CWB buying US wheat

[TOM4CWB]

Charlie;

I keep hearing, from different sources, that the CWB bought 1.6million bu last week of DNS wheat from the US...

And why exactly did the CWB put in the Oct. 2002 "Update from the CWB" that came with our interim 2001-02 cheques...

"The CWB has not sold this year's entire crop at last year's prices."

THE useage of the word ENTIRE in this sentence really is strange and disconcerting...


Could someone from the CWB explain, truthfully, exactly what has been done?

What is volume of wheat has been sold at what prices for the 2002-03 crop year?

Exactly how much more wheat must the CWB buy back from other suppliers to fill contracts the CWB made for 2002-03 before August 2002?

[charliep]

Not able to answer. Your 1.6 mln bu equates to about 320 contracts.

The reason the CWB would use the futures market is as follows:

1) Hedging tool. The CWB should be long grain. To lock in a price, they would sell futures/hold until they have made the actual sales to customers. They may have done this and are now in the process of liquidating their futures position (made sales). A normal part of risk management for any grain company/farmer. As a note, the CWB may have sold at MGE futures prices somewhere around $5/bu - money in the bank if they did it given today is closer to $4.70/bu.

2) Replacement strategy - They may have forward sold wheat in the cash market with an idea of reducing risk. Their strategy now says prices have opportunity to go higher and they are willing to use the futures market (buy futures/go long) to participate in this potential rally. If they are wrong and prices go lower, the futures position looses money and overall pool retures are reduced.

3) Speculate on the markets - No need for explanation. Read the replacement strategy paragraph and take out the discipline/reasoning.

Just a question - does this refer to futures or cash? If it was the cash side, the CWB normally deals with accredited exporters. The process of getting out of a sale (similar to what many farmers are dealing with on canola cash contracts) is to buy the contract out (paying any damages/change in market prices). The accredited exporter still has the contract with the customer and seeks out other supplies to replace what they have committed on their contract.

[charliep]

First off - I have no idea if the CWb was making any futures trades or not.

If they did, it may be a combination of some of the things Charlie mentioned. (Speculating is not one of them). Facilitating a basis contract is another area for using futures as well. Perhaps this was wht you meant in the first paragraph Charlie.

The CWB will not be buying contracts to to take physical delivery to cover any sales - that's absurd speculation on the part of tom4cwb.

The PPO programs also require the use of futures to offset the risk. So there are lots of things that require the CWB to be in the market on any given day.


Tom

[TOM4CWB]

Thalpenny;

You have said;

"The CWB will not be buying contracts to to take physical delivery to cover any sales - that's absurd speculation on the part of tom4cwb."

Thalpenny, do you know exactly what the CWB Sales Dept. has done, every contract, in the last month?

Interesting that Maltsters have contracted EU Barley for import.. into western Canada... could the CWB be paying for this? How exactly do we know?

SO why exactly were the CBOT traders talking about the CWB buying 1.6 million bushels of DNS?