Weighted Average Prices

Rolf Penner- CWB Monopolists don’t like spot price comparisons, because they can’t beat them. They don’t like simple average price comparisons because they can’t beat those either. So they sometimes like to use the USDA weighted average prices to compare with because sometimes they can beat those (see chart below). But there are some big problems with using this USDA measurement for comparisons.

First off while many, many Western Canadian farmers do take the pool price you can not point to a single US farmer that actually received the weighted average price. This is because the weighted average price is a mathematical construct, yes it is based on real sales data, unlike the CWB pool though nobody actually receives that price. 

Secondly I have talked to two different people at two different times at the USDA NASS (statistics) branch about how they do their weighted average prices. Both have clearly said to me that they do not separate out the various grades and protein levels for spring wheat and they do not have the ability to do so, it is all combined together into one number. It is a real mixed bag, all premiums, discounts and contracts across all quality levels including feed. They also don’t include what American farmers forward priced for any given crop year. This is what single desk supporters conveniently forget to mention when they quote these prices, and they like to compare this “mixed bag” price with just the CWB # 1 high protein wheat price, and sometimes they don’t even bother to take off the standard CWB deductions. 

Thirdly the USDA uses a different crop year than we do. They go May-June whereas we go August-July.

It is interesting to note that even though its not a fair comparison the 2006 crop year weighted average price for spring wheat in North Dakota came in at $4.49 USD per bushel. Remember this is a catch all of every kind and grade of spring wheat from the highest quality to the lowest. The final CWB pool return for the highest grade of CWB spring wheat, #1, 14.5% protein CWRS, worked back to Manitoba came in at $4.40 Canadian. Even with our best wheat in 2006 the Board couldn’t beat the weighted average grab bag North Dakota price.

I wonder why they never talk about 2006? Or any of the other years when they did worse than the weighted average price?

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The chart below shows the differential between the CWB final payment (the May PROfor 2007/08) backed off to central Saskatchewan and the MYA prices in North Dakota.The data shows that, with the exception of 2001/02 and some crops in the current marketing year, the CWB final payments are consistently and significantly lower than the US MYA prices.

  USDA Weighted Average Prices vs Final Pool