ROSETOWN, Sask. — Do the terms margin call, net position, butterfly spread or call option make you check if your wallet is firmly in your pocket? The Winnipeg Commodity Exchange would like to change that.
Since 1991 the WCE has provided educational seminars for prairie farmers. The exchange started the program with a grant from the Western Diversification Fund and in 1993-94 held more than 60 of the two-day seminars.
The course is designed to introduce farmers to the options market so they may reduce their price risk on commodities traded on the exchange. Options allow a seller or a buyer to purchase insurance that will lock in the futures price of a commodity.
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“Farmers teaching farmers about trading has proved to be the most successful method of explaining the market,” said Gordon Cresswell, a facilitator of the WCE course and a farmer from Tisdale, Sask. Cresswell has been involved with the program for three years and teaches more than a dozen of the courses to fellow farmers across Saskatchewan between December and March.
Courses in demand
“Eight farmer facilitators are teaching the program and it has proved very popular,” said Sandy Craven, marketing co-ordinator for the exchange. “We have been increasing the number of courses based on demand.”
One participant in the Rosetown course, Wayne Bosch, of Dodsland, Sask., said: “I never realized that keeping my grain in the bin and then selling to the local elevator when I thought the price was right, was the most risky marketing that I could do.”
He will try the options market on a limited scale during the coming year.
Bosch, like many farmers experiencing the options market for the first time, expressed a commonly-held belief that only big farmers or people with a lot of money use the markets.
“People don’t realize that as farmers they can control the price they sell their production at,” said Cresswell. “Many didn’t believe it was possible to reduce their risk.”
Some of the people who pay the $20 course fee have attended several different classes on options. The commodity exchange has language of its own to describe the relationships of buyers and sellers. Many people find that several classes are needed before they feel comfortable with all the processes involved.
Colin Ahrens operates a mixed farm near Rosetown and has been to several programs dealing with options marketing. While he has yet to use the market, he feels that a strong understanding of it will work to his benefit when he does.
“You have to diversify everything you do in this business, including your marketing.”
The future of the program will be reviewed at the end of March when the money runs out.
“We will examine the future of the program then, but there is no doubt that it has been a success,” said Craven.
