pricing wheat for 2012

[disker]

Now that the cwb changes have come about
what are everyone's thoughts about contracting
wheat? I have a couple of concerns and would
like to hear what other guys are getting for
offers/options.
- what are companies going to use a a grade
base, I have heard 1 hrs 13.5 and also 2 hrs
13.0 I have concerns ad well about hvk and
falling number grading. If the companies are
using grade discounts at time of delivery and we
don't know what the grading standards are I am
concerned. The Cgc needs to step up and
announce standards. I am also concerned about
grade discounts at delivery and buyout costs/act
of god clause
-what about trucking premiums, I have heard
they are done for next year and it would be in
the basis. With the current offers in our area I
would be farther ahead to sell it now and fix
price it with the trucking premium.
There is going to be some learning curves for
all of us but it sure is nice to have options. I
hope as a group we weed out the programs that
put all the risk on the growers and the rewardto
the handlers.
Also what happens to the contracts if some hold
up comes Aug 1st
Curt

[wd9]

I think many people may have trouble grasping the concept of growing and being paid for what the customer wants. Certain varieties have better baking and milling qualities.

The future is wide open with an open market, at least i hope so.

[jimbobobaroo]

I only have a couple tidbits that I have heard from
Cargill as far as I was told.

Their contract will be base #1 - 13.0 protein.
The protein spread won't be able to be locked in
until date of delivery. They told me that they
couldn't lock it in ahead, so it couldn't be
guaranteed.

A slight murmur about no trucking incentives, on
account of basis taking it into account, but no
confirmation as of yet.

Anyone have info on the Viterra contracts?
Richardson hasn't let their programs out yet that I
am aware of.

[TOM4CWB]

Disker,

Take out the word 'Canola' and put in 'wheat'.

We negotiate Canola premiums and discounts on grade and quality every year.

There will be massive changes in contracts August 1 as we move to a spec. based shipping system of filling contracts... much like we do with Canola today.

Japan is the only country using CGC papers to settle Canola contracts today.

Much the same will happen in wheat as we move forward... after August 1/12 reducing handling costs and increasing 'just in time delivery' efficiencies.

The industry has been transitioning in off-board grains for some time. Customers have the specs they require and are willing to pay for. Industry delivers... CGC grades are secondary quality determinants.

All of which means more consistant time sensitive deliveries delivered when and how the customer needs the products.

The colour sorters and specialised cleaning equipment being installed means consistant shipping of specs needed will be attained.

Win Win for all involved.

[farmaholic]

With all due respect Tom, I don't think it is that simple to just replace the word canola with wheat. There are way more grading factors affecting wheat than canola. In the whole contracting process I think we will find the grading discounts/premiums to be the most frustrating. Most other contracting details should be relatively straight forward, like canola.

I don't think we will be able to dump our wheat on the market and get what we want. Marketing power will come from the ability to hold the product and find the buyer who actually wants your wheat based on it's quality specs. If you don't need the cash flow or can generate cash flow with some other crops, build bins and store it until your satisfied your getting paid for what it's worth/is. We may find wheat will be the crop we still have to sit on and use other commodities to generate cash flow. Will I always get a premium for my #1CWRS 15px, or will I have to wait to find a buyer who needs it to blend up their lower px wheat stocks.

[charliep]

What will change on August 1.

Real prices based on the market. Not a price
forecast in terms of a PRO or a fixed price contract
based on locking in a payment relationship with a
PRO.

Real protein price spreads based on the market.
Not unknown spreads that will be determined in
final payments or spreads based on the initial
payments at delivery time in the case of producer
payment options.

More ability to match what is in a farmers bin with
delivery requirements for set periods. More
accountability in the delivery system. Today, some
ability to negotiate trucking premiums but no real
incentive by anyone to segregate quality except at
the minimum grade standard level.

More ability to lock in delivery periods consistent
with a farmers needs to get paid/cash flow
requirements.

Downside - need to pay more attention to
marketing. Suspect a farmer who pays attention
will be paid well for extra time.

[farmaholic]

Going forward, now more than ever, it will be important to know what you have in the bin. We will need a quick test for falling number, or at least have your own tested so you know what it is. I detest the subjective nature of grading. If the measurable factors meet the end users specs, does it matter how pretty it looks(a bit of frost(or whatever) or not). I find the CGC extremely tough and have always done better at the local terminals with "getting the grade". I too beleive that those who put an effort into marketing their grain will be rewarded.

[VK58]

Interesting comments about the grade/protein premiums/dicounts. At the local terminal on friday afternoon the spread sheet for protein showed $7.50/t for 14.5 pro, 7.50 for 15.0 pro,no bid for 15.0 pro,-$21.5 for 12.5 pro, -$3.95 for 13.4 pro. Base price was for #1 13.5. Any basis would be determined at time of delivery only. This policy seems to be the same as our neighbouring US elevators.
Talking to our US farming family members in ND, they thought that hrs wheat was the least likey commodidity for them to pre-sell as the basis was extremely volatile.He said the last two marketing years has seen the basis change over $1 to as much as $2/bushel within 2 weeks. Locking in a delivery period/delivery point hadn't seemed to work out for them. They thought it was far safer to sell canola,corn and soybeans than wheat.

[jimbobobaroo]

VK. So the protein discounts were lockable but basis
was not? Was there any indication of a basis range?
Was this Viterra's offering? My gut feeling is if there
is no basis to lock, but only really a forward futures
type of price, it might just be better to hedge on mgex
or the new ice milling wheat future, at least there is
any easy out if the basis doesn't fall within a
comfortable range.

[VK58]

No, thats incorrect, each grade/level of protein has a different discount/premium to be determined at time of delivery.The premium/discountwill be reflected in the basis for the non conforming grade/protein level,that day. ONLY #1 13.5 has a set basis. This is why my American friends hesitate to lock in delivery date or location,the volatility is a killer. Two elevators same wheat,same protein same day different price, dependant on each elevators needs that day.They feel it is better to bin the crop and let the basis determine their deliveries.