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CWB Wind-Down Affects Delivery And Pricing Programs

Western Canadian farmers used to marketing some of their wheat and durum later in the crop year will have fewer options in 2011-12, as the uncertain future facing the Canadian Wheat Board has caused the marketing agency to refrain from offering some of its programs.

“Given the uncertainty around the 2012- 13 crop year, and what our business structure will be, we’ve had a hard look at the programs we offer to determine what we can offer and how we can manage the risk of the impending change – which we don’t know,” said Dave Gallant, manager of farmer programs with the CWB.

Canada’s federal government intends to introduce legislation that would end the CWB’s current single-desk powers for marketing western Canadian wheat, durum, and barley as early as August 2012.

The CWB would normally offer three periods for the delivery of wheat and durum, but so far will only be offering Series A contracts, with an Oct. 31 deadline for most classes.

“We were uncertain whether we would be willing to make commitments that late in the crop year, given the fact we may have to close everything else by July 31 (2012) and wind up the operation,” said Gallant.

Gallant said the CWB will evaluate the commitments made by farmers and customers under Series A and match those as closely as possible before deciding if a Series B or C is needed or if deliveries could be covered by guaranteed delivery contracts.

Under a Series contract there is uniform acceptance for all of the grain delivered through the program, while guaranteed delivery contracts work on a first-come, first-served basis. Historically, 80 per cent to 90 per cent of the grain marketed by the CWB is moved through Series A contracts, but Gallant said interest in guaranteed delivery contracts has grown in recent years.

Farmers may have to commit earlier than normal given the lack of certainty that a B or C Series will be offered. He said many farmers usually hold off a certain amount of their grain for the later delivery periods, which means they may need to think a little differently this year.

The Wheat Storage and Churchill Storage programs are also not being offered this year, as those programs are for delivery in 2012-13, said Gallant.

In addition, the CWB will also not be offering producer payment options for 2012-13 grain against the futures in September as it normally would, said Gallant.

“We will certainly be doing everything we can to try and offer farmers the same, or comparable, services once we know more,” said Gallant, “but until we know more it’s very difficult to plan for those things.”

FlexPro and Early Payment Option programs for 2011-12 grain are available, but won’t be offered for 2012-13 until the CWB has a clearer sense of its role going forward. Usually futures pricing for the next crop year becomes available in September, with most of the new crop-pricing programs beginning with the release of the first Pool Return Outlooks in February.

“We may learn a lot more between now and January, which will put us in a better position for the February rollout of the other programs,” said Gallant.

———

Butuntilweknowmoreit’svery difficulttoplanforthosethings.”

– dave gallant, cwb

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Phil Franz-Warkentin - MarketsFarm

Phil Franz-Warkentin writes for MarketsFarm specializing in grain and commodity market reporting.

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