Recent History – 2000
March 14, 2000
By Mark Nielsen, Daily News Staff
Grain farmers will have two new ways to sell their product this coming crop year.
The Canadian Wheat Board (CWB) board of directors gave the green light earlier this month to allowing fixed price contracts and basis contracts as an alternative to the traditional price pooling.
Those who attended a CWB members meeting in Dawson Creek Monday evening got a closer look at schemes designed to allow members to better manage their cash flow.
The primary reason most will participate is so they will be able to get their money faster instead of relying on an initial payment from the CWB for much of the year.
“But what they are doing is that they are taking more risk on themselves in terms of the time that they actually sell,” said CWB district one director Art Macklin.
Fixed price contracts allow producers to take a price at a particular point in time and basis contracts allow them to play the futures market.
Fixed price contracts will be based on the pool return outlook which in turn is based on the CWB’s best estimate the final price the for that marketing year. It’s generally given in a range of $20-$30 per tonne.
“So what the wheat board is saying is we will relate the fixed price contract to the mid-point of that range,” Macklin said.
For five days from the date the pool return outlook is announced, farmers will also have the option of using basis contracts. based on the Minneapolis futures market. The underlying futures will be December futures for April and May contracts, and March futures for June and July contracts.
The two new schemes will be limited to mill-quality Canadian Western Red Spring Wheat, but it’s the largest class of wheat that is produced in Canada.
“So this does allow producers right across the whole prairie region to participate in this program right off the bat,” Macklin said.
Staying with a single class of wheat also reduces administrative costs, and the plan is expected to go through a one- or two-year trial period before it’s expanded.
“So we’re going to walk before we run on this one,” Macklin said.
Macklin, who ran on a platform of orderly marketing during the elections in 1998, said the moves are not a step towards dual marketing.
“It’s giving producers some pricing options, but you’ll notice that the options are based off the pool return outlook,” he said. “And the Canadian Wheat Board is still the single marketer to export positions and for domestic human consumption.”
Macklin also stressed that those who stick with pool accounts won’t be paying for any of the administrative costs for the other two methods.
CWB members will also get a mail-out in April explaining the two schemes more fully.