the deal... and sell for less with a competitive advantage?

Or does a 3CWRS make just as good products as a #1CWRS... and this whole grading issue is a smoke screen for subsidising low yield fields... with high prices?

[charliep]

I don't know how to answer your questions. The millers (my understanding can buy higher quality) but they have to be prepared to pay a Japanese equivalent price (or better). Not a lot of 1/2CWRS around this year and almost all on the east side of the prairies.

You question about milling quality is also beyond my technical expertise. Flour yields are lower on 3CWRS. If damage is sprout, then falling numbers can be bad (shows up with bread that will not rise). This product does not fit needs of high quality flour markets. For the generic markets, fits the quality needs mostly (provided reasonable protein - > 12.5 % and falling number).

[TOM4CWB]

Charlie;

Is there a good reason that domestic millers should not pay Japanese prices backed off for transportation?

In the USA the domestic millers must compete with the Japanese for high quality wheat, no different that for Canola going to the CDN crushers vs. Japanese buyers. The Canadian crushers have long complained about competeing with the Japanese export market for price and supply.

What exactly is the structural difference between the Canola market and the high quality milling wheat market... and the premium the Japanese pay for either one of these products?

When I exported my wheat to NW Montana, and recieved a Seattle basis export price, was this not the basis for Japanese deliveries as well?