HRSW CWB Basis

[lakenheath]

Funny how the basis drops from 63 cents to 54 cents the day after the PRO's come out. For 2 months the basis (low value to begin with) remains consistent and then drops without reason to 54 cents in one day dropping the fixed price payment contract to it's lowest value since the fixed price was first offered this year.

Maybe I am missed out on some fundementals that drive this basis figure.

I anyone knows please help me.

[melvill]

Good question, lakenheath. The CWB basis can move up or down on PRO day based on this formula:

Basis = Reference Grade(in this case,13.5% HRS) PRO - CWB's Forecasted Futures price - discount (for price risk management, time value and admin costs).

If you look at that formula carefully (what an exciting task!), you'll see that basis can change on PRO day for two main reasons: 1) if the PRO changes and 2) if the Boards forecast for the futures price changes. It could also change if the Board's costs for the discount change, although I suspect those changes would be relatively slim compared to the other two.

In the past, sometimes the basis got stronger on PRO day or sometimes it got weaker depending on what happened to those two main factors.

Hope that helps.

[wd9]

Lee, is it possible to have a fully open market for board grains, like canola with cash and futures, but still operate as a single desk seller? With the programs available we are seeing part of it, but can it go further, and if so how far?

[cropduster]

Mel....am too suspicious!!!With a 600% increase in these FPC`s any movement in the basis deserves an exam.Any idea what that FPC`ed tonnage is?Ooops...it`s probably a national secret??!!

[melvill]

wd9, I'm not certain that I understand your question.

If the question is 'can we have a fully open market like canola with cash and futures'without the CWB, the answer is 'of course' provided that enabling legislation (rescinding the CWB Act) passes the House of Commons.

If your question is 'can we have a fully open market . . . . and a single desk' both operating together', I don't know. (This last statement might be a career-limited comment.) I've been struggling with that question for quite some time. I've asked that question of some other people trying to figure it out and they don't have an answer, either. As usual the devil is in the details.

When I think of some of the neighbors around our farm, I cringe when I think of them trying to market without being able to pool! Others would, I'm sure excel at it because it's something that really interests them.

[melvill]

wd9, I forgot to answer one of your questions which is, I think, 'can the current programs go farther?'. Yes, one I'd like to see is a spot basis in addition to a pooled one and a spot cash price both of which extend further into the crop year, although, I confess the current programs extending to Oct 31 serves much better than ending July 31.

[melvill]

cropduster, the tonnage commited under the Fixed Price and Basis Contracts is relatively easily available (unlike the secret to getting a 6-volt Chrysler flathead six to start easily)<grin, private joke>.

FPC tonnages were approximately:
- 01-02 - 88,000 t
- 02-03 - 44,0000 t
- 03-04 - 735,000 t
- 04-05 - 940,000 t
- 05-06 - 280,000 t

BPC tonnages were approx:
- 01-02 - 85,000 t
- 02-03 - 14,700 t
- 03-04 - 110,000 t
- 04-05 - 235,000 t
- 05-06 - 353,000 t

[TOM4CWB]

Melville,WD9,

I agree that the "single desk" and pooled sales, and pooled basis; are not seperable.

For instance:

“From : Ms. Felicity Johnston[UN Auditor OFF contracts]…
Subject: Irregularity in Iraqi Contracting

… I confirmed to Mr. Berne Saunders at the Canadian permanent mission that money should not [not underlined] be paid to a Government of Iraq bank account in Jordan… I suggested that the supplier could perhaps appease the Grain Board of Iraq by offering to accept a lower value per metric ton for delivery of the goods to Umm Qasr and this lower value could equate to the $700,000 transportation cost quoted by the Grain Board of Iraq, The supplier followed this course of action and has not been awarded the contract.”

"Date January 13, 2000 UNO.0006.0037
To: Mr. John Almstrom"
http://203.94.171.34/offi/exhibits.htm

So Lee and WD9;

How could the CDN supplier offer to pay the bribe to Saddam... if they didn't have a pooling account to pay the money from in the first place and the "single desk" to extract the "kickback" out of?

If just futures, cash prices, and a competitive basis were used...

Back to back sales that were not done through the pool accounts (as all sales are done now);


Then a comparison on different sales could more easily find this kind of issue out... especially if yearly audits become the norm at the CWB.

Secrets like the UN let out of the bag... havn't been avaliable before in the public realm...

Clearly they identify the CWB "problem" (a lack of accountability)... which becomes our problem as "designated area" growers on the recieving end of the pooled basis and pooled grain accounts, and the likely resulting lower prices.

While this example does not prove that the CWB does this often, it is independant confirmation that they were willing to make the offer!

IMHO... thats enough proof for further investigation... at the very least~!

God bless Canada!

[melvill]

Hey, Tom whatcha doin' in the house at 11:08? Did you get rain over the weekend or are your fields too set to work? Found out on the weekend that ours look dry on top but, under the crust, they're dangerously wet! Oh, how I hate the 'near-death' feeling of tractor tire slippage this time of year!

[cropduster]

Sorry above the off topic but can`t resist .......Melvill.....surely you JEST about the `Special Areas`!!!And no cracks about the posting time here either!!