There is nothing like a quickly rising market to sharpen the frustration of those who watch out-of-Canada grain prices and compare them to the Canadian Wheat Board’s Pool Return Outlook.
Stephen Vandervalk, who farms in southern Alberta, sent us some calculations last week that compared U.S. elevator prices to the August PRO.
At that point, for his farm, the PRO would generate about $514,000 less than what he could get across the line for his durum, wheat and malting barley.
A new PRO came out Sept. 27 with a huge jump in the durum outlook and significant increases for the other CWB grains.
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That whittled down the difference a lot, but it didn’t eliminate it.
Let’s look at Vandervalk’s durum crop and assume the two currencies are at par.
He has 63,000 bushels. Under the August PRO of $7.41 per bu. basis his elevator and U.S. price of $12.60 early last week, he was behind about $327,000 on that crop.
Updating that, the September PRO backed off to his local elevator is $10.70 per bu. The U.S. Department of Agriculture report on Montana cash grain Sept. 28 said durum bids in the northeastern part of the state had rallied even higher and were about $13.10 per bu.
So that is a $2.40 per bu. difference, multiplied by 63,000 bu., for a total of $151,200.
Of course, it is not fair to compare the PRO, a year-long average price, to a spot price. But the options, such as the CWB fixed price contract, don’t equal the U.S. elevator price either.
The CWB argues that the grain it sells on any given day is equal to or better than what the open market would generate.
Its published export price for Oct. 1 was $620.33 or $16.88 per bu. for No. 1 and 2 durum basis Thunder Bay. Backed off to the Prairies, that is in the neighbourhood of $15.25 to $15.50.
That is more than $2 per bu. better than the elevator price in Montana, if the board is actually selling anything at that price level. If lots of durum sells at that level, the PRO could rise again next month.
So what is the answer? We’ve heard all the arguments from both sides of the CWB debate before.
But for Vandervalk, a $151,200 bird in the hand for his durum crop looks a lot more appealing than a Pool Return Outlook in the bush.
