New rules for CWB PPO Contracts?

[TOM4CWB]

Charlie,

Fixed Price Contracts now are blended pool prices?

WHAT is going on?

FlexPro how does a grain grower get out of it if no milling wheat?

WOW... if being complex... and confusing... is better... we must have the BEST!!!

The CWB prices wheat throughout the year according to a strategy approved by the Board of Directors,
through a combination of cash sales and futures. Typically the wheat pricing pace is:
25 per cent priced by harvest
50 per cent priced by December
75 per cent priced by spring
100 per cent priced by fall
The pricing pace to date is released monthly with the Pool Return Outlook.
Prices posted daily for the Fixed Price Contract (FPC) are determined as follows:
FPC = (average price of priced wheat x percentage priced) (current market value of wheat x
percentage of wheat unpriced)
The current market value of wheat is established by taking the weighted average of current prices available
for shipping periods and destinations that the CWB expects to sell into for the remainder of the sales
period.
The daily price posted for the FlexPro contract is simply the current market value of wheat:
FlexPro = current market value
The Basis Price Contract (BPC) is comprised of a basis, futures value and adjustment factor.
BPC = basis futures adjustment factor
The basis and adjustment factor can both be calculated in one of two ways:
Basis = FlexPro – futures
OR
Basis = FPC – adjustment factor – futures
Adjustment factor = FPC – FlexPro
OR
Adjustment factor = (average price – current market value) x percentage of wheat priced
The adjustment factor allows for later sign-up into the fall period after harvest is complete and is set at zero
early in the FPC/BPC sign-up period. It is an adjustment to ensure producers signing up later FPCs and
BPCs take a share of previously completed pricing. It is locked in when tonnes are first committed to the
program. The adjustment factor is not applied to FlexPro contracts because all FlexPro tonnage
commitments are known early in the year, before the adjustment factor is incorporated into PPO pricing.
Example
The CWB has priced 25 per cent of wheat at an average price of $240 per tonne; 75 per cent remains to
be priced.
The current market value is $210 per tonne.
The December futures are $192 and the March futures are $198
FlexPro = current market value
= $210
2010-11 Producer Payment Options www.cwb.ca PPO price establishment
FPC = (average price x percentage priced) (current market value x per cent unpriced)
= ($240 x 25%) ($210 x 75%)
= $60 $157.50
= $217.50
Adjustment factor = FPC – FlexPro OR (average price – current market value) x percentage of
wheat priced
= $217.50 - $210 OR ($240 -$210) x 25%
= $7.50
Basis = FlexPro – futures OR FPC – adjustment factor – futures
December basis = $210 – 192 OR $217.50 - $7.50 - $192
= $18
March basis = $210 – 198 OR $217.50 - $7.50 - $198
= $12
What factors influence prices?
There are many market factors that can influence prices. Individually, each factor can have either a
positive or negative impact. Combined, the impact depends on how market forces interact and which
factors exert the greatest influence at that time. Some examples include:
World supply-demand balance
o Greater than expected demand supports prices, while larger than anticipated supply is
negative
U.S. futures market versus world market dynamics
o Speculative activity in U.S. markets can drive futures sharply higher or lower, while world
cash values are flat
Foreign exchange
o A strengthening of the Canadian dollar tends to pressure prices, while a weakening dollar can
be positive
Quality
o Prices can rise when key competitors have poorer quality wheat
Ocean freight
o Higher ocean freight rates can pressure pries lower for sales into offshore markets

[oneoff]

Is this a taste of what farm marketing is meant to be. You're going to clog every available brain cell with this type of BS.

[bucket]

Don't know much about using futures but the cwb could use the mgex to price grain similar to what grain companies do with canola, or am I missing something?


Meanwhile the cwb makes up useless programs that are not in sync with the industry and confuses farmers into not using them.

Currently, high protein wheat has a very good price that western canadian farmers are not getting.

[HFL]

Don't worry guys. I was at a meeting yesterday with Mr. Hill and his friends from the CWB. They have everything under control. We farmers can rest easy at night.

[charliep]

TOM4CWB

Actually flexpro never has been a price.

The CWB manages its price risk from the producer payment options (including flexpro) across the entire pooling year. Flexpro is not a price that reflects a sales opportunity or world/domestic market. It is a calculation.

Canola has a price that reflects an actual sales opportunity (be it an export sales, canola product sales (oil and meal) or futures markets. It is reflective of the market.

The closest the CWB came to an actual price was the Daily Price Contract. That program was eliminated and replaced by flexpro. CWB arguement was the DPC presented too much risk to the overall pool the CWB couldn't handle.

Good questions this fall for the CWB director elections.