More Price Comparisons

My last commentary was about how the CWB’s final pool return was much lower than the average “market” price for the year.  It created a bit of a stir and discussion so I want to add to it.

I used the CWB’s daily selling price as a reflection of the market price – it’s the price they quote to domestic millers.  Someone suggested that price wasn’t actually the “market” price – I should use a US price, suggesting that the price I was using was just the CWB’s asking price. He said that the CWB could be selling below the “asking price”.

DTN collects cash prices from over 300 elevators in the Northern Plains if the USA (mostly North Dakota and Montana) each and every day, then publishes the average.  Most consider this to be a very good representation of the market.  Comparing the pool return to the annual average of the DTN prices and the 08-09 pool return showed the pool return was $37.18/tonne below the average DTN price.  Although this is better than the $55.55/tonne below the average Canadian offering prices, the pool return is still substantially below average for the year.

Now, for the benefit of you doubting-Thomases, this was not a one-year event.  Over the seven years ending in 08-09, the final pool return was, on average $32.23/tonne below the DTN average.  The worst performance was in 07-08 when the pool was $63.21/tonne below the US average; the best was in 04-05 when it was $11.36/tonne below the US average.

I asked it before.  I’ll ask it again:  Are below average prices good enough? 

Pro-CWB director’s candidates explain their support of the CWB - because it’s a “marketing advantage” (Stewart Wells),  “the CWB has clout” (Allen Oberg), or “it provides the best opportunity for farmers to maximize their returns” (Kyle Korneychuck).  How do these comments fit with these price comparisons?

I would sincerely like to see the CWB explain this.  Remember, the CWB says in its Annual Report that it achieved average premiums in wheat over the competition of about $7/tonne.  How can you get premiums when the final pool returns are consistently so poor relative to the North American market?  Is there something else in the pool calculation that isn’t apparent?