Questions about the new cwb

[ProFarmer]

Why are you worried about the grain companies screwing you? You must be from that small brainwashed few that think only the CWB can do the best for you, Give your head a shake! The CWB has been screwing us over for years and it is time for change. We would not be farming here if it was not for the private companys and the open market on canola , flax etc. Educate yourself and get out of the coffee shop and learn a little about marketing and you will do good for yourself. A quit running back you mommy CWB she is gone move on...

[riders2010]

So smartass are you signing up for contracts without knowing the discounts? That'll be nice possibly locked into selling #2 for less than feed won't it? What f'n school did you go to? I see you must have got grade one diploma good for you, is it hanging up on the wall hillbilly! You think you're not getting screwed? how stupid can you be. Yaa canola is so profitable if you grow 40 bushels every year all the time. what about when you don't? is that built into the price? Is that why no young farmers, more turnaround than a *****house in terms of farmers going broke. Take a look around you.

Did I say the cwb was good? No and god knows shouldn't have to list the reasons on this site, but if you think there is gonna be this big bonus now think again. This is a shit show at best. And I will say that looking at this now guys farming north of about Yorkton, who knows what kinda delivery system, logistics for different grades there will be. etc. Even a remote chance for those areas north things may be worse than before.

[bucket]

This is part of what I don't understand. The cwb had a system that could accept all grades into the system and make it work. It had a system of discounts that were predetermined. And for as much grumbling, it worked.

And yet they are the last to the table with any kind of new crop program. And they have five years of guaranteed backing.

It really is incompetence.

[bucket]

Why did I ask about the cwb?

I believe once they put a program in place, even if it is similar to what they have been doing, it may define the discounts and premiums going forward.

That forces the grain companies to make known their discounts. I would not sign a contract without knowing that.

[riders2010]

I agree totally, you would think they would have been chomping at the bit to get out what they have to offer. But it is like a dead zone, and soon enough too much of the crop will be committed elsewhere for them to be even economical to operate is my thinking could be wrong. But is it the people that were there? or the ones apppointed to self destruct or what?

Big opportunity being missed I think anyways!

[bucket]

I have to agree. If was the previous board unwilling to make changes then its on their hands. Scorched earth.

And if it is the new board then its just wrong.

Either way they, meaning both boards, lost an incredible opportunity.

Ask cotton. He had a list of economically viable things the new cwb could have been into by now, make both farmers and investors money.

[charliep]

Note the comment about the sanity in signing wheat contracts when grades and protein spreads when they are not established.

The reasons I would look at new crop contracts (CWB or grain company).

1) My financial plan/cash requirements and market plan are to sell wheat off the combine in the fall. If this is the case, you will be locking in whatever the grade spread in wheat is anyway based on what you sell in September/October anyway. In the new world, you will have to think more about delivery access. Farmers with contracts will generally get first access to the elevator system.

2) I farm in an area that consistently over time gets 1 or 2 CWRS wheat 13 % plus protein. By that I mean gets 1/2 at 7 times in the last ten years. If you are in an area that normally gets a low protein 2 CWRS or a strong likelihood of 3CWRS, then I suspect you should be looking at CPS wheat and making your pricing decisions about this crop (you can lock in a price with lower grade spread risk given only 2 grades and Canada feed).

3) Your market outlook indicates a strong possibility of lower wheat prices this fall. In this train of thought, hedging directly using futures may be a better alternative versus contracting directly with a grain company - more alternatives in the fall to react to grain companies based on knowledge of the actual grade of wheat in your bin or ability to lift the hedge if things don't work out/markets go crazy this summer. Low volumes/open interest ICE Canada still. Currency risk US futures markets. Still have not established a delivery access in the fall (important in the new world).

[charliep]

On a risk on the third point, we still don't know what a good basis is for either Canadian ICE Canada futures or the relationship between Canadian cash prices and US futures.

[bucket]

The cwb has for years put in place a system that defines the grade and protein spreads. It was called an initial payment. Typically interims are pretty generic - just topping up.

The question becomes - why can't the cwb introduce a program that follows what they have done in the past(and according to them successfully and at a premium) in regards to grade and protein spreads???

[charliep]

I won't second guess what will occur in CWB programs over the next month.

I will highlight that initial payment spreads (and for that final paymenet ones) have nothing to do with market value/signals but rather are a way of allocating funds within the pooling system. In the new world, spreads will be based on the market/what is being paid on that day.

CWB payment spreads have never really reflected full market spreads and to get people ticked have reflected a transfer of revenue from farmers who grow high quality/protein to those at the lower of the scale. You are going to get a lot more signals in the new with spreads likely to widen. Perhaps to Riders point, this reflects a higher risk on contracts when you try to apply lower grades/proteins.

[bucket]

The current spread between a 13.5 and a 12.5 is a buck a bushel.

That seems steep but maybe more reflective of the market. And then one starts to wonder if it would make more sense to grow feed wheat will higher yields?

[charliep]

A question I get at all the ARD meetings about wheat and barley marketing transition that I have presented at is will western Canadian farmers will grow more mid quality wheats in the new world (prairies spring, winter wheat, soft white). Not sure my self but history will tell us in a couple of years.

Each of you will have you own answer based on your farm of the yield advantage of mid quality wheats and from their grade/protein risk.

You will have to do your own risk assessment on contracting. I suspect there are many ways to position yourself to enable to capture some new crop pricing and keep your spread risk to an acceptable level based on what has occurred on your farm in the past in terms of grades and proteins. This has to be tempered with the agronomic realities (soil moisture etc.) this spring. Not suggesting anyone sell the whole today but I would be prepared to do some pricing over the next couple of months.

[bucket]

But without knowing the grade and protein discounts, you could end up selling 12.5 px cwrs for less than the ethanol plants price on feed wheat.

I am not sure it makes sense to discount food grade wheat to less than cattle feed.

[charliep]

On your comment, spreads can change quite dramatically with adjustment payments. High protein CWRS is likely to get a $20/tonne plus adjustment in the next couple of weeks. Low protein and mid quality likely to get nothing or close to nothing. Work the numbers on existing deliveries of low protein CWRS into the pooling system or try to find a delivery home for the same quality wheat/sign a fixed price contract. As highlighted before in Eskimo, I suspect you can add $500 to $1,000 to your bottom or a 10 % improvement in price on "B" train. After the adjustment payment is announced, the opportunity will be gone (two weeks).

On the spread side, many farmers in Alberta felt the pain last year (2010/11) of signing fixed price contracts at what what proved to be relatively low price levels and then getting feed wheat. Between big spreads and the feed wheat discount, the pain could best be described as extreme.