Farmers
Organic marketing options
What are my options for marketing organic wheat, durum and barley?
The Organic Spread Contract for wheat and durum
What are my options for marketing organic wheat, durum and barley?
Sell to a grain company marketing organic grain
Western Canadian farmers have a number of choices when marketing organic grain. Upon receiving your organic grain, companies that have handling agreements with the CWB will pay you the CWB initial payment, plus a privately negotiated organic premium. Later, you will receive any additional CWB adjustment, interim and final payments. For sales to any other buyers, you must go through the Producer Direct Sale (PDS) program first. Benson Quinn/ADM, Growers International/Paterson, Prairie Flour Mill and Saskatchewan Wheat Pool have handling agreements with the CWB.
Sell to other brokers, companies, or processors
A number of Canadian and foreign buyers deal in organics; to receive a list of some of these buyers, contact the CWB. Whether the product will be used domestically or exported, to sell to these companies you must first do the Producer Direct Sale. It is recommended that you deal with licenced buyers.
Sell to the domestic feed market
If you sell your grain for domestic feed, you do not need to go through the CWB PDS process. However, to export feed, a PDS is required, unless the feed is processed and contains less than 75 per cent wheat or barley.
Deliver as conventional to CWB
If you cannot find an organic market or you want to retain the option of delivering the grain as conventional to the pool, sign up for CWB delivery contracts.
The CWB Producer Direct Sale
How do I do the PDS?
1. Get a PDS price quote from the CWB.
The CWB quotes the PDS prices (the prices the CWB is getting in various markets)
on a daily basis. Contact the CWB to find out what the PDS price is prior
to agreeing on a price with your customer. Negotiate a price with your customer
that provides you with an acceptable organic premium above the conventional
price.
Call the CWB to do the PDS.
For the purpose of conducting business by telephone, you need to have a CWB Personal Identification Number (PIN), which you can apply for by fax or mail. To complete the PDS you must provide the CWB with the following information: grain, grade, protein, volume, country destination, shipping date, and port of exit. You will be faxed confirmation of the sale. After shipment you must report the final shipment weight to the CWB. For all PDS sales, the CWB reserves the right to request that farmers submit documentation that verifies organic status, completion of the sale and completion of shipment.
3. Arrange method of payment.
You pay the difference between the PDS price and the CWB initial payment (the
PDS spread) for the grade and quality of grain. This difference can be paid
at the time of sale or deferred by using the Credit Sale. You later will
receive adjustment, interim and final payments to the full value of the pool
return. The net result of this transaction is the pool return, plus whatever
additional premium above the CWB's PDS price that you are able to negotiate
with your buyer. The administration fee for the PDS is $15.00 for Non Credit,
or $30.00 for the Credit Sale. Under the Credit Sale, the PDS spread can
be deferred up until the final payment is issued. Any CWB payments will be
applied to whatever is owed on the sale. Interest at prime rate accrues on
the PDS difference after 30 days from date of contract.
Please note: Payments must be made on outstanding cash advances at the
relevant per tonne rate 30 days from the date of unload.
4. Apply for an export licence.
After completing the PDS, to export the grain, complete an export licence application form and fax it to the CWB (204-987-4178). Ensure that the trucker has a copy of the licence and presents it to Canada Border Services Agency at the border. For overseas sales, ensure your shipper, export agent or customs broker remits the export licence and B13A Export Declaration form to Canada Border Services Agency.
CWB Producer Payment Options
Your choices
When pricing your organic grain, in addition to negotiating your organic premium with your buyer, on the CWB side of the transaction you can choose between the pool return and the CWB Producer Payment Options (PPO) programs.
You can use PPOs when you sell independently using the PDS as well as when you deliver to organic grain companies. The net result of a PDS is normally not known until the final payment is issued; the benefit of using a PPO in combination with the PDS is certainty.
Early Payment Option (EPO)
Farmers can combine the PDS with the EPO to lock in a maximum PDS spread (i.e. the difference between the PDS price and the EPO Value). This also lowers interest costs on the credit PDS. Within 10 business days of delivery, the EPO will pay either 100, 90, or 80 per cent of the pool return minus the "discount", i.e., the cost of risk, administration, and the time value of money. The farmer will then also receive any subsequent CWB payments that bring the pool return above the EPO value – so if the pool return increases, these gains are still captured by the farmer.
Fixed Price Contract (FPC)
To use the FPC farmers can lock in the total price for wheat, durum, select barley and feed barley (which includes the December, March, May, or July basis and futures) before or at the time of sale. You must sign up for the contract between February 27 and November 1 at 7:30 a.m. CT. The PDS spread will be the PDS price minus the FPC.
Basis Payment Contract (BPC)
To use the BPC (available for wheat and select barley), farmers lock in a pooled basis (the difference between the PRO and the forecasted futures for the crop year less a discount for risk, administration and the time value of money) and then later lock in the futures price. The basis can be locked in between February 27 and November 1 at 7:30 a.m. CT, and the futures price can be locked in at any time up until the end of each relevant BPC futures month expiry date. Using the rollover option of the BPC, you can price your futures until June 30. The PDS spread is the PDS price minus the total priced BPC value.
Organic Spread Contract (OSC)
The Organic Spread Contract (OSC) for organic wheat and durum was designed to facilitate direct marketing of organic grain. The program offers a one stop combination contract that streamlines using the Producer Direct Sale (PDS) together with a CWB Daily Price Contract (DPC) payment option for wheat. The program also offers a spread contract for durum.
Why is the PDS required?
- The PDS allows farmers to sell directly to their buyers, while maintaining the benefits of single-desk selling and pooling for all farmers.
- The PDS enables farmers to retain the full organic premium they negotiate overand above the CWB spot price for conventional grain.
- The net result of the PDS transaction is that farmers receive the pool return (the same as all other farmers), plus the organic and any other premiums they negotiate for their grain.
- The PDS discourages independent sellers from selling below the CWB conventional selling price, which would undercut prices to both conventional and organic farmers.
When is the PDS not required?
- If you have your own mill on farm and mill grain you have grown, you can sell it within Canada without doing a PDS. If the flour is exported, you must go through the PDS.
- A PDS is not required for sale of Pedigreed seed, manufactured feed, spelt, kamut, or einkorn; however, an export licence is still required.
- A PDS is not required to sell organic feed grains to the domestic feed market.
The Organic Spread Contract for wheat and durum
New for 2006-07: The sign up deadline has been extended to November 30, 2006.
Commit an estimated tonnage of certified organic wheat or durum to the program by November 30, 2006. Tonnage that is committed following the start of the crop year (August 1, 2006) will have an adjustment factor applied to allow for risk management activities.
What is it?
The program offers a one-stop combination contract that streamlines using the Producer Direct Sale (PDS) together with a CWB Daily Price Contract (DPC) payment option for wheat. The program also offers a spread contract for durum. For the 2006-07 crop year the sign up period has been extended to November 30, 2006 at 7:30 a.m. CT.
The PDS price is based on the lowest value that the CWB would be selling at to U.S. end users. The DPC value is based on U.S. elevator cash markets. Since both these prices are cash prices based on the daily price for North American grain, when markets rise or fall these prices will rise or fall together. Thus, the spread, or differences between these prices, will tend to be fairly stable. The Organic Spread Contract is also available for domestic sales and for overseas sales at values reflecting those markets.
What advantages does it provide?
Your advantages with this program are certainty and predictability. Once the OSC is priced, you know the full cost of the transaction without having to wait for additional CWB payments. Since the spread between the DPC price and the PDS price will remain fairly constant even though cash prices rise or fall, the volatility and risk involved in using the program will be minimal.
Prices and forms
- Forms
- Fax on Demand 1-800-275-4292 (telephone menu option #3 )
- Telephone 1-800-275-4292
- Contact the CWB Farm Business Representatives
- Or email OrganicPDS@cwb.ca
How does it work?
You can sign up tonnage for the OSC on any business day, from June 1, 2006 to November 30, 2006 at 7:30 a.m CT. Unlike other pricing options, there is no minimum or maximum signup tonnage.
You also have the option of reducing un-priced tonnage committed to the program until November 30, 2006 at 7:30 a.m. CT. There is an Administration fee of $15.00 per reduction. This provision allows you to reduce commitments in response to production shortfalls.
The spread value can be booked for sales between August 1, 2006 and July 31, 2007. Once the Organic Spread Contract is booked, you must ship the grain within 60 days.
To register for and execute Organic Spread Contracts:
- Ensure you have a valid permit book and PIN number
- Call the CWB and commit tonnage by November 1; reduce commitment as necessary by November 30. Price spread indications are available by calling the CWB.
- Complete a "Verification of Organic Certification declaration", and provide copy of organic certification certificate by November 30. Adobe® Acrobat® reader is required to this PDF document.
- Call the CWB to price the Organic Spread Contract
- Remit payment on the spread
- Apply for Export Licence
- Submit grade sample and shipment verification documentation
For more information about the OSC, or to register tonnage after June 1, call the CWB at 1-800-275-4292.