Western Producer Article (Dec. 25) - CWB Looks at New Ways to capture the best price.

[charliep]

I encourage everyone to read the above article. It can also be found at:

http://www.producer.com/articles/20031225/news/20031225news09.html

The key questions posted are as follows:

"Fellow wheat board director Rod Flaman said the board needs to change its longtime approach of pricing grain in roughly equal increments over the course of the crop year.

"It's apparent to this board of directors now that that strategy didn't work last year and we need a new strategy," he said.

Here are some of the ideas adopted or under consideration:

• Under a new "wheat pool pricing model," the board will continue with the strategy of pricing grain throughout the marketing year. But it will be more flexible in using derivatives, such as hedging and options, to price grain when cash sales are not available and the market is strong.

The directors will set out parameters on the use of these derivatives and how much risk can be assumed.

• The agency will work on developing new mechanisms to identify spikes in the market and ways to take advantage of those spikes.

• The board will devote more resources to developing market intelligence.

• More attention will be focused on figuring out the volume and quality of grain that Canadian farmers will make available to the board for export.

• The board has set out new guidelines outlining the conditions under which a pool account can be closed early."

Any comments on the above suggestions?

[carebear300]

I learned something new again today, actually thought they were supposed to be doing those things all along. So much for trusting bureaucrats that don't have any stake in the marketing of the grain. I think somebody should be held responsible for the big screw up that went on in the last crop year. Enough of being so negative hope that you all have a rewarding and prosperous new year.

[poorboy]

So previously, I am to believe that by not using the tools and selling 25%, every quarter of the year at best the CWB was getting the average.

All the years of hype about how good the CWB is for farmers and yet we find it is delivering average prices. Would an open market not have the same average?

[TOM4CWB]

Charlie;

The CWB states over and over again, I quote from the CWB Home page www.cwb.ca:

“All sales revenue, less the costs of marketing, is returned to western Canadian farmers.”

“COSTS of MARKETING”, what are they?

In October of 2003, one of my Canola “costs of Marketing” was not having a government department stopping me from selling canola I had in the bin, ready for market. In the CWB marketing wheat, however this was the circumstance.

The CWB said;

“When wheat prices were peaking in late September, the CWB did not have a clear picture of the quantity and quality of the wheat crop that it would have for sale because of the late harvest. This situation was further exacerbated by the fact that there was a small crop and therefore, a small margin for error. Farmers were slow to commit to delivery contracts with the CWB because they didn’t know what they were going to get off the field, if anything. The October deadline for Series A contract sign-up was pushed back to November 15 to give farmers a chance to get their crop harvested. That proved to be insufficient: farmers continued to sign up well into December.”

If the CWB had offered a cash price in October, I suggest they would have had ample supplies of 1 and 2 CWRS, IN OCTOBER when it was needed.

I recall $380/t CWB offering prices for CWRS 1 13.5 Port Price being quoted at the beginning of October 02…
Even if the CWB had only offered $340/t cash… this type of price would have attracted significant sign-up by farmers.

NOW, Not only was the CWB stopping me from selling, “The CWB also bought back some sales contracts so that this grain could be allocated to higher return markets and to solidify long-term business relationships with its core customers.” Too bad the CWB did not manage the risk on these sales, because the result of the above CWB strategy appears to have cost everyone (both farmers and governments) significant losses.

What can we learn from these experiences?

Farmers must be responsible for the decision WHEN CWB grains are offered to the market…

AND, be given transparent price signals to allow accurate assessments of true market conditions…

When this opportunity is offered to CWB “designated area” grain farmers, then,... and only then,...

finally the CWB could become...

“a farmer-controlled organization that markets wheat and barley grown by western Canadian producers.”

[TOM4CWB]

Correction;
In October of 2002, (not 2003) one of my Canola

[Ration-Al]

Carebear,

I think that your response is probably shared by the vast majority of producers. What do people know about how the CWB was run over the past 50 years under the direction of the Federal government and its "appointed for life" commissioners? What do people know about the pooling system and its inadequacies?

Do the vast majority of producers understand the significance of the shift in CWB governance now that it is run by a board of directors with ten of the fifteen being farmer elected directors? Obviously we would all like things to change quicker but has the significance of the changes so far escaped being noticed by most producers?

Is the cup half full or is it half empty? Is the CWB headed in the right direction?

I have said it many times here, and I will say it again. Lets have some CONSTRUCTIVE criticism of the CWB.

[Everest]

Constructive criticism of the CWB is all well and good. One would hope that all criticism be constructive, but I understand why it isn't in all circumstances regarding the CWB.

Two points that are relevant here:

1. The CWB doesn't have to abide by anything offered by way of criticism, constructive or not, and has shown that it won't. It is shielded by its government provided monopoly. (Although there is some opinion that is not as absolute as the CWB, its chairman, and its supporters assert)

2. As long as the CWB hides behind its monopoly and exerts its oppressive actions and belligerent attitude towards farmers who would like to have their fundamental economic freedoms respected, they are open and entitled to all manner of criticism. Some of it is just not going to be constructive. The oppressiveness and belligerence we all experience from the CWB is certainly not a constructive attribute. Farmers retain the right to criticize the CWB in which ever way they feel compelled, as long as they are compelled to do business with it. When that is over, my bet is the criticism will stop.

[TOM4CWB]

Ration-Al;

I am confused:

I said;

"What can we learn from these experiences?

Farmers must be responsible for the decision WHEN CWB grains are offered to the market…

AND, be given transparent price signals to allow accurate assessments of true market conditions…"

AS Western CDN "designated area" farmers are not privy to transparent pricing info, and the CWB sells all grain through the Pooling accounts (including all PPO grain) were these needs that my business and marketing plans demand... are they unreasonable requests?

These have nothing to do with the "monopoly" and I said nothing about the "single desk"... yet somehow I am still a radical for needing the marketing info my marketer has... and am a radical for needing the right to decide WHEN to sell the grain my family and I produced on our farm!

AWB offers many different pools, prices, advances, etc. as does the OWPMB options the CWB refuses to even consider.

Ration-Al, why won't the CWB price milling wheat for the fall of 04 TODAY, Why won't the CWB offer this simple risk management opportunity?

[Ration-Al]

Tom, you said
"AWB offers many different pools, prices, advances, etc. as does the OWPMB options the CWB refuses to even consider."

According to the Western Producer article these are exactly the things that the CWB is considering. With your continual posting about what the CWB is NOT doing it almost appears that you would be happier with the status quo so that you could continue to rant here on Angry-ville.

Tom, then you ask
"Ration-Al, why won't the CWB price milling wheat for the fall of 04 TODAY, Why won't the CWB offer this simple risk management opportunity? "

If you can see an opportunity on the MGE or KCBOT you can certainly hedge your risk today without paying an administration fee to the CWB. If you have that degree of certainty about the 'fall of 04 TODAY' why don't you go for it? If you believe that the CWB is a hindrance to the operation of your business have you taken all necessary steps to mitigate the situation? Or are you content to simply whine about the perception of a problem?

Further what marketing information do you NEED from the CWB to market your grain? The market information consists of supply and demand, weather, foreign countries economic concerns etc. You can delve into all of these factors yourself and come up with the same market analysis that the CWB does. You can also derive this market information from various commodity brokerage services. Once you have assimilated all of this information you can make your move on paper to capture whatever market premiums are available.

If you are a good "marketer" you can make money any tiime the market is moving regardless of whether it is moving up or moving down. You simply need to know in advance which way it is going to move. Conversely if you think that the price is high enough at any given time you can simply lock that price in on the commodity exchange with a futures contract or a derivative.

Quit boring the readers of agri-ville with your sniping at the CWB and get out there and do what you say you are so good at.

[cropduster]

Ration-al,it`s a little early in the New Year to have to listen to your LIBERAL diatribe.....Private ownership induces an attitude of stewardship.Witness the CWB 85.4 million fiasco.Your Liberal gov`t should be thankful these clowns weren`t trying to sell an above average crop.Think what the numbers would be then!!Moreover,private property rights are a fundamental and necessary condition if people are to be prosperous and FREE.Your fear of giving TOM4CWB his freedom is simply undefensible.Look at the success of an socialist regime in this world.......it doesn`t work ....any way LIBERALS cut it!!!!!!!!

[TOM4CWB]

Ration-Al;

Since you brought up the subjects of CWB Basis cost, and info transparency... I will start a new topic for each, starting with the Basis issue.

For the life of me the above entry sounds just like lectures the CWB's Tom Halpenny gave me in the past.... so be it!

[AdamSmith]

I see the socialist utopian theorists are still looking for that magic pixie dust that creates wealth and prosperity with a wave of a wand.

Wealth creation by committee, moved, seconded and adopted.

Be it resolved; that the CWB will posess the insight and instictive knowledge to identify, in advance, the highs and lows in the market.

I feel so much richer already.

[Everest]

The bottom line here seems to be that as far as the CWB is concerned, they are under considerable pressure to deliver better results than they have in the past. As a result they seem to be trying to devise ways to do it, albeit within the old monopolistic regime. As far as farmers are concerned, they need better results from the marketplace for their wheat and barley.

What I find as little amusing (except it isn’t because of the $$ lost) is that farmers by and large are asking for the same range of opportunities with the same flexibilities to market, hedge, and manage risk as an open market provides. And according to the Western Producer article, the CWB is responding by trying to simulate an open market.

So the question that arises is, why try and simulate that which we already have? Instead of tying ourselves up in knots trying to do the impossible, by trying to invent a monopoly that is the same as an open market, why don’t we just admit that the system we have is no longer the kind of system farmers want or need, and replace it with a system relevant to today’s situation? Nowhere am I hearing from farmers that the most important elements of a marketing system are the 3 pillars of the old system; price pooling, single desk selling, and government guarantees. What I am hearing is that farmers want pricing and hedging flexibility, competition for their product, prompt efficient service, and opportunities to move up the value chain.

The needs of farmers have changed over the last 60 years. That means that systems need to change to meet those changing needs. Maybe we’ve come some way to that realization when the CWB now openly muses about it. I for one hope that as they examine the range of options, that they can get passed the nostalgia and romance with the history of our business, and truly come up with a plan that meets today’s needs for today’s commercial farmers. Can the present board of directors rise to that kind of challenge, or will they cling to their authority while continuing to look for the magic pixie dust?