New freight charges for Winter Wheat

[redbaron]

Adam - I am not sure if it is the wet weather that has you primed but love your formula.

Pardon my ignorance but why would increased production of winter wheat in eastern Canada reflect on my freight rates out west. Hey when the markets were being shipped out of eastern Canada we still paid. How does the CWB have any jurisdiction on freight rates that is not part of their monopoly.

[Kodiak]

FAF- Freight Adjustment Factor

An amount (arbitrary) charged by the CWB to account for the extra costs of getting CWB grain to export position in Eastern Canada (Montreal, Baie Comeau, Quebec City) from Thunder Bay. The rational is that eastern prairie farmers should have to pay the full cost of getting grain to export position rather than just to Thunder Bay since more western located producers are deducted rail freight covering the full cost to export position in Vancouver. Initial payments are based on Thunder Bay and Vancouver, even though Thunder Bay is only part way to export position.

But as I think most people know, it doesn't matter where the CWB is actually shipping grain to from any particular location. (That’s a topic for a whole other thread) Farmers who deliver CWB grains are deducted rail freight based on their proximity to either Thunder Bay or Vancouver - the reference point for initial payments. I believe the "centre" is Scott Saskatchewan, a point where at one time the rate going east was equal to the rate going west, and depending if you were east or west of Scott, your freight deduction was either the Thunder Bay rate or the Vancouver rate, which ever was lower. Freight rates were “distance related”.

The rational is that the FAF is the way the CWB can simulate what would happen naturally in an open, competitive market.

But since we don't have a competitive market there is no real way to arrive at a market value for CWB grain or for the market to arbitrage and allow grain to flow naturally to the area which would net the seller the highest value, it has to be simulated and conjured up.

So why we just don't open the market up so that wheat and barley find their highest and best use and flow naturally? The CWB turns itself inside out and creates all kinds of complicated formulae and calculations (FAF being just one example) in a futile effort to try and simulate it. But because the marketplace is a dynamic thing - always changing - they can never hope to get it right anyway. And furthermore, while they say they are trying to simulate what would happen in an open market, we all know of examples where other motivations dictate their decisions, and why we must never know what goes on inside their black magic box.

Besides, for the CWB it’s better to keep things complicated so that it can’t be figured out. It leaves all kinds of wiggle room in the pool accounts to cover up mistakes, arbitrarily reward things that the marketplace may not reward but the CWB wants, and makes farmers (some at least) think they need the CWB to protect them because, after all, wheat marketing is way to complicated for farmers to understand and Cargill and ADM would fleece us all.

In short, in the minds of the elite thinkers at the CWB, farmers are way to dumb to make the right decisions.

[furrowtickler]

Funny, where is agstar,willie,burbot? Strangly silent when the CWB is caught with their hands in the cookie jar.

[Jay-mo]

They're still doing the math on the above stated formula's......"hmmm, hehe thats good stuff

[Fransisco]

Substitute the word farmers for parents and CWB for Department of Education and this clip pretty much sums it all up.


http://www.youtube.com/watch?v=LLDb2V86Ei0&eurl=http://gerrynicholls.blogspot.com/

[wilagro]

Never cared for "Mr. Prime Minister" and still don't.

Can't see any relationship to the current discussion about freight rates.

Ho hum!! Next posting...

[charliep]

Kodiak got the answer. Prize is recognition.

The maximum adjustment factor for wheat ex durum is $8.30/tonne ($12.35 in 2007) and $5.99/tonne for malt barley ($6.68 in 2007). Durum has is basically zero although there is a buckish negative FAF (reduces CWB deductions) in some eastern locations. Feed barley is zero (used to be a small FAF in southern Alberta to reflect access to US market.

For a brief explanation of mechanics, see:

http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/econ8946

[parsley]

charliep,

1. Factor setting is obviously indeterminate, with new fees and rates popping up at random, so your posting might already be out of date.

2.CWB staff take their recommendations for consideration to the Board to get them passed. Some staffer came up with this brainwave and the Board passed it because it taxed the farmer some more. Ca-ching. Let's not try and make this look as if it has rhyme and reason. It doesn't. Not in an organic sector. It's another money grab. CWB Staff = Self Interest.

3. Price setting for fees: Is it an open process? Is it transparent? Is it consistent? Bang. Another fee. Bad PR. Bad formulation. Bad introduction. Bad explantion. Bad policy. Bad idea.


I'm a sore loser, charliep. I wanted to mulch that bloody hat.

Parsley

[parsley]

I'd like to poke the kodiak type with a lead pencil. Every word perfect, with his shoes shined, I'll bet. His mother probably licked down the hair sticking up on his head with her finger every day, too. ....that's how he learned to market to win.

Parsley

[Kodiak]

Ouch - that could hurt Parsley!