More than 21 percent of the Canadian Wheat Board’s 2003-04 grain sales has been priced through the board’s payment option programs.
About 3.4 million tonnes of wheat, durum and barley were priced through 13,634 producer contracts, including the early payment option, fixed price contact, basis payment contract and guaranteed delivery contract for feed barley.
The board expects to ship 16 million tonnes of grain this marketing year, so the 3.4 million tonnes works out to 21.3 percent of its sales program.
That compares with 130,696 tonnes and 897 contracts in 2002-03, or one percent of total sales.
Read Also
Research looks to control flea beetles with RNAi
A Vancouver agri-tech company wants to give canola growers another weapon in the never-ending battle against flea beetles.
Board officials attribute the big increase to a combination of factors, including increased farmer awareness and familiarity with the programs, market conditions and the cash-flow squeeze facing grain producers.
“It’s a financial reality that farmers need to get their money faster,” said CWB chair Ken Ritter.
He also said early indications are that the board’s payment options are continuing to gain favour with farmers in 2004-05.
Ritter declined to release specific numbers on the sign-up rate to date for the fixed price and basis contracts, saying that could have an impact on the market.
“But I would say the numbers are much greater than they have been in the past.”
By far the most popular payment option in 2003-04 was the early payment option, which allows farmers to lock in at time of delivery 80 or 90 percent of the Pool Return Outlook, less a discount for risk, time-value of money and administration. The farmer remains in the pool account and receives any future payments.
Slightly less than 2.4 million tonnes were contracted under the EPO by 8,483 farmers, including 1.5 million tonnes of wheat, 638,000 tonnes of designated barley and 241,000 tonnes of durum.
Ritter said one of the biggest factors in the popularity of the EPO was the federal government’s decision to be more conservative in the level of support it is willing to provide to initial payments and adjustment payments, resulting in lower payments than might otherwise be the case.
“We feel that is unfair, but it is a reality and producers are needing money and taking advantage of the options.”
Here’s what happened with the board’s other payment options in 2003-04:
- A total of 379 farmers took out fixed price contracts, covering 70,583 tonnes of grain. The previous year’s total was 247 contracts covering 31,140 tonnes.
Most of it was wheat (374 contracts for 69,935 tonnes), with four durum contracts for 606 tonnes and one barley contract for 42 tonnes.
The fixed price contract enables farmers to lock in a price based on the PRO less a deduction for risk, time and administration. Farmers receive full payment at delivery and are out of the pool account.
- A total of 335 farmers opted for the basis payment contract, covering 103,982 tonnes of wheat, compared with 55 contracts for 8,796 tonnes a year earlier.
The basis contract enables farmers to lock in the difference between the fixed price and the U.S. futures price. Farmers receive full payment at time of delivery and are out of the pool.
- A total of 4,437 producers signed guaranteed delivery contracts for feed barley, covering 882,240 tonnes. There was no GDC the previous year.
Ritter said while the payment op-tions are clearly gaining acceptance, the board will continue to look for ways to improve them, based largely on feedback from farmers.
One significant change for 2004-05 is the extension of the deadline for signing fixed price and basis contracts to Oct. 31 from July 31. That means farmers will know the quantity and quality of their crop and have more market information available as they decide whether to price their grain inside or outside the pool.
