July CWB PRO

[charliep]

Just a note that the CWB released the July PRO today. Specifics can be found at:

http://www.cwb.ca/payments/pro/2002-03/072502.shtml

http://www.cwb.ca/payments/pro/2001-02/072502.shtml

1) Old crop CWRS contracted but unpriced - Caught between the devil and the deep blue sea in that I hate to carry crop unpriced into a new crop (leave my money in the system for an extra year). If you can afford, likely the way to go. Other options. Hold your nose and sign a fixed price contract/price out right away August 1. If you are over 85 % delivered on your CWB contracts and still have in the bin - sell non board regardless of grade/protein (will need to include trucking premiums/other incentives in this decision).

2) Old crop durum - Price all contracted old crop supplies into 2001/02 crop year.

3) New crop spring ex durum - still concervative even under the current market. Only high protein 1/2 CWRS wheat should be contracted under the current scenario. Remainder should go to the non board. Basis on fixed price contracts has gone from bad to worst. Current 1CWRS 13.5 basis $2.30/t over the converted Dec. MGE price. June basis - $11.62/t over. May basis - $24.72/t over. Unless you have a May contract, do nothing.

4) No comments durum. Feed barley - who cares.

5) $207/t minus a $40/t CWB deductions equals $177/t or $3.85/bu for SS 2 row malt barley. The only place this will present a viable alternative to the domestic feed market is Peace River in Alberta. I note the CWB actually widened the 6 row/2 row spread for 2002/03 but still narrower than 2001/02.

[TOM4CWB]

Charlie,

What is CWB logic in widening the basis so much more on CWRS...?

I see CPS didn't widen that much this time...

Have you heard anything about a committee to study the basis issue and PPO contracts over at the CWB?

[charliep]

Not 100 % sure but would guess reflects the spreads between MGE and KCBT. The MGE has the following spread chart on their website.

http://exchanges.barchart.com/intra/mgex/mgeds02.htm

Haven't heard about the focus group work for PPO contracts.

Will be interesting to observe the spreads on CWES. CWES payments have varied anyone from 2CWRS to 1CPS equivalent depending on year. With a smaller CWES crop, I would assume a higher payment structure this year - available supplies should only go to the best/highest paying customers.

[TOM4CWB]

Charlie,

I doubt the CWB will get any CWES at all in Alberta, and I was told they have virtually no shipping planned after supplies from this crop year are shipped out...

Sales of CWES seed literally stopped this spring, and I would expect those who are growing it are doing so for the feed market.

This is a real shame, as CWES is worth every bit as much as CWRS, yet it has been killed by the CWB, to the detriment of everyone else...

[TOM4CWB]

Charlie,

It really looks and feels like the CWB is playing with the PPO contracts and PRO's for 2002-03, just like they are on the feed barley pool for 2001-02...

If anyone thinks the PPO contracts are not politically enhanced and adjusted, with the nessasary political adjustments to the PRO's...

Now to survive financially we are forced into dealing with this fog...

How do we as farmers get true market signals...

moreover what political signals do the CWB give to our customers???

When the Ausies were here in Feb, they claimed domestic feed barley prices were higher than in Canada, so how come can't the CWB get fair market value for our feed barley?

Does the CWB have low value long term feed barley contracts, to end up only getting $2.00/bu?

Or was this an order from the Gov. of Canada to ship aid only, and leave the rest for the domestic market???

Aren't the grain Co's who assured $3.35/bu now going to take a bath?

[TOM4CWB]

Charlie,

I see the AWB does PRO calculations more often, why doesn't the CWB?

Here is this weeks press release;

"AWB National Pool has taken advantage of stronger international wheat prices this week, with majority of new season, 2002/03 estimates lifting by between $5 and $12 per tonne.

Estimated Pool Returns for 2002/03 APW pay grade have been increased by $10/t, to $240/t (FOB, GST exclusive), with similar increase also in APH and AH. Estimates for ASWN have increased by $12/t, to $266/t.

Today’s increase means during the past month, AWB has lifted the 2002/03 National Pool estimate for benchmark APW by $20/t.

General Manager AWB National Pool Sarah Scales said global weather conditions had remained a key driver for the grain market during that time.

“US futures have hit four year record high levels during the past fortnight, following the release of the USDA monthly report which reduced production forecasts for a number of key wheat producing regions,” Ms Scales said.

“International demand has yet to turn around, and the deteriorating crop conditions in large wheat exporters such as the US and Canada has provided the support for futures’ values,” Ms Scales said.

Ms Scales said AWB had capitalised on the upward trend in wheat values, during a period in which prices were seasonally very volatile.

“As we move through Northern Hemisphere harvest there is traditionally a high degree of volatility, and as a result we need to take a balanced view of the market in the longer term,” Ms Scales said.

“But we have seen futures jumping out of what has been a generally narrow trading range, and if that strength is sustained it will be positive for prices going forward,” Ms Scales said.

Estimates for the 2001/02 AWB National Pool have also been increased this week, with AWB lifting APH estimates by $6/t, AH by $5/t, and Feed by $5/t.

The next Pool Update will be Monday, 5 August, at 5pm."

Is the CWB just too lazy???

[charliep]

Tom4cwb

You're asking the wrong person.

My only comment is that I would prefer a better understanding of the relationship between US price changes and potential impact on pool returns. The confidence I need to feel is that the model used in calculating the PRO is done correctly (the CWB sales program should not change that much week to week) and there is some clarity as whether the CWB simply uses futures prices in forecasts or whether the prices themselves are CWB forecasts.

In some sense, the fixed price contracts should provide this signal as well as a pricing option. Establishing a basis once a month and making an assumption automatically about relationships between PRO forecasts and the calculated US futures prices eliminates this.

In a difficult year like we are in, farm managers require accurate market signals to make decisions.

With apologies, this reminds me of a joke. A fish and game officer suspected a really good friend of fishing with dynamite. To test the theory, the officer decided to go out fishing with the friend at a local lake. When they get out to the middle of the lake where the fish were, the friend reached into his/her tackle box, pulled out a stick of dynamite and lit it. The punch line is "Are we here to fish or cut bait".

[TOM4CWB]

Charlie,

Since no marketing organisation can predict the weather, let alone the market for wheat or barley, Why do we have a PRO at all?

Setting conservative PRO predictions invariably become destructive as setting selling goals at low level creates low prices... and certainly doesn't extract premiums...

If the CWB reported sales values, and volumes weekly, just like they do on tendering, this would have a much more valued use than present PRO forcasting...

THE sick part of this all is that the CWB sets themselves up as the "expert superstar" marketers, when in fact they put their pants on each morning, just like farmers do... and don't have any better idea what the day will bring than we do.

This CWB myth about expert marketing, as well as pooling being fair and the single desk extracting a premium when practical examples show the opposite... what a waste...

If we are going to become more efficient, productive and innovative, we must get past this issue...

And if the market determined that we should grow more feed grains, instead of the CWB, maybe we would have more feed being grown for our livestock, and less American grain being imported...

And if I knew I could access the market, without CWB interference, maybe I would grow more barley and feed wheat... and help my community be stronger...

The way it is now, we are all fighting each other over CWB effects, and desired effects, and theoritical and political effects...

And how does this help us, make us better and more co-operative??

Does the CWB think it can force itself on farmers, yet truly be a freind of farmers at the same?