Spring Price Endorsement - Alberta Crop Insurance

[charliep]

$45/t is the standard basis for low protein 2 CWRS. All the remainder will be off the spreads used in the Oct. PRO. This should be detailed in the information in your crop insurance information package.

[TOM4CWB]

Charlie;

TO be clear, the CWB October PRO may have a basis $20-40/t better than the CWB PPO Fixed Price or Basis Price Contract today.

THIS is the problem with calculating a price using today's CWB PPO contracts!

I know a number of farmers who are being sucked into believing that today's PRO/PPO contacts mean that the Spring Price Contract is already in force.

This, if examined closely... IMHO is false.

What do you say Charlie?

[TOM4CWB]

Charlie;

If you load the CWB electronic Financials for 2001-02, the page numbers on the printed document do not match the readout on the Adobe reader at the bottom... this is quite confusing!

[charliep]

Yes. The October PRO will be different (either positive or negative) from the average price used in the 2CWRS 11.5 CI prices depending on where the actual basis (I hate to use this term as is really not a basis but rather an adjustment to reflect a pooled price). Given the changes in the CWB fixed price/basis contracts, there should be less basis risk for both farmers and this program. The other assumption (hopefully right) is that western Canada will have a more normal crop and from there, a return to a larger/normal distribution between ports and customers (less basis risk).

The objective is to have a more visible process for crop insurance prices. This past year is a hybrid and perhaps why some of the anamolies are occurring (particularly on wheat).

[TOM4CWB]

Charlie;

I have not seen why exactly there should be less basis risk, can you please explain why this is so?

Chairman Ritter said a major change in the PPO contracts was that the PPO contracted price could be higher than the PRO. This was the case when I priced on July 24th, 2002.

The PRO on CWRS #1 13.5 was $201/t, the Fixed Price Contract was $235/t, and on a #1 CPS Red the PRO was $172/t, while the Fixed Price Contract was $198/t.

WHen I brought this to the attention of Chairman Ritter... his comment was simply, "You should be happy then".

This is why I fail to understand how the "new" PPO's are any different from last year!

I sure hope you have an answer that can show how exactly CWB changes will make the Basis more stable!