Farmers will be able to quickly cash out their wheat and feed barley crops this fall.
The Canadian Wheat Board has announced that farmers will now be able to get 100 percent of the Pool Return Outlook for wheat and feed barley within 10 days of delivering their crop to the elevator if they sign up their grain for a new option in the board’s early payment options, or EPO, program.
Last year producers were only able to sign up for an 80 or 90 percent payment for wheat and feed barley.
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This year producers can also sign up their durum and malting barley for either 80 or 90 percent of the PRO value. Last year’s durum and malting barley program only allowed producers to sign up for 90 percent coverage.
Wheat board spokesperson Louise Waldman said the move to offer 100 percent in wheat and feed barley was prompted by farmer comments.
“It became very apparent that a lot of farmers felt that the 100 percent EPO would be beneficial to their farm operation,” said Waldman.
“They recognized there would be a deeper discount, but they said, ‘let us make that choice.’ “
Pool accounts safe
The board’s EPO program is not allowed to undermine the security of pool accounts. Whenever a producer signs an EPO agreement, the wheat board attempts to protect its financial exposure, said Waldman.
The board was able to offer wheat and feed barley at 100 percent of the PRO because there are futures contracts for those commodities.
But the board would have a more difficult time offering 100 percent payments for durum and malting barley because there are no futures contracts for those commodities, Waldman said.
The lower percentage EPO contracts have a much lower risk premium charged to farmers. Recently the 80 percent wheat EPO had a risk premium of about $1.50 per tonne, compared to $2.75 for 90 percent and a likely premium of about $16 if 100 percent had been offered.
Farmers also pay for the interest value of the payment and for administration.
The board’s EPOs have been popular. The wheat EPO was introduced in 2001-02 and was used by more than 5,000 farmers in the 2003-04 crop year.
About 4,000 farmers signed up for the feed barley contracts.
Farmers must sign up a minimum of 20 tonnes to take part in the program. There is no maximum limit, but the board has not guaranteed that it will take everything that is offered.
Waldman said volatility in the market or difficulty hedging the board’s exposure could cause the program to be suspended.
