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    DPC Replacement

    CWB introduces new wheat pricing option for farmers

    May 28, 2008

    Winnipeg – Prairie farmers have a new way to price their wheat, the CWB announced today. FlexPro, a year-round wheat pricing contract with no tonnage limit, has been developed in time for the new crop year, with sign-up beginning on June 23.

    “Farmers have told us they want as much flexibility as possible in the way they price and get paid for their grain,” said CWB President and CEO Ian White. “FlexPro is the latest addition to a suite of Producer Payment Options specifically designed in response to the business needs of today’s producers, whether they’re focused on maximizing returns, minimizing risk or managing cash flow.”

    Under FlexPro, farmers can pick their own market-based prices on any day throughout the crop year. Producers simply sign up their desired tonnage, with no maximum limit at sign-up, between June 23 and July 28, 2008. Then, they lock in a price any business day from August 1, 2008 to July 31, 2009. They can choose to offer all their tonnage at once or price different amounts on different days.

    “Since 2001, when the CWB rolled out its very first Producer Payment Option, we have been constantly working to refine and improve the available mix of grain-pricing choices,” White said. “It has been a time of great change for this organization, led by a board of directors who are firmly focused on the business priorities of farmers.”

    Like the other pricing options, FlexPro is available online through CWB e-Services, enabling farmers to sign up and monitor their contracts from their own computers. A target pricing service is also available on all Producer Payment Options. Detailed program information on the CWB’s Producer Payment Options is available at www.cwb.ca. A snapshot has been provided below:

    FlexPro: a year-round pricing contract for wheat, newly introduced for the 2008-09 crop year. Sign-up runs from June 23 and July 28, 2008 with no tonnage limit. Producers lock in prices any day of the new crop year for all or part of the tonnage committed.
    Fixed Price Contract: farmers choose a fixed price for wheat or durum, with tonnage signed up between February 25 and October 31, 2008.
    Basis Price Contract: producers lock in a basis and futures value for their wheat at different times. For 2008-09, the period to lock in futures values runs from September 4, 2007 to October 31, 2008. The basis portion can be locked in between February 25 and October 31, 2008.
    Early Payment Options: to help manage cash-flow, farmers can access 80, 90 or 100 per cent of the Pool Return Outlook for board grain (less a discount) shortly after delivery. Available early-payment values depend on what time of year producers deliver.
    Farmers also have the option of being paid for all or part of their production through the CWB pool accounts, which return them the average price received from all sales made in a crop year, for their particular grade and class or grain.

    #2
    No mention of what the price is based on. Tonnage commitment and pricing are still separated. This is better how?

    Comment


      #3
      What happens when you cannot deliver unpriced tons. Like after harvest when you don't have the tons.
      I don't like having to commit the tons so early. Why not after harvest? Wouldn't that be more logical?
      We should be allowed to commit tons or sell fixed price year round. Anything else and the CWB will steal our grain just as before.

      Comment


        #4
        My issues.

        Definition around prices and how determined will be critical. It will not be adequate to have a number that is pulled out of the air.

        A clear understanding of the risk management strategy and costs around this program need to be clearly stated. Will highlight the losses on the risk management program in the past 2 years and what is likely to have been a pretty ugly year in 2007/08 (won't know results till annual report is released). In most worlds (including the non board), the allowance for risk will be wider basis levels. At least in the non board, there is competition that forces companies to keep the cost of managing risk as low as possible. This discipline does not exist in the current CWB system - they simply hand the bill to farmers/remove from the contingency fund (which is now likely negative).

        Finally, the CWB needs to be more imaginative in how they run the pools. I don't think you can have 1 year pools or the mish mash of classes included in the overall wheat excluding durum pool. They needed to do this 5 years ago versus the current farmer consultation process described by disker with something happening maybe a year from now (more likely 3 to 5 years).

        Comment


          #5
          how is the flexpro price going to be any different from the fpc? how and why could there be any difference in the two values? why not just run a full-year fpc?

          Comment


            #6
            Under the theory sometimes the best defense is a good offence, it will be interesting to see what the CWB annual survey says. Will note in the past, the CWB has announced changes ahead of negative news to demonstrate how they are responding.

            Comment


              #7
              On the technical, will be interested in how grade and protein spreads will be handled. I assume market based similar to the current DPC. In a pricing system that includes information from world markets, how will they be determined? From clarity, the current DPC uses US grade and protein spreads.

              Comment


                #8
                It's pretty clear what they think they're responding to with this release: no tonnage limit. As if the only problem with the PPO's last year was that the DPC filled up so quick.

                Guess what - a tonnage limit isn't likely to be a problem if we know nothing about the price, and if the program doesn't offer any meaningful advantage (like the high-price DPC did) over what we already have. I could take a Basis Contract today and price it any day of the year too, so why muck around with this with no information about the price?

                I think it's safe to expect that the flexpro price won't be as high as the DPC, since the contingency fund couldn't afford to back it anymore.

                Isn't it interesting that the DPC - originally a politically-motivated pricing program designed to counter farmers' criticisms that U.S. elevator prices were always higher than CWB prices - had to be discontinued? Seems to indicate that the Board can't in fact keep up.

                www.farmlinksolutions.ca

                Comment


                  #9
                  Now you can get cheated on unlimited tonnes of grain. How nice. You don't need to worry about a basis either. It will be some imaginary flat price that is completely unrelated to futures prices.

                  Comment


                    #10
                    Heh farmlink/bjtejhgkj hows your archives update going?

                    Should i even bother?

                    Comment

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