Not all the grumbling about the Winnipeg Commodity Exchange’s re-designed canola contract has subsided.
Farmers who attended a day-long meeting of the Saskatchewan Can-ola Growers’ Association (see story on page 16) told exchange officials they feel shut out because they can’t deliver canola against a futures contract.
The Canada Canola Growers’ Association unsuccessfully tried to block the exchange’s adoption of the re-vamped contract through a last-minute appeal to the Federal Court of Canada and then to federal agriculture minister Ralph Goodale under the Grain Futures Act.
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Neither was successful.
When the appeals were made, the biggest issue was the decision to move the par pricing point for the contract from Vancouver to a region surrounding Saskatoon.
Farmers argued moving the pricing point would mask the influence of cash export sales in price discovery and create a market that was “supply pushed rather than demand pulled.”
Now, it seems some farmers are upset by change in delivery specifications to a warrant system, rather than a warehouse receipt at a specific elevator.
Sandra Craven, former marketing manager for the Winnipeg Commodity Exchange who now works for the United Grain Growers Grower’s Marketing Services, said only a licenced facility can issue a warrant for delivery.
More facilities
Under the re-vamped contract, 13 companies have licensed more than 200 elevators and so are eligible to take deliveries, compared to a handful of facilities and two companies under the 1994 rules.
“The threat of delivery is enhanced by the new contract,” she said.
It is not impossible for a farmer to deliver canola against a contract under the new rules, Craven said. First they would have to arrange for the space to be available in a licensed facility with its owners and then pay elevation – about $10-$11 per tonne – one of the specifications of the contract.
But Cal Ausenhus, president of Chinook Grain in Didsbury, Alta. and one of the members of the 1995 task force that recommended changes to the canola contract, said this arrangement would depend on the goodwill of the grain company.
He added farmers have basically been shut out of the delivery process on canola for about 10 years since the ship-to-sales program for canola was introduced. Original legislation allowed producer cars to be delivered against futures contracts in Vancouver, he said.
He agrees with Craven that the enhanced liquidity and network of delivery points of the new contract increases the threat of delivery.
The new contract was a compromise for farmers on the task force, he said, who wanted to see their ability to continue delivering against a futures contract preserved.
Ausenhus said there’s no reason the canola contract can’t be fine-tuned and points to changes made in the western barley futures contract as evidence of the WCE’s ability to respond to market conditions.
“Perfect futures contracts aren’t born,” Ausenhus said. “They evolve.”
