In an unusual move, Agriculture Canada market analysts were asked to
take a second look at what wheat prices would have been on July 31
after Alberta farmers began expressing concerns that crop insurance
prices were based on out-of-date prices.
“We were asked to take a second look at the prices,” said Glenn Lennox,
wheat analyst for Agriculture Canada’s market analysis division, which
sets final crop insurance numbers for the provinces.
Normally, analysts base Alberta crop insurance’s variable price option
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on the Canadian Wheat Board’s last Pool Return Outlook of the crop
year. But because there was such a dramatic jump in wheat prices from
the July 25 PRO to the Aug. 9 mid-month PRO, Lennox said the Alberta
Financial Services Corp., which operates crop insurance, asked the
analysts to go back and predict what the price would have been on July
31, the cut-off date for the projected market price.
“This was a really weird exercise for us because normally we use
everything we know at that point and time to make a number.”
Instead, crop insurance officials told the analysts not to use their
present knowledge of higher wheat prices and crop shortages, but only
the information they would have had at the end of July.
“The constraint put on us by Alberta crop insurance was that we
couldn’t use anything we didn’t know on July 31,” Lennox said.
“I would have been just as happy to use the Aug. 9 PRO and go with the
higher numbers.”
Using the prices that they thought would be realistic on July 31,
analysts revised wheat prices upward, but not enough to trigger a 10
percent difference of the price set in January.
Lennox said that in a normal year, using the wheat board’s last PRO of
the crop year provides a good enough price prediction for the variable
price option.
“The board’s track record has really been quite good.
“It’s just with the rapidly rising prices and the shrinking crop size
throughout July and August, the PRO lagged the actual increase in
prices. They were being cautious, I guess.”
