Deadline for CWB Producer Pricing Options

[charliep]

Just a posting to get some chatter going around CWB pricing options. You have three weeks to make this decision including booking basis if you want to keep the alternative open to lock in a price.

Should a person lock in a fixed price contract? Supplement with a wheat call? Loonie relative to US buck?

Sign a CWB basis contract if uncomfortable with the flat price offered by fixed price contract?

Leave both but be prepared to utilize the early pricing option next fall?

The reason I bring up these issues is to get you thinking about your market plan for CWB grains. This is particularly the case if you are in a cashflow crunch this fall (impact of drought, uncertainty over calf price/potential that you will background calves/retain heifers instead of dump, etc.). My objective would to have one third (good financial situation) to two thirds (tight cash/poor balance sheet) of Oct./Nov. cashflow needs covered through forward contracts.

[charliep]

Drought impact refers to last year - no crop to sell last six months.

[TOM4CWB]

Charlie;

The EPO option seems like a much better alternative to a Basis or Fixed Contract.

We do really need to see the CWB 03-04 initials to make any judgement anyway.

The CWB and gov. are chicken to tell us just how low they are going to be, which is not fair for managers who need a little time to digest and figure out the best course of action.

The Last couple of years was a typical gutless Goodale job, wait till the last day of July for the CWB to tell us, rather than giving us a week to work issues like PPO contracts through.

THE CWB directors already know what the Initials will be, why not farmers?

[charliep]

Based on what has happened in the past, the new CWB initial payments are likely to be 75 % of the June PRO forecasts. As an example, the initial payment for 1CWRS 13.5 would be $145.50 basis port (June PRO $194) or a Alberta based initial payment of about $2.75/bu.

As a note, the CWB still has to get approval from the federal gov't (taxpayer guarantees) prior to releasing the new crop values. The recommendation comes after the June PRO.

[TOM4CWB]

Charlie;

I understand the recomendation for initials goes from the CWB to the feds, then the feds fine tune CWB prices.

We can be sure the fed will be on the low side of prices this year... some times the fed forces intials down to 55-60% of the PRO, depending how generous they are feeling.

With the advent of the EPO payments, my guess will be that the fed is going to make the CWB back the risk of EPO payments, from the CWB contingency fund, allowing the fed to set the initials on the LOW side of the price spectrum.

Don't be surprised if initials are the lowest in modern history (20yrs or more)!