Newsroom
2006
Popularity soars among farmers for CWB market-based options: sign-up increases 400 per cent
Winnipeg -- More than 14,000 Prairie farmers chose to participate in market-based CWB Producer Payment Options this year, taking advantage of their ability to lock in prices based on futures markets or U.S. elevator prices for 3.5 million tonnes of grain.
The farmer sign-up for 2006-07 represents a four-fold increase over last year, with a 500-per-cent increase in grain tonnage committed for the CWB Fixed Price Contract (FPC), Basis Payment Contract (BPC) and Daily Price Contract (DPC) programs. The sign-up period for the FPC and BPC ended October 31.
"Farmers are gaining awareness and comfort with these innovative programs, introduced in 2000-01 specifically in response to their business needs," CWB president and CEO Adrian Measner said. "When the wheat markets rallied this year, many farmers recognized they had the ability to access those prices if they chose, while pooled returns remain an excellent alternative as well.
"There is now a full range of options to suit any farmers' business needs. It provides Prairie producers with the best of both worlds."
A total of 13,998 producers committed 3 541 655 tonnes of grain to the three programs in 2006-07. This compares to 3,181 farmers who signed up 710 590 tonnes last year. In 2004-05, 6,782 producers committed 1.2 million tonnes.
The FPC was the most popular option this year, with over 9,700 farmers choosing to lock in a futures value. The BPC, which provides an ability to lock in a basis level or futures value at different times, attracted over 2,000 producers and a 57-per-cent increase in grain committed compared to last year. The DPC, using values based on U.S. elevator prices, had reached its maximum program sign-up of 500 000 tonnes by July 31. To date, more than half of that grain has been committed and paid out.
The prices in these programs fairly reflect market values. The CWB offers daily values for the FPCs and BPCs, establishing a basis from the reference grade Pool Return Outlook (PRO), less forecasted futures, less a discount for risk, time value of money and administration. The FPC is calculated by combining the December basis to the futures each day. The DPC is offered as a flat price contract that is responsive to daily movements in the cash markets.
"These three programs – combined with our Early Payment Options, Guaranteed Delivery Contracts and our new pilot Delivery Exchange Contract – are all designed to give farmers the flexibility they need to run their businesses," Measner said. "Many farmers have expressed their support for these innovative additions to the CWB."
Controlled by western Canadian farmers, the CWB is the largest wheat and barley marketer in the world. As one of Canada's biggest exporters, the Winnipeg-based organization sells grain to more than 70 countries and returns all sales revenue, less marketing costs, to Prairie farmers.
For more information, please contact:
Maureen Fitzhenry,
CWB media relations manager
Tel: (204)-983-3101
Cell: (204)-479-2451
CWB market-based Producer Payment Options (PPOs) |
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Fixed Price Contract (locks in a flat price based on December futures and basis) |
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Crop Year |
# of producers |
Contracted tonnes |
2001-02 |
439 |
87 152 |
2002-03 |
230 |
38 703 |
2003-04 |
379 |
70 583 |
2004-05 |
5,869 |
962 145 |
2005-06 |
1,197 |
282 331 |
2006-07 |
9,747 |
2 193 387 |
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|
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Basis Payment Contract (locks in basis and futures values at different times) |
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Crop year |
# of producers |
Contracted tonnes |
2001-02 |
379 |
84 370 |
2002-03 |
55 |
11 853 |
2003-04 |
335 |
103 982 |
2004-05 |
913 |
244 729 |
2005-06 |
1,577 |
352 695 |
2006-07 |
2,752 |
846 724 |
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|
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Daily Price Contract (locks in a flat price based on daily U.S. elevator cash prices) |
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Crop year |
# of producers |
Contracted tonnes |
2005-06 |
407 |
75 564 |
2006-07 |
1,499 |
501 544 |
- Producer Payment Options (PPOs) were introduced in 2000-01 to give farmers flexibility in how and when they price and get paid for their grain. This move was made by the CWB's farmer-controlled board of directors in response to producers' desire for more control over these factors.
- CWB pool accounts are the alternative to the market-based PPOs. They provide farmers with risk management by pooling returns from all markets for the entire crop year. By contrast, the PPOs provide the choice to price grain at a particular point in time.
- Producers can manage the degree of price and production risk exposure by selecting the payment option that is right for them. In combination with the risk management provided through price pooling, the PPOs can be used as a balanced marketing strategy throughout the crop year.
- In addition to the three market-based programs above, PPOs include Early Payment Options. On the delivery side, the CWB offers Guaranteed Delivery Contracts and a pilot Delivery Exchange Contract which provides participants with flexibility over the timing of their deliveries.
- For more information , please refer to the 2006-07 Fixed Price and Basis Payment users guide. For historical PPO pricing information, please refer to the CWB Web site.