WINNIPEG (Staff) – The Winnipeg Commodity Exchange had been thinking about a feed pea futures contract for several years. But the idea of designing a cost, insurance and freight (c.i.f.) contract was only floated by the board of governors several months ago.
Peter Lloyd, who chaired the committee that designed the contract, said the c.i.f. contract is unusual but has a better chance of working than one with a domestic pricing point.
- Originally, the exchange had discussed Thunder Bay as a pricing point. But Lloyd said because of deregulated freight rates, many peas from the western Prairies will now move through Vancouver, making a Thunder Bay pricing point irrelevant.
- But peas from the eastern Prairies will still likely move through Thunder Bay, meaning Vancouver wouldn’t be a logical pricing point for those growers.
- Terminals were reluctant to tie up space for futures delivery when they need space for throughput.
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nAn inland point was considered, similar to the way the new canola contract is designed. But companies weren’t interested in putting up facilities for delivery. International consumers would also not likely be interested in an inland point.
- Few traders were enthusiastic about an interior point, and felt it would be easier to use the cash market.
“It’s really a trade-off,” said Sandra Craven of the Winnipeg Commodity Exchange. “The price that’s discovered will be a real true reflective price, and so it will give better pricing information to Canadian participants, but it is a little more complex to figure out what’s actually in that price.”
Tom Jackson of the Alberta Pulse Growers Commission said while producers would rather have seen a “domestic barley type of contract,” they’re happy if the trade-off means the contract has liquidity.
“If the buyers of our product are not really comfortable with what’s going on, then it would be very difficult to have a legitimate, well-used futures contract.”
