To deal with huge supplies of feed wheat in prairie farmers’bins, the Canadian Wheat Board has devised a new pricing option for 2010-11.
Farmers will be given the option of immediately locking in aprice for Canadian Western feed wheat, based on the early payment option.
The new program was launched Nov. 29.
“Wet weather throughout the growing season means more feedwheat in the bins than there has been in at least six years,” CWB president andchief executive officer Ian White said in announcing the new option.
It’s expected as much as 25 percent of all wheat harvestedthis year could be graded as feed.
In an average year the two top grades No. 1 and 2 accountfor 70 percent of prairie wheat crop. This year that is expected to dip to 38percent, with 35 percent No. 2 and 25 percent as feed.
“Farmers tell us they’d like to lock in a feed wheat pricethis year, so we’ve adapted an existing program to enable them to do that,”said White.
Here is a summary:
• A farmer anticipating an increase in the market fromcurrent levels would most likely want to lock in the highest price possibletoday, so this would be either the 200 per cent EPO or the FPC.
The 200 percent EPO can be used to lock in the minimumguaranteed price on feed wheat yet to be delivered, while the fixed pricecontract (FPC) can be used to settle feed wheat deliveries already made.
• If the market is going higher, the best choices are thoseoptions that allow the farmer to capture that upside. They include: remainingin the pool, which will provide an average of market returns, including anyupside yet to come; the 80 or 90 percent EPO, which will keep most of the sameupside as the pool while providing more cash flow on delivery.
Lastly, for farmers who are very confident of higher pricesto come, the best choice would be to wait and then choose a 200 percent EPO orFPC when they believe prices are at or near their peak.
• For feed wheat, the EPO contract allows you to lock in avalue equal to 80, 90, 100, 125, 150, 175 or 200 percent of the pool returnoutlook.
More detailed information about the EPO and the new programis available at www.cwb.ca/epo.
