Force Majeure Option

[kamichel]

I was just told by a grain company rep that the for the force majeure option to take effect one has to have a 100 percent loss. So he is telling me that if one had 50 percent loss and one could not cover the contract then a buyout would still be in order.
Any input on this would be appreciated, I want to pull the trigger on some grain.

[Burbert]

Remember now, grain companies are our friends, they love farmers and will do anything to please them. Railway guys think we are a neat bunch tooo. Don't worry, be happy, just me and my PC we will overcome. Freedom comes with a cost attached to it. Remember they need us!!

[btjadenlepp]

wow, am i ever ignoring that drivel above. sad to see people reduced to such ranting and raving.

i can confirm the cwb's act of god clause is totally useless. i've looked at this closely adn wasted some good money on it last year, only to realize afterwards that there really is no protection because of the reasons you state.

why not just do 15-20% of your expected production now? if the market goes higher and you know you have the crop later, you can sell more. if you don't have the crop, you should be able to find someone to take these fpc's off your hands later, at $5/bu net.

just my thoughts.

[btjadenlepp]

oh yeah, the force majeure also doesn't cover downgrading. so if you end up with feed, you're stuck marketing it through the board even though the non-board market will most likely be at a $50/t premium, plus whatever feed-specific discounts they apply to feed grades marketed under the fpc.

transfering cwb fpc's between growers is never a problem - unless you have a force majeure tacked onto it. so actually you take on more contract buy-out risk with this little add-on than you had in the first place. it's quite something really, like nothing we've ever encountered in dealing with private companies.

[kamichel]

Sorry I was actually referring to the CWB Force Majeure Option.
I was also told that if you take the force majeure it would be better to have 4 100 ton contracts than one 400 ton contract. Will phone in to the CWB in the morning, hope I talk to someone there that knows something. Burbert, you may have stepped on your tongue.
True bjtadenlep it is not transferable so if transferring the contract to another grower then it is a liability.

[kamichel]

Force Majeure is not availlable anymore.
Max. tons have been reached in May I was told. I chickened out on the tons I was going to contract so only did 100 tons. Overnight trade was up 9 cents. Still want to use the daily price contract also. Still watching fixed price with interest.
Hopefully the basis does not change for the worse than it already is.
If the daily price works off the northern tier USA ellevators then would the daily price not be much better???