Pricing Durum into 11/12 cropyear

[charliep]

Good questions for the Director at their meetings over the next 3 weeks.

[URL="http://www.cwb.ca/public/en/newsroom/events/farmforum/"]farm forums[/URL]

Perhaps a pet peeve of mine but everyone will complain here but no one goes to the director meetings to ask the director/CWB operations people in attendance about important issues like this.

[highwayman]

Would have to assume that current pro for 2010/11 durum is as good as it will be and perhaps will fall as major amounts of durum are pulled out of the B series contract offerings before the March 31st deadline. This in turn will most likely cause and increase in the adjustment fee to roll contracted durum forward committed under the A series contract. Quite ironic when the board can threaten liquidated damages on undelivered contracted grain when they have no obligation to take delivery of the same grain. Makes you wonder if such a one-sided contract would hold up in a court of law.

[highwayman]

Would tend to believe that the upcoming CWB Farm Forums will be attended better then past events with the multitude of contentious issues that are presently making headlines. Heated discussions will most likely occur involving ship purchasing, wheat and durum markets, government bills allowing opting out, just to name a few. I for one have more than one such meeting marked on my calender to attend.

[charliep]

Perhaps a measure of risk is the EPO premium. I note the discount/deduction for a 100 % EPO is $24.04 (durum).

[URL="http://www.cwb.ca/db/contracts/ppo/ppo_prices.nsf/epo/epo-durum-2010-20110303.html"]durum epo[/URL]

The discount/premium for 1CWRS 13.5 protein 100 % epo is $14.58.

<a href="http://www.cwb.ca/db/contracts/ppo/ppo_prices.nsf/epo/epo-wheat-2010-mhrs-20110303.html">CWRS epo</a>

Difference on the 90 % epo is about $5/tonne. Higher premiums for durum would indicate higher risk of not achieving. Perhaps related to delivery patterns and support your hypothesis is what you see is what you will get on the durum PRO.

[charliep]

You guys ask a question and it gets to be like a tune that won't leave my head.

Issue. Cross signals. Old crop versus new crop spread tells farmers to store durum. The durum pool would gain addtional value from old crop deliveries and sales. Would also meet export customers needs for supplies this spring.

Solution. Offer a zero cost 100 % EPO. Benefit - more farmer deliveries and sales at higher prices therefore increasing the value of the 2010/12 pool. Still less than the 2011/12 forecast but getting paid on delivery (or 2 weeks after) will take some of the sting out. If additional sales add more value to the pool, everyone benefits. Risk is durum prices decline and the contingency fund eats the losses of current PRO value (whats the risk).

[TOM4CWB]

Charlie,

I was doing some EPO's today and saw that #4/5 Durum now have the same to 200% EPO as feed wheat.

$243.31/t #4 Durum 200% EPO
$232.02/t #5 Durum 200% EPO


Buy backs this afternoon on Durum:

Cost above the PRO March 4th 2011

#1-12.5px Durum- $94/t above PRO@401.91

#2-12.5px Durum- $99/t above PRO@384.07

#3-13px Durum- $83/t above PRO@351.94

#3 Durum- $76/t above PRO@ $337.67/t

Feed Wheat is $44/t above PRO@ $289.06

#3CWRS 14px is $43 above PRO@$367.73/t