contract deliveries

[samhill]

I am quite ignorant of the whole grain industry,and so
ask this question:

DJ ICE Futures Canada Delivery Notices - Jul 13

why does RBC Dominion Securities take delivery of
canola contracts? can anyone take delivery? or only
designated entities?

Thanks for any replies.

[charliep]

why does RBC Dominion Securities take delivery of canola contracts?

Likely didn't. They could be acting on behalf of a client they provided brokerage service to a client who will get delivery. Could be planned event (crusher or exporter who wants the physical product) or an unplanned event (someone who held the long side of a futures contract too long and was delivered on). Should note that all futures contracts can end up being firm contracts if held to expiry. Most contracts are liquidated far earlier - take the opposite position of the initial trade (i.e. sell 100 tonnes if you bought 100 tonnes originally).

can anyone take delivery? or only
designated entities?
Yes. Just stay in the contract till the delivery period and you will get a piece of paper that says you now own a agreed volume of canola and a bill that says how much you owe (full value of the contract). You are responsible for storage and all costs after that - own canola in a deliverable location.

You didn't ask but providing delivery is somewhat different - short side if you like. You have to have your canola in a delivery locations - specified primary elevator. Should be more specific about the paper work but need to do the research side to remind myself. Actually a complicated process which is why farmers very rarely if ever deliver against futures.

Every farmer who has speculated in the futures from the long side (replaced physical canola or some other crop they have sold with futures) has at some time held a futures position too long. Always an exciting day when the broker phones to tell them where they own canola (unexpected surprise) and highlights the money required for the purchase ($40,000 plus for 100 tonnes today). Ways of getting out but likely painful.

[charliep]

Likely more than you want but here are the delivery terms.

15.14 Delivery Process
Delivery against canola futures contracts shall be done in accordance with the following;
a. Delivery against canola futures contracts shall be initiated at the option of the seller who
holds an existing short futures position by presentation of a Tender Notice to the
Clearinghouse by 2:00 p.m. Central Time on the day prior to delivery. Such presentation of
a Tender Notice can be made from one (1) Trading Day prior to the first Trading Day of the
delivery month, up to and including 2:00 p.m. on the first Trading Day after the last Trading
Day of the delivery contract.
b. After 2:00 p.m. on the first Trading Day after the last Trading Day of the delivery contract, all
outstanding short positions will automatically be tendered for delivery by the Clearinghouse.
c. On delivery day;
(1) the Exchange will notify the Clearing Participant for the buyer, of the monies owing
for the delivery, which notice shall be provided by 12:00 noon;
(2) the Clearing Participant for the buyer will provide the Clearinghouse with the monies
for the delivery, by wire transfer, no later than 2:00 p.m.;
(3) the Clearinghouse will provide the monies to the seller no later than 4:00 p.m.
15.15 Calculation of Payment
a. Upon delivery the Clearinghouse shall invoice the Clearing Participant of the buyer at the
previous day’s settlement price, or the settlement price of the last Trading Day for deliveries
made during the two (2) Trading Days after the last Trading Day of the delivery contract.
Invoicing of the settlement price shall be based on No. 1 or No. 2 non-commercially clean
canola.
b. In the event the shipment is from a non-par delivery point:
(1) the buyer, after completion of the shipment, shall invoice the Merchant Participant
which issued the Warrant(s) for the appropriate non-par price differential discount,
OR
(2) the Merchant Participant which issued the Warrant(s) shall, after completion of the
shipment, invoice the buyer for the appropriate non-par price differential premium.
c. The Merchant Participant which issued the Warrant(s) shall, after completion of the
shipment, invoice the buyer the appropriate commercially clean premium, if applicable.
d. All invoicing shall be done promptly upon completion of the Confirmation of Shipment form
and shall be payable within five (5) Business Days of the date of the invoice.
15.16 Initiating Shipment

<a href="https://www.theice.com/publicdocs/futures_canada/rules/Rule15_Canola.pdf>canola delivery</a>

[charliep]

[URL="https://www.theice.com/publicdocs/futures_canada/rules/Rule15_Canola.pdf"]canola futures delivery[/URL]

[samhill]

Charlie, your obviously quite familiar with this
process, and many thanks for helping.
Is there a list of elevators where delivery or
acceptance can occur?
I don't understand par vs non -par regions.
There is much paper work involved, but it seems
that there can be deliveries or receivers without
transparency as to the buyer or seller as per RBC
Dominion, is that correct?

Thanks again for your efforts.

[charliep]

The list of elevators is on the ICE website. Link below.

[URL="https://www.theice.com/marketdata/reports/ReportCenter.shtml?reportId=15&productId=1092&hubI d=1051"]canola futures delivery points[/URL]

Not sure how to answer the issue of transparency versus confidentiality. Reporting is done at the broke/executing agent level.

[charliep]

Forgot the question on par and non par.

The main delivery area is a ring around Saskatoon. This is called
par. Non par areas have an adjustment for differences in freight
costs with an emphasis on the west coast. Not an exact number but
what is used for the price at delivery time calculations. There is
good map in the delivery locations link above.

Should note the main idea is to encourage (some would force)
participants out of their futures positions ahead of the delivery
month. Delivery is an ultimate solution but as highlighted, most
contracts are liquidated.