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Adjustment Payments - 2006/07

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    Adjustment Payments - 2006/07

    Will also note that the federal government approved (and the CWB announced) adjustment payments. I will note that the payment adjustments are aggressive (under the conservative watch) versus levels the former government announced at a similar time in previous years. I note feed and malt barley initials sit at about 80 % of expected total payments. Wheat is about 70 %.

    I also note the CWB has also tried to bring the protein and grade spreads somewhat into line with zero adjustment payment on high protein (15.5 % plus) to a $27/tonne increase on 3CWRS). You need to recalculate the relative advantage of delivering different CWRS grades and proteins against your fixed price contracts.

    Anyone who has already delivered high protein wheat against a fixed price contract - you have additional money in your pocket. Those who haven't (either your decision or no space or not called) - your relative price has gone down. Anyone with lower grades (#2 and #3) or lower protein - the new initials are in your favor when applying a fixed price contract to deliveries. Again, you have to rework the numbers by comparing the PRO spread (Thursday announcement) to the initial payment one.

    #2
    I highlight the historical price charts for the daily pricing contract and spreads.

    http://www.cwb.ca/en/farmers/producer/historical/pdf/2006-07/dpccharts_dec112006.pdf

    I note the dpc spreads reacted to changing market conditions. The same cannot be said for the fixed price contract which only changes with initial payments. One day can make thousands of dollars in your bottom line in a situation where you do not have delivery control.

    I also not the premium of the dpc over the fpc and pro. The benefit is at least $10/tonne - winter wheat is close to $40/tonne higher in the dpc.

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      #3
      Only one interested in this/likely too far down for anyone to look at but thought I might also highlight the proposal for the CWB to take over all aspects of initial payments/adjustments. They will use a contingency (plus whatever they can get out of the federal government) to backstop risk.

      Comments? My only comment is the producer pricing options already have a contingency fund which has raised questions. How much better managed would a CWB managed contingency fund for the overall pool be?

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        #4
        I'm thinking they'll raid the PPO contingency fund to support the pool accounts (again).

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