Farmers
Fixed Price and Basis Payment Contracts
2006-07 FPC/BPC enhancements
The 2006-07 FPC/BPC program sign-up period will start on February 27, 2006 when the first new crop Pool Return Outlook (PRO) is released at GrainWorld.
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 1-800-275-4292 starting February 27, 2006 at 2:30 p.m. CT.
Development of a limited force majeure program
The producer will have the option to select the force majeure clause at program sign-up for the type and class of grain. Such clauses excuse performance under the contract if certain specified events occur which are beyond the party's control, such as flooding, drought or other natural disasters.
If during the term of the contract any of the specified events occur, the affected party may declare force majeure. Force majeure claims will be subject to verification.
This clause will only apply to production loss, not downgrading. Full details pertaining to the clause will be available for the February 27, 2006 program start date.
Separation of the adjustment factor from the basis calculation
Currently the CWB provides a CWB basis to producers as a single figure in Canadian dollars per tonne or bushel. The basis is based on the Pool Return Outlook (PRO), but is also adjusted to reflect the amount of the pool that is sold.
In the coming crop year, the CWB will provide producers with a basis that separates the PRO value and the adjustment factor that is applied to account for the amount of the pool that has been sold. This will provide producers with a greater level of detail when they're attempting to assess basis levels when making pricing and buyout decisions.
Full-scale selected barley BPC program starting February 27, 2006
Last year, the CWB offered a pilot program limited to direct domestic malt facility deliveries.
The full-scale program will be available to all producers, including grain company selections 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 the 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 advantage of market rallies that may occur during the crop year. The program will also improve producers' access for locking in selected barley premiums to domestic feed values using the basis option.
The December 2006 basis and futures values will be available for sign up starting February 27, 2006. On August 1, 2006, March, May and July 2007 basis and futures values will also be included.
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)
2007-08 FPC/BPC enhancements
Locking in the futures component of a Basis Payment Contract on September 1, 2006
Starting September 1, 2006, producers can lock in the futures one year in advance of harvest using the BPC program.
The CWB will offer the U.S. December futures price in Canadian dollars for each of the seven classes of wheat. Producers can lock in the futures first, then price their basis starting at the end of February 2007 when the first new crop PRO is released. The basis can be locked in between the end of February and October 31, 2007.
Producers can benefit by accessing the futures lock-in using the BPC in the fall to:
- Provide more certainty about margins when planning seeding intentions.
- Take advantage of future market rallies.
- Increase ability to lock in foreign exchange rates.
- Manage futures and foreign exchange with less complexity and at lower costs.
- Manage smaller tonnages using the BPC (minimum 20 tonne commitment) vs. using futures contracts of 136 tonnes or 5,000 bushels.
Click here for historical pricing information.