Applying 03-04 CWB Deliveries to 04-05 PPO's

[TOM4CWB]

CHARLIE;

LOOK AT THIS!

THE CWB IS LISTENING TO US!

AMAZING!!!

CWB Bulletin 35
http://www.cwb.ca/en/movement/elevator_managers/elevator_news.jsp

"Applying 2OO3-04 deliveries to a 2OO4-O5 Payment Option

Farmers can deliver wheat, durum, feed barley and malting barley committed under a 2003-04 delivery contract into storage to be settled after August 1, 2004.

For deliveries settled after August 1, 2004, the farmer has the ability to apply these deliveries against a 2004-05 Fixed Price Contract (FPC), Basis Payment Contract (BPC) or Early Payment Option (EPO). Farmers are responsible for advising the elevator agent that they wish to settle a storage ticket against a FPC, BPC or EPO.

The following procedures should be used when settling for 2003-04 deliveries in 2004-05:

• Record the call designation on the storage ticket and report this on the settlement in the new crop year.

• Report the delivery with the quota year 03 and the payment year 04 (payment basis zero). This ensures that the delivery is applied against the farmer’s 2003-04 delivery contract and that the farmer receives the 2004-05 payment for the grade and protein settled.

• If the delivery is against a FPC, BPC or EPO, record the farmers payment option contract number on the cash ticket. The contract number is used to ensure that farmers receive accurate and timely payment for their deliveries.


The Canadian Grain Commission (CGC) has repealed the regulation that required payment for deliveries within 90 days. Licensed grain dealers and primary and process elevator operators must pay in full for the grain received but only when the farmer requests payment. This change does not affect the security (grain company bonding) provisions under the Canada Grain Act and Regulations. Under these provisions, producers are protected for a maximum of 90 days from the date of delivery or 30 days from when payment is either given or refused. If producers defer payment beyond 90 days from delivery, they are not protected by security for that delivery."


WHo would have thought... an innovation!

CRUSHER, YOU have an answer!

[TOM4CWB]

CWB Bulletin 35
Applying 2003-04 deliveries to a 2004-05 Payment Option

http://www.cwb.ca/en/movement/elevator_managers/elevator_news.jsp

New features for the 2004-05 Fixed Price Contract and Basis Payment Contract — Wheat and Feed Barley

Following consultations with farmers, the CWB has made some enhancements to the Fixed Price Contracts (FPC) and Basis Payment Contracts (BPC) that will make these programs easier for farmers to use.

The most significant change is the extension of the sign-up deadline to October 31, 2004 for the FPC and BPC for wheat and the FPC for feed barley. This will provide farmers with the opportunity to assess the quality and quantity of their crop before signing a contract.

A tonnage limit of 200,000 tonnes has been established for the FPC for feed barley. Sign up is on a first-come, first-served basis.

CONTRACT SIGN UP and COMMITMENT

Sign up for the FPC and BPC begins on February 27, 2004 and continues through October 31, 2004.

Between February 27 and October 31, farmers can sign a BPC for December 2004 and March 2005 futures. Starting August 3, 2004, May 2005 and July 2005 contracts may also be signed.

A rollover option, that enables farmers to change their futures contract month, starts August 3.

There is a $1.00 per tonne administration fee for each rollover transaction.


Farmers can sign up by:
Phoning 1-800-275-4292 and advising the CWB of the tonnes they wish to commit. Farmers are required to provide their 10-digit identification number and CWB Personal Identification Number (PIN) when phoning.

Completing a fax acceptance form for this program (available at www.cwb.ca or through our fax on demand number at 1-800-275-4292) and faxing it to the CWB.

The minimum commitment is 20 tonnes. There is no maximum. Upon sign up, farmers are required to indicate the class of wheat that they will be delivering.

PRICES

Each day at 2:00 p.m., the CWB announces the fixed price, basis and futures prices. These values are available on the CWB Web site at www.cwb.ca, through fax on demand, or by calling the CWB. Prices remain in effect until 7:30 a.m. the following business day. Farmers can lock in their fixed price, basis or futures price by fax or by telephoning the CWB.

Wheat:

The basis is the difference between the PRO and the forecasted futures less a discount for risk, time value of money and administration. The value of the discount can change daily resulting in a change to the basis.

The fixed price is equal to the December Basis plus the December Futures Price. Feed Barley:

The fixed price for barley is the PRO minus a discount for risk, time value of money and administration.

DELIVERY and SETTLEMENT

All classes and grades of wheat are eligible for delivery, excluding sample grades and mixed grain.

An additional discount applies on deliveries of CW Feed, No. 3 CWSWS or No. 4 CWRS.

FPC and BPC contracts are payment contracts only. Farmers must offer the grain on CWB delivery contracts. Delivery occurs through delivery calls issued for these contracts.

If grain is being applied against an FPC or BPC, record the farmer’s FPC or BPC contract number and the call designation on the cash ticket. This ensures that the farmer is promptly paid.

At the time of delivery, farmers receive the initial payment (less freight and elevation) for the grade delivered. Within 10 business days of receiving the delivery information, the CWB will pay the farmer the remaining amount. The farmer is not eligible for adjustment, interim or final payments on these deliveries.

An incremental payment to reflect the time value of money is included in the CWB’s payment to the farmer.


Additional information about these or other Producer Payment Options is available on the CWB Web site or by calling 1-800-275-4292.

[crusher]

I assume freight and other deductions will be 03/04 values. Looks like a farmer could deliver some time after the middle of May and still be covered by CGC. The next unknown will be what grain companies charge for storage. One should be able to negotiate this down, because I would expect the grain company could make their handling fee right away.

[cropduster]

Good news Tom. They must have put away the crib board for at least a few days!!!

[charliep]

Amazing how rules can get changed when it is politically expedient.

I went on a long tirade as to why this is a dumb idea and a strong indication of the benefits of moving to daily cash pricing (either open market or using the CWB Producer pricing option model) only to end up deleting before I could send (likely lucky for people in the room).

My question revolved around having grain in the system under storage tickets (farmers still own this grain and this has impact on the system) as well as the financial risk. The question also has to be raised why Canada carries over so much wheat between crop years when most other competitors effectively sell out their crop. Deliveries at the end of the crop year are a major issue here. Has anyone benchmarked the CWB on this issue?

My firm recommendation is not to use this program. Period.

[cropduster]

Good points Charlie! How do we know some carryover fudging isn`t going on now??

[TOM4CWB]

Charlie;

The strange part is that I would suggest this wheat can be shipped and sold by the CWB even though it is not delivered yet...

My take on this change is simple.

For the rest of the 03-04 crop year, this now effectively is a cash price for 03-04 grain delivered to the CWB.