Public prices for durum disappeared when the Minneapolis Grain Exchange dropped its durum contract.
But prairie farmers can still lock in a price with the Canadian Wheat Board’s new durum producer payment option program.
“You can fix your price,” said Mel Pawlyk, the manager of contracts and permits for the board.
Other wheat board producer payment option programs are based on a futures price on a commodity exchange, but the board has had to operate this program differently because there is no active durum futures contract.
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Even last year when Minneapolis still hosted a durum contract, the board didn’t use it to hedge its pilot durum producer payment option program because the contract did not have enough liquidity.
The new durum fixed price contract program allows producers to lock in a posted price on any day up to July 31. The price is based on the wheat board’s pool return outlook for durum, minus a discount for the board’s risk, the time value of money and the cost of administering the program.
The prices can be found on the board’s website, at www.cwb.ca, or by calling 800-275-4292.
Farmers must commit at least 20 tonnes to take part in the program. The program is capped at 100,000 tonnes for all farmers.
Pawlyk said the program can help achieve several goals. Farmers who want to lock in a profit can use the program to capture a profitable price, if one is offered. Farmers can also use it to capture a high PRO price, if they think the market will fall.
And they can use it to provide fast cash flow. The fixed price contract gives the farmer the contracted fixed price when the grain is delivered, rather than the producer to wait for interim and final payments.
A farmer delivering into the durum program will receive an initial payment from the elevator and the rest of the fixed price from the wheat board, which will mail out the money within 10 business days.
Alberta Agriculture market analyst Charlie Pearson said farmers should consider locking in some of their production in order to get early cash flow.
But farmers may feel less secure using the board’s durum option than its wheat options, he said.
“The others are technically better connected to futures prices,” said Pearson.
“There isn’t as much visibility here.”
But if farmers are focused on locking in profitable margins, the program may suit them well.
“If you see a profit there, as a business you may want to lock in 25 percent.”
