Farmers
Selected barley BPC
The selected barley BPC program will be offered as a full-scale program in the 2006-07 crop year. This program is offered to producers, including grain company selectors and domestic maltsters with a tonnage limit of 50 000 tonnes to be allocated on a first-come, first-served basis.
Using the reference (base) grades of Standard Select Two-Row and Six-Row, an in store Vancouver or St. Lawrence basis will be offered at a spread to domestic feed barley market and priced off the Winnipeg Western Barley futures market.
The role of the program is to provide producers with increased pricing flexibility that follows the domestic feed barley market cycles, with the ability to take advantages of market rallies that may occur during the crop year. The program will also improve access to select barley supplies for maltsters, particularly when domestic feed barley prices are competitive with the CWB select barley PRO.
Forms
The sign-up and pricing forms for all PPO programs are available from the CWB Web site and Fax on demand. Producers can fill out the form and fax it to the CWB, or using their PIN, they can sign up by calling 1-800-725-4292.
BPC sign-up
Sign-up for the program will be available from February 27, 2006 until November 1, 2006 at 7:30 a.m. CT. Initially, only the December 2006 basis and futures values will be available for sign-up due to limited open interest on forward futures contracts. On August 1, 2006, March, May and July 2007 basis and futures values will also be included.
Important dates
BPC futures months' expiry dates
| Futures month | Expiry date | Last opportunity to price futures |
|---|---|---|
| Dec. 2007 | Nov. 29, 2006 | 7:30 a.m. CT Nov. 30, 2006 |
| Mar. 2007 | Feb. 27, 2007 | 7:30 a.m. CT Feb. 28, 2007 |
| May 2007 | Apr. 27, 2007 | 7:30 a.m. CT Apr. 30, 2007 |
| July 2007 | June 28, 2007 | 7:30 a.m. CT June 29, 2007 |
December basis sign-up period: Feb. 27, 2006 – November 1, 2006 at 7:30
a.m. CT
March, May, July basis sign-up period: August 1, 2006 – November 1, 2006
at 7:30 a.m. CT
BPC pricing method
Producers have the option to lock in a basis first, and price the futures later, or they can price the futures first, and lock in a basis before the November 1, 2006 at 7:30 a.m. CT sign-up expiry date.
Basis rollover option
Beginning August 1, 2006, existing (unpriced) basis contracts can be rolled to a different futures month before the BPC futures month expiry date. The producer's original basis will be adjusted in value by the futures settlement spread on the day of the roll between the current basis month and the rolled to basis month. An administration fee of $1.00 per tonne will also be charged for the roll. Basis contracts that have not been priced or rolled to another futures month will be automatically priced by the CWB on the BPC futures month expiry date.
Roll example
On November 22, 2006 a producer with a $50 per tonne December basis contract decides to roll the contract over to the May 2007 basis month, expecting the futures market to strengthen later next spring. On this date, the December 2006 futures settled at $123 per tonne, and the May futures at $127 per tonne. The producer fills out the BPC rollover form and faxes it to the CWB. The producer's adjusted basis can be calculated using the following formula:
Adjusted basis |
= original basis + (original basis futures month – roll to basis futures month) |
| = $50 + ($123 – $127) | |
| = $46 per tonne |
The producer now has a May 2007 basis and has until April 30, 2007 at 7:30 a.m. CT to price the May futures.
Pricing (Port position vs farmgate value)
All values will be posted as in store Vancouver or St. Lawrence in Canadian
dollars per tonne. As a result, the two-row and six-row basis will be at
a premium to the underlying Winnipeg Western Barley futures. To arrive at
a farmgate price, producers will need to subtract their rail freight and
handling costs from their contract price.
Selected BPC calculation
Selected barley BPC = seleted barley basis + futures + adjustment factor
The following example illustrates how the CWB in store values are converted to an equivalent farmgate price.
On September 15, 2006, the WCE December 2006 barley futures settle at $123.00
per tonne. The current feed barley cash basis, delivered into Alix, AB is trading
at $16.00 under, resulting in a feed barley cash price of $107.00 per tonne.
On the same day, the CWB Two-row basis is posted at $50 per tonne over the
WCE December 2006 barley futures. If a producer located in Alix, AB locked
in both the basis and futures on this date, they would realize a BPC of $173
per tonne ($50 + $123) in store Vancouver or St. Lawrence. Assuming rail freight
and handling from Alix, AB to Vancouver, BC is $51 per tonne, the producer
would net a farmgate price of $122 per tonne, a $15.00 per tonne premium over
the domestic feed barley price.
(for illustration only)
Application of deliveries
The process of reporting deliveries against a selected barley BPC does not require any changes to the current reporting process. Maltsters and grain companies will continue to apply deliveries against the Selected Barley Storage and Delivery contract and enter this contract number on the purchase tickets, not the BPC number. Upon receipt, the CWB will automatically apply these deliveries to the BPC on a first issued, first applied basis.
Landlord deliveries
Landlords require their own BPC and a corresponding Selected Barley Storage and Delivery contract if they want to participate in the BPC program.
Producer payment
The maltsters and grain companies will issue the CWB initial payment based on the settlement grade. Within 10 business days the CWB will issue a payment to the producer representing the difference between the producer's contract price and the initial payment of the reference grade in effect at time of settlement.
Additional payment = BPC value – initial payment of Standard Select at time of settlement.
Pricing damages
Producers are required to deliver 100 per cent of the BPC commitment. Any shortfalls will be subject to pricing damages based on the following calculation:
The greater of:
{(Current basis + current futures + current adjustment factor) – (producer's
basis + producer's futures + producer's lock-in adjustment factor)}, if negative,
then $0.00
OR
(current futures – producer's futures), if negative, then $0.00
Plus
$15 administration fee per transaction
Rejected barley
If a producer's barley is out of condition and will not meet specifications, the following options are available:
- Assign the contract to another producer.
- Buy out the contract. (See pricing damages for the buy out calculation)
- Transfer the selected barley BPC to a feed barley FPC.
Transfer to Feed Barley FPC
A transfer fee, representing the cost of opportunity to transfer between the selected and feed barley markets, will be deducted from the feed barley FPC value, plus a $1.00 per tonne roll fee.
Transfer fee calculation is the greater of:
{(Current sb basis – sign-up sb basis) – (current fd basis – sign-up fd basis)}
If negative, then $0.
- sb = Select barley
- fd = Feed barley
Producers will need to call the CWB for quotation.
General information
- Selected Barley BPC producer worksheet
(PDF format 69 KB)
Current pricing is available here or by calling the CWB's toll-free line. You can commit to contracts over the phone by providing your CWB Producer Identification Number along with your Personal Identification Number (PIN). Fax commitments are also accepted at (204) 983-8031. Sign-up application forms are available by contracting the CWB and local elevators.