Canadian Wheat Board
University Of Lethbridge
1 CWRS 13.5 vs. DNS 14
US$ /bu
Average Price Received
(USDA)
MT
Average Elevator Bid
DNS
ND
ND
DPC Offered
DPC Paid
PRO US$/bu
Aug
$
5.46
$
5.61
$
5.84
$
6.06
$
4.85
$
4.83
$
5.08
Sep
$
6.42
$
6.09
$
7.03
$
7.45
$
6.43
$
6.39
$
6.59
Oct
$
6.69
$
7.55
$
7.98
$
8.50
$
6.99
$
7.12
$
6.50
Nov
$
6.81
$
7.08
$
8.24
$
8.59
$
7.22
$
7.57
$
6.33
Dec
$
7.60
$
7.29
$
10.07
$
10.31
$
8.70
$
8.58
$
7.32
Jan
$
8.50
$
8.40
$
11.46
$
11.67
$
10.02
$
10.20
$
7.99
$
17.23
$
17.83
$
15.63
$
16.97
$
8.97
$
9.69
$
10.06
$
7.37
$
6.70
Feb to date
Weighted
Average
2
$
6.50
$
6.56
MT
1 CWAD 12.5 vs 1 HAD
US$/bu
Average Price Received
(USDA)
MT
Average Elevator Bid
Durum
ND
ND
Aug
$
6.93
$
6.64
$
7.32
$
7.31
$
6.65
Sep
$
9.73
$
7.05
$
9.66
$
10.58
$
10.47
Oct
$
12.30
$
9.50
$
14.54
$
15.18
$
11.26
Nov
$
12.50
$
9.13
$
15.07
$
15.38
$
11.09
Dec
$
13.00
$
10.60
$
16.78
$
17.63
$
11.10
Jan
$
14.50
$
11.90
$
18.78
$
19.18
$
11.63
$
21.45
$
22.29
$
12.65
$
14.80
$
15.36
Feb to date
Weighted
Average
3
$
10.45
$
8.15
MT
PRO US$/bu
SS CW Two-Row vs US Malt Barley
US$/bu
Average Price Received
(USDA)
MT
Average Elevator Bid
Malt Barley
ND
ND
Aug
$
3.38
$
3.65
$
3.15
$
3.20
$
4.15
Sep
$
3.86
$
3.73
$
4.40
$
4.19
$
5.07
Oct
$
4.42
$
4.02
$
4.96
$
4.81
$
5.09
Nov
$
4.53
$
3.22
$
4.62
$
4.62
$
5.02
Dec
$
4.16
$
5.15
$
4.88
$
4.61
$
4.90
Jan
$
5.30
$
4.13
$
5.39
$
4.77
$
4.92
$
4.89
$
4.64
$
5.00
$
4.61
$
4.41
Feb to date
Weighted
Average
4
$
4.27
$
4.12
MT
PRO US$/bu
Global Commercial Storage
110
U.S.
219
26
33
Argentina
Australia
21
Canada
23
9
0
41
50
100
150
Millions of Tonnes
Storage
5
Exports
200
250
Producer Cars
14,000
12,000
12,500
11,969
10,912
Railcars
10,000
7,933
8,000
6,000
4,000
2,883
2,342
2,320
2,000
0
'07/08
'06/07
'05/06
Crop Year
Annual
6
To Nov 17
1,797
'04/05
Railway Service Performance
Country Loading Performance for CWB Grain on CN/CP Lines
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Nov-07
Oct-07
Sep-07
CP Loading Percent
Aug-07
Jul-07
Jun-07
7
May-
Apr-07
Mar-07
Feb-07
Jan-07
Dec-06
Nov-06
Oct-06
Sep-06
Aug-06
CN Loading Percent
2006-07 Logistical Issues
•
Incremental Capacity
–
–
•
Lowering Supply Chain Costs
–
–
–
–
•
Churchill
Producer cars
Commercial agreements
Tendering
New rail allocation system introduced by CN Feb. 1, 2008
–
–
8
Maximizing use of BN and trucking directly to the U.S.
Taking advantage of lower freight rates
a system where grain is “pushed” from origin, instead of being
“pulled” to destination
6 grain shippers have applied to CTA for emergency relief
Railway Costing Review
•
Freight cost on grain movement single largest
marketing cost to farmers
•
Prior to the railway revenue cap – transportation
costing review every four years
•
•
Need to reduce farmer freight costs
9
CWB requesting that the CTA
pursue the continuation of regular
costing reviews to ensure productivity
gains are shared with farmers
Costing study
•
What is fair and adequate railway compensation?
–
July 2007 Travacon Costing Study reviewed 05-06 and 06-07
rail compensation
Result: railways have been earning more than $6 per tonne in excess of fair and
reasonable levels (50 per cent contribution rate versus 20 per cent)
10
Global agriculture
•
11
World-wide, the agriculture
industry is consolidating:
–
Four firms control over 70 per
cent of world grain trade
–
A handful of companies
dominate agriculture input
production and sales
–
Farmers must vertically
integrate to succeed
Global concentration
World wheat trade is controlled by a handful of very large
players
Annual company revenue (2006)
90.00
80.00
70.00
$CND Billions
Billions of
dollars
Canadian
60.00
50.00
40.00
30.00
20.00
10.00
0.00
Cargill
ADM
Bunge
L.Dreyfus Conagra
AWB
Annual company revenue (2006 available data)
12
CWB
Domestic concentration
•
Viterra, Cargill and JRI
–
–
5 of 6 terminals in Vancouver and Prince Rupert
3 of 5 terminals Thunder Bay
•
Rationalization of CN’s and CPR’s networks increases
captivity of farmers
•
Malting, milling, crushing, foreign owned
13
Concentration
•
•
Canadian Industry
–
Millers
–
Maltsters
–
Handling companies
4,947 elevators (1970)
1,300 elevators (1998)
950 elevators (2000)
376 elevators (2005)
284 delivery points
Transportation
–
–
14
6 major North American Railways
Short lines
Growing Region Distance from Water
(kms from center of growing region to port)
W. Canada
1,450
USA
650 - 1450
Argentina
350
15
France
320
Russia
Ukraine 675
340
Australia
160-280
Always a Wheat Harvest Somewhere
January
February
March
April
May
June
July
August
September
October
November
December
16
World Wheat Harvests
Argentina
Mexico,
India, Pakistan,
U.S.(HRW), China, North Africa, Middle East
U.S.(SRW), Eastern Europe
Canada (CWRW), Russia, Ukraine, EU
U.S.(HRS),
Canada (CWRS), Kazakhstan,
Australia, Brazil
Argentina, South Africa
Bilateral and Regional Free Trade Agreements
•
Canada’s key agriculture competitors are aggressively
pursuing bilateral trade deals with key customers for
Canadian grain.
Canada is negotiating with:
–
Colombia,
–
South Korea,
–
Singapore,
–
Dominican Republic,
–
and Central America - 4.
•
Canada has 6 concluded
agreements, 2 pending
implementation and 6 under
negotiation.
•
Continue to lobby the government for additional
agreements with markets such as Morocco, Japan and
South-East Asian nations.
17
Northern plains percent soil moisture: February
20, 2008
18
U.S. HRW February 2008
19
Western Canada Soil Moisture
(November 1, 2007)
Millimeters of Available Soil Water
0 mm to 25 mm (Very Dry)
25 mm to 50 mm (Dry)
50 mm to 100 mm (Moist)
>100 mm (Wet)
20
CWRS Pool Returns to Farmers
In store Vancouver or St. Lawrence
Cdn$/tonne
400
375
350
325
300
275
250
225
200
175
150
125
100
6
-8
5
8
$390
$360
8
-8
7
8
0
-9
9
8
2
-9
1
9
4
-9
3
9
6
-9
5
9
8
-9
7
9
1CWRS 13.5
21
0
-0
9
9
2
-0
1
0
3CWRS
4
-0
3
0
6
-0
5
0
8
-0
7
0
P
World Durum Production vs Consumption
45
40
35
Million Tonnes
30
25
20
15
10
5
0
2003-04
22
2004-05
2005-06
2006-07
Production
Consumption
2007-08E
2008-09P
Major Exporters Durum Wheat Exports
(July-June)
Million Tonnes
5
4
3
2
1
0
Canada
U.S.
2006-07
23
EU-27
2007-08E
Australia
2008-09P
Others
Source: CWB, IGC
Durum Wheat Pool Returns to Farmers
In store Vancouver or St. Lawrence
Cdn$/tonne
550
500
450
400
350
300
250
200
150
100
50
0
8
87
6
$468
$439
$125
8
90
9
9
93
2
9
96
5
9
99
8
1CWAD 13%
24
0
02
1
3CWAD
0
05
4
0
08
7
P
Pricing Alternatives
•
The following pricing alternatives are available to farmers:
–
Early Payment Option – prices based on Pool Return Outlook
(PRO), best used as a cash flow tool for earlier payment.
–
Basis Price Contract – can price basis or futures separately.
–
Fixed Price Contract – provides a locked-in price.
–
Daily Price Contract – similar to the FPC except that it offers a
spot basis and cash spreads based on the U.S. market.
Note: Pricing contracts only – not delivery contracts
PPO contracts require 100% application of tonnage
25
Direction and Planning
•
July 2007 board of directors planning session
–
unanimous agreement to focus on improving the flexibility and
control farmers have in pricing and delivery
•
Goal to increase farmer flexibility and choice with more options
within the single desk
•
A complete overhaul of programs to be considered where
appropriate
•
Consider different programs for different crops / classes to
address their specific marketing circumstances
26
Objectives
•
•
•
•
Flexible and easy for farmers to use
Provide farmers fair, reasonable and timely access to
delivery
Provide more predictable timing of delivery
Better match farmers’ deliveries with CWB
sales requirements
–
–
–
•
•
27
Improved logistical efficiency
Increased ability to capture sales opportunities
Better overall return
Farmers want a daily cash price
Program risks must be manageable (price and basis risk)
Improvements to existing programs for 2007-08
Changes approved by board of directors in October
28
•
Enhanced guaranteed delivery contracts
•
Delivery exchange contract (DEC) expansion
•
Early payment option improvements
•
Expanded direct selection (malt barley)
•
Cash buying (feed barley)
Moving Forward
•
•
Consultations with farmers on new programs and program
amendments for malting barley, CWRS and durum
Programs approved by the board of directors in Nov. and
Jan. board meetings:
• CashPlus for malting barley
• Pricing option year round on tonnage declared up front
– CWRS pilot program to begin this July for 2008-09
• Defined delivery contracts – pilot program to begin
•
August 2008 for CWRS
• Churchill specific contract
Consultations on minor classes
(CWRW, CPSR, CPSW, CWES, CWSWS)
29
Future Programs in the works for 2009-10
Lock in grade & protein spreads
To enable farmers to lock in grade & protein spreads that are more reflective of
market conditions
–
–
Based on the PRO
For FPC/BPC contracts
Additional EPO lock-in options
To provide more payment values to choose from (e.g. 75, 85, 95 per cent of PRO)
30