Fixed price contracts or flexpro

[charliep]

Choice2u raised the issue of fpc contracts in the canola thread so I thought I would pull out for another discussion area.

As a point of interest, I would actually consider a signing some tonnage to flexpro this year (deadline July 29 for 2010/11 deliveries).

The reason would be to take the adjustment factor out the pricing calculation. In rising market (existing sales at low levels and therefore a drag on the pool), the adjustment is likely to be negative. Flexpro does not include the adjustment factor in their calculation.

Current crop year (2009/10 was one of falling prices for much of the year (existing sales added value to the pricing pools) and the overall impact was a positive adjustment factor. Therefore the recommendation not to use last summer.

I like flexpro on 1/10 to 1/4 of the CWRS crop you are comfortable you can bin this fall. Reason - I like cash in my pocket on delivery (or two weeks after in this case). CPS, CWRW and the other alternative wheats are open for debate - would play the feed/ethanol markets as well as the CWB.

Others thoughts.

[charliep]

another freudian slip. Fixed payment contracts - no price. No such thing as price in the CWB system.

[sawfly]

i have about 10,000 HRS 1&2 11.5-13.5 carryover.
am was planning to lock dec. basis on today.
basis is better than it has been for a while. then lock price whenever ?

I should know ,but don't if i lock basis , am i free from an adjustment factor.

as for new crop , will have lots but its just started heading, and without a hot dry august , some possibility of all feed.

would the FPC be better on old crop and the flex pro on newcrop?

gets complicated in what i would/should deliver against the FPC if it freezes or does it matter?

read the flexpro contract this am
lots to learn .
Too much to learn
you never know if you should be working or learning or saying screw it and take a day off

[charliep]

Hadn't thought of it but a good comment. Basis fpc prior to Aug. 1 will knock off the adjustment factor. Only issue that may be a plus for the flexpro would be the fact you don't have to worry about potentially rolling fpc contract months.

[charliep]

One thing I should ask on your old crop is whether you are carrying over on a storage ticket. You are not allowed to use any of the CWB PPO programs for crop carried between crop years (delivered 2009/10 but payment decision in the 2010/11). If old crop carryover that will contracted under delivery opportunities in the 2010/11 crops year, then you can use the fpc/flexpro.

[charliep]

should read comments better. feed wheat is a risk - you have firm contract and in most cases delivering feed to the CWB is not worthwhile (non board pays better). risk is you may have to buy your way out of the contract.

You are also stuck with initial payment spreads. Can work for or against you if payment spread change during the year or in the final payments. No difference flexpro and fpc. Frustration given the CWB should be using market based spreads on the PPO contracts but that is a discussion for another time.

[vvalk]

If your wheat is heading out you should be ok shouldn't you. If not boy there is lot of cereals that won't make it.
Btw does anyone know on avg how long from end of flower to scathing it is on canola?

[sawfly]

barely heading 1 or two pokeing out.
have not been any where to see .
north of us near Battleford . a lot is headed out.

charlie wheat is in bins & condo

[btjadenlepp]

If the choice is FlexPro vs. a planned
future FPC sale, I'd take the former
because I agree the adjustment factor is
going to work against post-Aug 1 FPC
pricing.

But if it's a question of FlexPro or the
pool, the question is more complicated.
If they actually pay out of the pool
into the contingency fund, which in
theory is required to equalize the pool
and the PPOs as the pool sells into a
rising market, could this ever make it
over to FlexPro pricing?

www.farmlinksolutions.ca

[charliep]

Off the topic but brought on by looking at the CWB flashing promo for delivery
changes at the bottom of the threads, I have ask why the CWB dealt the delivery
issues but left pricing ones alone. There is a lot more room for creativity and
innovation. Changes seem to be driven by two things. The need for the CWB as
an organization to manage its risk better at the expense of farmer who use their
services (i.e. risk is downloaded on farmers) and the desire to show the
appearance of change when in fact there is none. Off my own topic. I
apologize.

[Fransisco]

If flexpro is the way to go then the July 29th sign-up is a bit of a problem as you'll still be estimating what your final yield will be. A deadline of August 30 would make more sense because usually you'll have it in the bin by then.

[charliep]

You have to understand CWB policy in terms of how they manage their organizations/pooling risk to answer the question as to why end of July on flexpro signup. The extension of the fixed price deadline to January 31 also has an impact on the decision. All this to imperfectly mimic a cash market (which it doesn't - they are designed to lock in a relationship with the most recent PRO). Which relates to Brenda's comment about how the uncertainty CWB how the CWB actually designs the programs and its impact on farmer risk/price signals.