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Canadian Wheat Board

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Farmers

2009-10 Fixed Price and Basis Price Contracts

2009-10 Basis Price Contract (BPC) and Fixed Price Contract (FPC) program details

The BPC is a pricing alternative for wheat that offers producers the choice of locking in either the basis or the futures component first and locking in the other at a later date. A late sign-up adjustment factor is also applied to the contract at sign-up. The late sign-up adjustment factor represents the cost of buying tonnage out of the pool after sales have been made. It is calculated when the pool sales period begins. Prior to that, the late sign-up adjustment factor is zero.

New! Effective October 13, 2009, the CWB has extended the basis lock-in period for the BPC program to align it with the futures lock-in deadline. Both the futures and basis components must now be priced by the basis contract month expiry date. (Basis contract month expiry dates are listed below.) Previously, the basis lock-in deadline was October 30, 2009.

If either the futures or basis component of a BPC is not priced by the basis contract month expiry date, the CWB will price the contract at the value posted on that date. Producers with a basis-first BPC have the option of rolling to a different futures month prior to the basis contract month expiry date. Futures-first BPCs cannot be rolled.

The FPC offers producers a flat price for wheat. The flat price is comprised of the same three components as the BPC, the difference being that they are all locked in at sign-up.

FPCPlus for durum was suspended February 24, 2009.

The new FPCPlus offers producers a flat price for durum. It will operate the same as the former durum FPC, except that participants will also have the potential to receive a rebate of the risk discount.

For durum, the flat price is calculated by deducting a discount for risk, time value of money and administration costs from the Pool Return Outlook (PRO). Different methods are used for wheat and durum FPCs because durum does not have an associated futures market, like wheat does.

This limits the CWB’s ability to effectively manage risk. As a result, risk discounts for durum are relatively higher than for wheat. The CWB uses other hedging tools, such as Minneapolis wheat futures, to manage risk, but the correlation between future price and cash market price changes for durum is poor.

In FPCPlus, the CWB and program participants will share the risks of operating the program. The up-front risk discount will be slightly higher than the current program, but participants will have the potential to receive a portion of any unused risk discount at the end of the marketing year. A portion of any unused risk discount will go into the Contingency Fund to ensure program stability in years of volatile price movement when sales revenue is less than expected.

Although there is potential for a rebate of the risk discount, it is not guaranteed. Any potential rebates will be made after the close of the marketing year once sales are complete. Potential rebates will be divided among participants relative to the amount of risk discount paid.

Sign-up periods

Program Sign-up begins Sign-up deadline
Wheat

Basis Price Contract – December 2009 futures only

September 2, 2008

9 p.m. CT (Winnipeg time) October 30, 2009

Basis Price Contract – December 2009 basis

February 23, 2009

9 p.m. CT October 30, 2009

Basis Price Contract – March 2010 futures and basis

May 11, 2009

9 p.m. CT October 30, 2009

Basis Price Contract – May 2010 futures and basis

August 6, 2009

9 p.m. CT October 30, 2009

Basis Price Contract – July 2010 futures and basis

June 25, 2009

9 p.m. CT October 30, 2009

Fixed Price Contract

February 23, 2009

9 p.m. CT October 30, 2009
 
Durum
Fixed Price Contract- FPCPlus June 1, 2009 Suspended September 24, 2009

The CWB reserves the right to withdraw these programs at any time, without notice, subject to market conditions.

2009-10 lock-in deadlines

Producers must lock in their BPCs by the deadlines listed below. If either component has not been locked in by the relevant deadline, it will be locked in automatically by the CWB at the price posted for that date.

Futures month Basis contract month expiry date
Wheat

December 2009

9 p.m. CT November 20, 2009

March 2010

9 p.m. CT February 19, 2010

May 2010

9 p.m. CT April 23, 2010

July 2010

9 p.m. CT June 25, 2010

Target pricing service

The CWB offers a target pricing service for the BPC and FPC programs that allows producers to place an order to lock in a specific price for either the basis or futures portion of a BPC or a fixed price for an FPC. Target pricing enables producers to take advantage of potential futures rallies while leaving the responsibility for monitoring daily market conditions to the CWB. Unfilled orders can be cancelled at any time. There is no fee for this service.

Producers can place a target order through e-Services, by calling the CWB at 1-800-275-4292 between 8 a.m. and 6 p.m. CT Monday to Friday or by faxing a target pricing application form (available on the CWB Web site) to 1-204-983-8031. For more information on target pricing, please view the target pricing information sheet.

Exchange for physicals (EFP)

The EFP option enables producers lock in a futures price that the CWB is not yet offering. The EFP can be executed once the CWB begins offering that futures month. It also allows producers to take advantage of intraday trading values. Producers can take a short futures position through their broker and exchange this position with the CWB to lock in the futures component of a BPC. When the EFP is executed with the CWB, the producer receives a long futures position at the previous day’s settlement price posted on the CWB pricing schedule, to unwind their short position. The CWB takes on the short position at the same price to lock in the futures portion of the BPC. For more information on EFPs please view the information sheet.

Basis rolls

Beginning August 4, if producers want to lock in their futures at a date beyond their basis month expiry date, they may choose to roll their existing basis to a later month. This can only be done prior to the expiry date. Producers may also choose to roll their basis backward to an earlier month. There is a $1 per tonne charge for each roll. Futures first BPCs cannot be rolled. For more information on basis rolls, please view the rollover information sheet.

Prices

The pricing schedule link on the left-hand side of this page is updated every business day at 3 p.m. CT. Prices remain in effect until 9 p.m. CT of the same business day. If futures close limit down, the CWB may not offer prices for the affected months. If the CWB does offer a price on a month that closes limit down, protection may be taken against the futures and/or the basis. If the CWB does not offer a price on a given day, sign-up and other transactions related to FPCs and BPCs, including rollovers, buyouts and lock-ins, cannot be executed.

Reference grades and deliverable grades

FPC and BPC values are quoted based on reference grades. However, grades other than the reference grade are deliverable against the contract. Below is the list of reference and deliverable grades for each program.

Wheat

Reference grade

Deliverable grades

CWRS

No. 1 CWRS 13.5

All grades and protein except sample grades and mixed grain

CWHWS

No. 1 CWHWS 13.5

 

CWES

No. 1 CWES

 

CPSR

No. 1 CPSR

 

CPSW

No. 1 CPSW

 

CWRW

No. 1 CWRW

 

CWSWS

No. 1 CWSWS

 

Durum

No. 1 CWAD 13.0

All grades and protein except sample grades and mixed grain

Feed Discount

Feed grades of wheat and durum are subject to a feed discount to adjust the value of the contract to the current feed wheat price. The following grades are considered to be feed grades: Canada Western Feed, No. 4 Canada Western Red Spring, No. 4 Canada Western Hard White Spring, No. 3 Canada Western Soft White Spring, Canada Western General Purpose and No. 4 and No. 5 Canada Western Amber Durum.

Contract transactions

Producers can conduct FPC and BPC sign-up, lock-in, rollover, target pricing and buyout transactions online through e-Services under the contract tab. If producers do not have e-Services access, they can apply for access online or print off an application form (both options are available on the CWB Web site) or call 1-800-275-4292. Producers can also conduct contract transactions by calling 1-800-275-4292, with their producer identification (ID) number and personal identification number (PIN) or by faxing the appropriate form to 204-983-8031.

To execute an assignment, please call the CWB at 1-800-275-4292.

Terms and conditions, sign-up forms, lock-in forms, target pricing order and target pricing order cancellation forms are available on the CWB Web site.

Delivery and settlement

FPCs and BPCs require 100 per cent delivery of the tonnage commitment. Pricing damages will be assessed on any shortfall tonnage at the end of the crop year. FPCs and BPCs are pricing contracts only. A series delivery contract or a Guaranteed Delivery Contract (GDC) is required in order to deliver against an FPC or BPC.

At time of settlement, producers should advise elevator staff to apply the deliveries to the program of their choice. Producers will receive the initial payment of the grade delivered, less freight and elevation, at the elevator. When the elevator reports the cash ticket to the CWB, the additional payment representing the balance of the contract price will be issued within 10 business days.

Settlements are applied to the highest priced contract of the type indicated first. If producers want their settlement applied to a contract other than the highest priced, they must contact the CWB at settlement. For more information on delivery and settlement, please view the FPC or BPC worksheet.

Minimum delivery guarantee for durum

Farmers signing an FPC for durum are guaranteed acceptance of 70 per cent of their production offered under the Series A and B 2009-10 durum delivery contracts combined (up to the maximum of their Fixed Price Contract). If the total CWB delivery contract acceptance for these two contract series is less than 70 per cent, farmers will receive delivery opportunity at the end of the crop year to fulfill the 70 per cent delivery guarantee. The Fixed Price Contract for durum is a pricing commitment only with no delivery terms. The minimum delivery guarantee should be used as a guide to determine the amount of production to offer under the program. Farmers are subject to all the delivery conditions of the 2009-10 CWB delivery contracts.

Force Majeure

The CWB offers a force majeure clause, commonly known as an "Act of God" clause, to protect against pricing damages due to production losses. The sign-up deadline for CWRW was December 12, 2008. The sign-up deadline for the other six classes of wheat and durum was April 30, 2009.

Only 50 per cent of anticipated production of any given type and class of grain is eligible for the force majeure provision. The force majeure option only covers production loss, not quality downgrading. Eligibility under the force majeure provision will be reduced by any grain the producer has that could be delivered against the contract. This includes all grain including carryover, new-crop production and any grain committed to the Wheat Storage Program or the Churchill Corridor Guaranteed Delivery Contract. The cost of the force majeure option is $7 per tonne. For more information on the force majeure option, please view the information sheet.

Assignments and Buyouts

Producers who want to get out of all or part of their contractual obligations may choose to assign tonnage to another producer or to buy the contract out. There is a $15 administration charge per assignment.

The cost to buy out a contract will vary depending on market conditions.

The buyout calculation for FPCs and BPCs is the greater of:

(Current futures + current basis + current late sign-up adjustment factor) – (producer’s futures + producer’s basis + producer’s late sign-up adjustment factor)

OR

Current futures – producer’s futures

Plus a $1.25 per tonne administration fee

For BPCs, only certain components of the formula apply depending on the producer's pricing commitments. Also, if the producer's contracted futures month has expired, contract values must be adjusted to the current nearby futures month for the buyout calculation. For more information on assignments and buyouts, please view the information sheet.

Pricing Damages

Pricing damages will be assessed on any shortfall tonnage at the end of the crop year. Damages are assessed based on market values on July 31, using the buyout formula.

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2009-10 Fixed Price and Basis Price Contract

User guide

Worksheets

Information sheets


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