And the award for top performance by a first-year wheat pricing program goes to – FlexPro.
More than 900 farmers signed up slightly less than 200,000 tonnes of wheat for the Canadian Wheat Board’s new pricing contract.
That’s the largest sign-up ever for the inaugural year of a new pricing program.
“We think it shows farmers are really interested in having this option out there, especially in a year where market volatility has sent prices all over the place,” said CWB spokesperson Maureen Fitzhenry.
The bulk of the tonnage was signed up on the July 28 deadline.
Read Also
Bond market seen as crop price threat
A grain market analyst believes the bond market is about to collapse and that could drive down commodity values.
Under FlexPro, farmers can sign up as much tonnage as they want and price it any day during the crop year.
The board said the program is a response to farmers’ requests for as much flexibility as possible in the way they price and get paid for their grain.
However, at least one market analyst said he isn’t impressed by FlexPro.
“I’m pretty neutral on the whole thing,” said Mike Jubinville of Pro Farmer Canada.
“It’s just another version of the Fixed Price Contract (FPC) in my opinion,” he said, adding that the sample FlexPro prices issued by the board throughout June mirrored the FCP almost exactly.
“It doesn’t go far enough in my mind,” he said.
Under FlexPro, the board publishes a daily price for various classes of wheat. Participants who lock in a price are paid the initial payment at time of delivery and receive the difference within 10 days. They still must sign separate delivery contracts.
FlexPro offers a flat price without any separate futures and basis components, reflecting futures markets and CWB sales.
The basis is determined using the CWB’s pool return outlook, futures prices and sales throughout the year. That’s similar to the FPC without the late sign-up adjustment factor.
Jubinville said the lack of specific information about the basis is the big problem with FlexPro, as it was last year with the FPC.
“There were significant complaints from farmers in 2007-08 about the wide basis,” he said.
This new program again tells farmers the price but not the basis, and that continues to be a problem.
Jubinville said that based on the experience with the FPC, the board’s policy appears to be to readjust the basis in order to prevent the contract price from getting too far out of line with the Pool Return Outlook.
He added that the board is hamstrung to some extent because it’s trying to offer a pricing environment like the open market within the constraints of a pooling system. The board’s pricing programs introduce an element of freedom and that’s appreciated, but they’ll never be able to design a system that gives a farmer complete freedom to determine his price, he said.
Because of the uncertainty about how the basis is derived, Jubinville has decided to stay away from FlexPro this year and watch how it develops.
