CWRS BPC

[ado089]

I haven't been following this as close as I should and without checking it daily back through it's hard to track. What does a good basis look like for this year? What do you expect going forward. Looks like Dec is about $35.

[charliep]

The CWB has good historical charts to help with your decision.

[URL="http://www.cwb.ca/public/en/farmers/producer/historical/#basis"]historical basis charts[/URL]

Is the basis good or bad? Don't know given the basis reflects the relationship between the most recent PRO and the current futures market.

I can comment in an open market because the basis can be compared to futures and a number of cash bids in domestic and international markets.

Having said that, the basis is historically very strong. You can look at the graphs. Suspect is a good decision to pocket at least some of this. Perhaps a bit of a pre-election special.

[charliep]

Current crop year is available at (starting chart 13):

<a href="http://www.cwb.ca/public/en/farmers/producer/historical/pdf/2010-11/2010-11fpcbpccharts.pdf">2010 11 basis charts<?a>

Updated to Monday.

[ado089]

So when the higher PRO is than the futures the narrower the basis gets?

New question...Is the same freight and handling charge deducted from VIP deliveries as exported product?

[charliep]

You have got me into an area a good friend and former likes to take about. I like to use stronger and weaker basis cause narrower and wider gets confusing as you highlight. The comment is the basis is offering a better/more advantageous relationship (stronger if you like).

On your other question which I assume is Value Added Initiative Program, you have the same deductions as everyone else. Everyones payments are related to a port position in some form. Your fpc is simply a way of collecting your payment up front.

[ado089]

Was that a yes on the basis being stronger (more adventatious for me) When the future get weaker than the PRO?

That's great, I get to pay an extra 2000km of freight. Who pockets that difference?

[charliep]

Sorry for using the lingo. Occupational hazard.

Yes $36 over futures is strong basis relative to history. Larger in over futures values is good.

On the question of why the $2000, you are not paid relative to where you deliver or the price paid there by that processor to the CWB but rather the over pooled price at Vancouver minus freight. Your VIP payment is meant to offset this to some extent. You can also working on trucking premiums/other things to that plant. But the basics of a pooled price is port minus costs.

To be fair, the domestic crusher price is not the same as Vancouver. Crushers pay less than Vancouver but you have to realize they pay freight on canola and meal. The crusher will also create its own demand price mountain. Dr. Derek Brewin at U. of M. did an interesting study looking at the impact of crushing plants on regional pricing. They are definitely benefiting Saskatchewan farmers - more competition between each other and the export market.

sorry for getting off but get your question all the time from farmers.

[charliep]

second last sentence "pay freight on oil and meal". Other words left out but hopefully makes sense. Should read more before I hit the send.

[TOM4CWB]

Charlie,

If the PRO goes UP $20/t... this would mean the basis would DROP $20/t in one day. Thursday... Oct 27.

THis PPO system is totally absurd.

[TOM4CWB]

Charlie,

Am I wrong?

Dec 10 futures plus basis equals Fixed Price for Oct 27 ($318.27/t CWRS).

$318.27 minus (Oct 27 Dec 10 futures) 287.72 is $30.55 plus negative $5.13... equals $35.68 Positive basis for Dec 10 FPC!

So... perhaps the PRO has nothing to do with the FPC basis?

I am confused... please help... my head is spinning!

Soooo... if I have CWRS feed wheat... after the discount for feed I get $300/t... minus the spread between 1CWRS 13.5 and feed ($134.20 minus $78/t) is $56.20/t off... for a total of $243./t. With my Handling of $55/t; I net $188/t or $5.12/bu.

I see on feed barley GDC contracts the CWB locks in the EPO.

"Note: A Guaranteed Delivery Contract must first be in place before you can apply to receive the Early Payment Option value, paid within 10 business days of delivery. Sign-up forms are available from the participating stations. You can also call the CWB to sign-up the EPO after your GDC is accepted by the grain company. The Early Payment Value and EPO discount will remain constant throughout the GDC sign-up period."

If complex is good... the CWB is the best!!!

[charliep]

You are right. I had forgotten to knock off the adjustment of $5.12/tonne. My math is the same as yours otherwise.

Also confused by the program until I remember the fixed price and other producer payment options are simply a value the single
desk buyer provides farmers reflecting their ability to manage risk around the CWB total payments. The fpc is not a real price.

The real frustration is this price is not available (as you highlighted) unless you can deliver. Sign a fixed price contract. Sign an &quot;A&quot;
series feed wheat contract. Hope that all goes well over the next six months. Why not a program like feed barley?

I can't explain. But a good question for the CWB director candidates. May take some off message.

[URL="http://www.cwb.ca/db/contracts/ppo/ppo_prices.nsf/fixed_price/fbpc-wheat-2010-mhrs-20101027.html"]oct 26[/URL]

[charliep]

The original posting was about the general fpc. I note (won't go through
the mechanics) that feed wheat calculations are somewhat different.

On other classes of wheat, you will need to follow when initial payments
are adjusted and how much. My suspicion is 1CWRS 13.5 will get the $70
adjustment payment and other grades/low protein the $50 end. If this is
the case, delivering lower/protein CWRS after the adjustment will result in
a $20/tonne lower price in your pocket.

With elevators plugged, you have no control over delivery. Suspect the
higher grades/proteins will move the fastest with even a guaranteed
delivery contract for 1CWRS 13.5 for the Japanese market a likelihood.
This will work against the pricing interests of a farmer who wants to move
2 CWRS 11.5 or 3 CWRS early to obtain a better spread on their initial
payments/a higher valued fpc.

[mcfarms]

Tom

This is what worries me on the feed wheat side of things it is set on settlement which may be in 6 days or 6 months the grain markets changing alot in that time frame anymore it seems. I would for sure be taking some of this level for the feed wheat but when this spread can change based on delivery it certainly gives me pause .



Feed wheat delivery discounts (spread adjustment)
A class specific feed wheat discount will apply to deliveries of No. 4 CWRS, No. 4 CWHWS, CW Feed and CW General Purpose settled on October 27, 2010 . Please note: a negative feed discount indicates a credit.

The discount according to your contracted class is:Feed Wheat Discount” is the value identified as such in the Pricing Schedule that adjusts the Fixed Price Payment set out in paragraph 6.b for
delivery of Feed Wheat based on the Settlement Date.

[bucket]

Just out of curiousity.

Why couldn't farmers just phone the elevator for a wheat price like canola. Sign a contract for the number of tonnes he wants to deliver and get to work.

These long ass discussions about how to figure out the fpc is non productive.

[charliep]

Can't agree more but unfortunately, these are the rules of the system you live in.

Business is being by the way. South Korea supposedly bought Canadian feed wheat for Cdn $308.25/tonne CIF (delivered S. Korea). Would have to knock off ocean freight and fobbing (ship loading cost) Vancouver/Prince Rupert. Price should be $250 to $260 ish in store.

[URL="http://www.albertafarmexpress.ca/issues/ISArticle.asp?aid=1000390507&PC=FBC&issue=10272010 "]feed wheat price[/URL]