WINNIPEG — Feed pea price and trade information will soon be available from the Winnipeg Commodity Exchange on its daily price cards, its director of marketing says.
John DePape said the exchange hopes to start providing the information this spring as part of an effort to increase visibility of the burgeoning cash trade in feed peas.
Work is also under way to implement standardized trading of feed peas, but he noted an important element of that will be the development of feed pea grading by the Canadian Grain Commission. Although the commission is discussing the implementation of a grading system with the industry, the earliest it will be in place is Aug. 1, 1995, spokesman Paul Graham said.
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A committee at the exchange has been re-examining the possibility of implementing a feed pea futures contract since last fall. A study of the issue in 1988 concluded it wasn’t feasible at that time.
But pea production on the Prairies has nearly quadrupled since, making peas a larger crop than two of the crops already traded on the futures floor — flax and rye.
Production increasing
Between 1981 and 1990, field pea production averaged 224,000 tonnes. Last year, Statistics Canada reported 970,000 tonnes of field pea production. Much of that production flows into feed markets as a source of protein.
Preliminary trade estimates expect this year’s acreage to be at similar levels or higher.
“Farmers are telling me they need more cash price visibility,” he said. “That’s one of the reasons they want a futures market.”
But efforts to develop a futures market for feed peas are hampered by the lack of visible cash price information, DePape said.
Effective market
A key component of an effective futures market is that the cash and futures prices converge when the contract expires. Because the trade in peas is sporadic and conducted over a wide regional base, there is no visible means of determining that relationship.
“We’ve discovered there’s other things we have to do first,” DePape said. “We need to make cash prices more visible.”
While work continues on developing a futures contract for the commodity, DePape said there are a number of hurdles still to be overcome. For example,# futures contracts have traditionally specified a delivery point — usually at key terminal locations such as Thunder Bay and Vancouver.
But the grain handling system is evolving from a storage-based system to high throughput. Terminal operators have become reluctant to have their location named as a delivery point because deliveries against a futures contract can tie up space indefinitely.
One way around that is to specify delivery will be at the futures price regardless of location, similar to how the domestic feed barley and rye contracts are structured.
But it still comes down to having a visible cash market in place.
“A feed pea futures contract based on par delivery would experience the same challenges as with the previously launched contracts — sourcing valid price information and education,” a briefing paper said.
