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Reality of the 06-07 Wheat PRO

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    Reality of the 06-07 Wheat PRO

    On reading the wheat commentary re the 06-07 crop year it was suggested that many producers were carrying wheat sales forward into the new crop year because of higher prices. As per usual the CWB always has an excuse when prices go down. My question is. Is this a reality? I would suggest that there are more likely other things a play. Prices for HRS wheat in many locations were less than the feed market and movement through the board in many situations was both slow and late. If I remember correctly the board only took 80% of the A series Contract allowing producers to re visit their marketing positions. I also suspect that as prices for wheat moved higher the spread between higher and lower grades narrowed and that the premiums for high end high protein wheats shrank both in price and volume. I would suggest that the CWB likely had to make a number of sales where they basically gave away protein because the market was not prepared to pay for it. A farmer has to make his marketing decisions based apon what is best for his operations. It's time for the CWB to quit blaming someone else for their marketing performance.They keep telling us about the premiums they get in the market place. It's time we saw those premiums in our pockets and not just in some commissioned study.

    #2
    Can't argue with that logic. Got stung big time with CPS last year with the same scenario. I do everything I can to not pool my grain. Unfortunately I got shut out of the DPC this year. Anyone have a new crop DPC they want to sell me?

    Comment


      #3
      Thought I would throw up the CGC grain statistics weekly website as a place to look at market information providing inforamtion relative to the CWB press release and craig highlights.

      http://www.grainscanada.gc.ca/pubs/grainstats/2006-07/07gsw_shg51.pdf

      Farmers have delivered 17.2 mln tonnes of wheat excluding durum during the first 51 weeks of the crop year (up from 14.5 mln tonnes some period 05/06). Wheat ex durum exports have amounted to 13.7 mln tonnes, up from 10.7 mln tonnes to end week 51 05/06. My estimate July 31 carryover is about 7 mln tonnes (others have different numbers) down from 9.7 mln tonnes July 31, 2006. Only farmers can answer but likely close to empty wheat bins at the end of the 2006/07 crop year.

      Don't know when farmers started putting wheat on storage tickets and also note significant deliveries during July (500,000 tonnes per week) but find the decline in 2006/07 PRO interesting relative to the flow of grain.

      Likely a discussion killer but also intersting to look at the raw data. As craig indicates, would also be interesting to look at the timing of sales (including class, grade and protein) as well as the volume of wheat that has been lost to the domestic feed market (some of which has been contracted to the CWB).

      Comment


        #4
        More boring stuff.

        Of the 17.2 mln tonnes of deliveries recorded to primary elevators, about 1.1 mln tonnes was to the non board (page 14 of the Grain Stats Weekly). That means 16 mln tonnes board deliveries (plus or minus given what happens at crop year end and also recognizing some non board may be durum). Based on the assumption of a $5/tonne decline in 2006/07 PRO, this is about an $80 mln decline in the value of the old crop wheat ex durum pooling results. Is this decline in value realistic?

        Comment


          #5
          Sorry for monopolizing but every interesting answer/observation brings up a question. How much 2005/06 wheat was carried into the current pooling year? What impact would this have on 2006/07 pool returns?

          That would raise issues about how inventory is valued between crop years but that is a whole new discussion. Understanding the black pooling system is so easy.

          Comment


            #6
            Good questions Charlie.

            The chances of getting answers to these questions before 2010 are ... ?

            Comment


              #7
              Charlie,

              I find this nothing less than EXACTLY what the CWB should have expected given the way they handle PPO Contracts.

              Without viable and accurate cash pricing options, the pool system cannot absorb the growing skill of grain growers' wisdom to sniff out where the grain market and basis levels are heading.

              The CWB is blaming "Basis" for much of the poor performance the CWB sales dept. is responsible for.

              The CWB should think long and hard about cash pricing the pool sales out each day...

              Basis management is a important part of risk managment... Which the CWB depends on a simple rolling yearly average to manage this risk.

              THe CWB does not have a cohesive strategy to minimise this risk... our grain buyers do... and the "market" (the CWB sales dept.) as created by the CWB "single desk" "WISDOM" does not have the ability to call the buyers bluff any longer.

              THe CWB sales dept. has lost real and important people skills and history... and we are all beginning to pay the big price.

              THEY don't have what it takes to understand who or what they REALLY are working for.

              Comment

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