Farmers who signed fixed price or basis contracts with the Canadian Wheat Board in 2004-05 won’t be able to price that grain in the 2005-06 crop year.
Until now, farmers have had the option of delivering contracted grain in one crop year, putting it in storage and then taking settlement in the next crop year to take advantage of price changes.
But at its January board meeting, the CWB’s directors approved a rule change that requires farmers to settle their contract before the end of the crop year July 31.
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Directors and board officials say the change is designed to protect the financial integrity of the pool accounts.
“One of the guiding principles of the producer payment options is that they are not to impact in any way on the pool accounts,” said Mel Pawlyk, manager of the board’s PPO programs.
The board decided that could happen if farmers delayed payment of their contract into the new crop year to take advantage of a rising market as the crop year changed.
As a result, revenue that would otherwise be part of the old crop pool would be transferred into the new crop pool.
“By allowing the transfer, that takes revenue out of the old crop and transfers it to the new crop, and the guy who delivered early loses out because he’s already settled,” Pawlyk said.
While the board hasn’t yet formally announced the new rules, information about the change has been sent to elevator agents and has been leaking out into the countryside.
Mike Halyk, a farmer from Melville, Sask., and a former CWB director, said he was shocked when he heard about the change, which he described as an unnecessary and unwelcome restriction on farmers’ marketing choices under the PPO.
He said the options have worked well and proved increasingly popular with farmers and should be left as originally designed.
“The merit of the program is not to beat the pool account, it’s to get cash flow,” he said, adding the board could always put tonnage limits on the program if it was concerned about the impact on markets.
CWB director Rod Flaman said the board felt it wasn’t fair to producers who delivered into the old crop pool to allow those with contracts to defer settlement.
He rejected the suggestion that anything is being taken away from farmers as a result of the new rules.
“People choose to go into a fixed price option on a voluntary basis,” he said.
“The rules are known in advance and it’s meant to be as close to the real world as possible.”
All of the pricing options are designed to give farmers who choose to participate a chance to move away from artificial market situations as reflected by pooling and into the real world risk that’s involved in buying and selling grain, Flaman said.
