Thoughts the CWB One Time Changes to Early Pricing Options

[charliep]

What are your thoughts about the change this year that will allow farmers to use the early pricing option on previous delivered grain? More information can be found at:

http://www.cwb.ca/en/news/releases/2005/030705.jsp

[TOM4CWB]

Charlie;

Since EPO's were avaliable, they could be done retro-actively... but with more difficulty last year;

This year was the first it was stopped... until now.

If the admin fee is charged... and the risk management premium is charged, why not do it any time?

What difference does it make if it is done before or after delivery... it is still a seperate transaction... that must be tracked and accounted for.

However if it is done before delivery is complete... then liquidation damages are charged against the farmer...if the grade is not acheived... like I mentioned here a few months ago...

$27/t liquidation damages on an eighty%EPO when the farmer's wheat graded feed instead of 3... and it couldn't even be switched between CWRS and CWHW... even though they are exactly the same grade values.

THis was simply a money grab up front this year.

Now... the CWB realises it can still make more money for the contingency fund/pool by doing it after delivery... as was done by the CWB for many past years!

This activity is what happens when CWB Directors cannot take part these PPO options...

[wd9]

There doesn't seem to be much of a purpose to any of the pricing options if there is a pool. Why attempt to try and emulate a free market when there could be a real one instead? It's a simple concept, like pure socialism, sell all the grain for a price and divide it up for the farmers equally. Shame on the CWB for providing these options.

[onearm]

That's right! I have enough problems selling my canola, the last thing I need is more choice.

[charliep]

Onearm

I have to apologize but sometimes people make comments that raise my curiousity. If the western Canadian wheat sold was an open market with a CWB alternatives including pooling, would you still deliver/sell to the CWB?

[wd9]

According to Paradox of Choice by Barry Schwartz, having more choices makes it more difficult to make a decision because you always feel you could have done better, this in turn, in many instances causes depression and generally not a better life or a happier life. It also causes you not to make a decision, procrastinate, and end up usually worse than by having far less choice. This is backed up by many clinical case studies.

Fascinating stuff. We see that in DVD players, cars, trucks, and now CWB options.He never mentions the CWB of course in the book, but would farmers be happier with the CWB and no options like EPO etc than a free market or a CWB with 57 options to choose from?? I am now forced to stress and maybe end up depressed over whether I could be doing better by choosing a CWB option within a pooled system. Sheesh. I gotta stop reading.

[cropduster]

Yes,I happened to be cruising the pothole/gap called Sask. and heard Gormley`s shallow program!Sure is interesting how just choosing from two choices(captialism/socialism)made an effect on Sask.I sure hope Sask. keeps it`s singular choice of socialism.It seems a good deal of it`s residents want to succumb to MORE choices.Alberta seems to need all the best people Sask. can provide!!

[charliep]

In a marketing sense, I see this in terms of people who review alternatives with profit a key driver, are able to act on the best one and then move on to the next set of decisions. Not all the decisions are perfect but they don't dwell on them. Instead, there is a review process with a goal of improving the next decision versus feeling guilty about the last one.

[freenorth]

If you wonder why something is the way it is find out who's making
money from it being that way.

Martin Luther King

[onearm]

charlie, what you suggest provides more choice. and wd9 had it right, the more choice I have, the less happy I seem to be. the auction market makes it easy for the cowboy, a bunch of guys in the stands tell him what the cows are worth. they can't all be wrong! his choice what day do i go to market.

[charliep]

You are likely getting my sensitivity on the issue of calling the market - people calling me asking me what to do.

I do my best to explain the fundamentals/drivers and my opinion. I also do my best to encourage action - a $1/bu rally has to be rewarded with a sale no matter how small. I also talk to clients about the basis they are being offered, their financial situation (mainly cashflow needs) and their risk tolerance. On the latter, some farmers (believe it or not) are born risk takers - they will risk a dollar to make a dime.

The CWB is offering farmers these tools to assist with mainly the cashflow side of their business. I would encourage any farm manager who is getting squeezed by cashflow issues in their business and who has not used the early pricing options already to do so now. Realizing their is a cost ($2/bu for 100 % alternative for wheat ex durum) and 50 cents/bu for 90 % option for all pools (not feed wheat so be carefull), they are worthwhile using. Not only can you increase the amount of cash you have this spring but it also serves as a minimum price contract - no one can take this money away from you if actual payments are lower but you still can benefit from additional payments if results are higher.

[charliep]

Too early. Not $2/bu. That should be $2/tonne and 50 cents/tonne respectively. I hope I am more wide awake curling in the next hour.

[Incognito]

U subbing for Ferby this weekend, Charles?

[charliep]

The answer would be no. I moved from my normal position as lead to skip. Without going into details, the same person who confused bushels and tonnes was at the rink this morning. An early coffee. Need I say more.

[TOM4CWB]

Charlie;

Wouldn't you agree that early in the pool year... that the risk of a major decrease in the pool is the greatest... that as we close in on July 31st the value of EPO's time value decreases?

I would agree that the 90% EPO doesn't cost much... but after all it is our own money in the first place... so why should it?

Now if we could reinstate 04-05 cash pricing through the PPO prepricing for the next crop year... as was the accepted policy till the end of January... we could get back some decent choices.

It is simply amazing how the CWB so often chokes on their own foot... they seem to have a habit of sticking it in their mouths, often; of late!