CWB Wheat Initials Spreads Widen

[melvill]

I haven't had time to look at the new initials on all types of non-durum wheat but, on CWRS, the spreads have widened quite a bit since the August 1 initials. That widening reduces the effectiveness of the EPO for grades lower than #1 CWRS 13.5 delivered after the change. However, it does improve the return to EPO deliveries of wheat grading better than 13.5% protein.

Note that the 80% EPO was terminated some days ago.

Any comments? (Let's see if my comments in another thread did any good. Whoa, my own guilt-trip detector is going off!)

[TOM4CWB]

Lee;

I note other advisors were telling grain producers to lock in FPC spreads... which of course was not possible.

Initial spreads determine the FPC Spreads, Period. If Initials change, FPC payments change to the same extent.

I am glad Agri-ville participants didn't get sucked into false contract expectations... if they were paying attention!

[melvill]

Yes, actually, I've seen some inaccurate info saying that any of the CWB PPOs including fixed price, basis and EPO lock in the spread. As you said, they only lock in the spread if they are priced and the grain delivered before the initial prices change and the spreads change at that time.

I have to confess, that I didn't notice that little detail in the first year of those problems, mostly because the spreads changed very little when initials changed. Guess I was lucky, although, I've had to eat humble pie (preferably with home-separated whipped cream) on other things.