WINNIPEG – The Winnipeg Commodity Exchange has approved, in principle, a dramatic change to the 32-year-old canola futures contract by moving its price reference point from Vancouver to Saskatchewan.
The board of governors of the exchange based its decision on recommendations made by Larry Martin, a consultant and agriculture economist from Ontario’s University of Guelph and a task force of industry representatives.
Martin said the delivery point or region will be at or near Saskatoon. But there will likely be other delivery points to the west and east, where premium or discounted prices will be paid.
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Martin said moving the price reference point to Saskatchewan would likely lead to the cash and futures price of the crop converging during the delivery month – something that is supposed to happen now, but rarely does.
It also means prices on the board could drop by $40 per tonne, Martin said, simply because transportation costs will be much less of a factor.
Delivery method changed
The delivery method will change to a warrant from the current warehouse receipt system. A warrant is the sellers’ promise to have the canola in a hopper car or truck outside their facility, whereas a warehouse receipt is the Canadian Grain Commission’s guarantee that the grain is in the bin. Martin said this will free up space in elevators.
Another change sees delivery at ‘buyer’s call’ rather than ‘seller’s option’.
Buyers will have the right to ask for supplies when they need them, rather than sellers saying when the commodity will be delivered.
The changes will likely come into play for the June 1996 contract.
Larry Weber, spokesperson for the exchange, said committees will work out details by May 15, including delivery reg-ions, delivery premiums and discounts.
