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Canadian Wheat Board

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Farmers

2010-11 Fixed Price and Basis Price Contracts

What's new for 2010-11

Sign-up deadline extension

The sign-up deadline for Fixed Price Contracts (FPCs) and Basis Price Contracts (BPCs) has been extended from October 29, 2010 to January 31, 2011.

In addition, to maintain cash flow and provide more time for a pricing decision during this extended sign-up period, producers can instruct the CWB to apply deliveries previously applied to the pool to an FPC or BPC at the time of sign-up.

As part of the sign-up extension, the CWB will guarantee 100 per cent acceptance of wheat signed up under Producer Payment Option (PPO) contracts until the announcement of Series A acceptance levels. For durum, the delivery guarantee is 80 per cent of production committed to PPOs up until Series A acceptance. After Series A acceptance is announced, producers can only price to the level of wheat and durum accepted under delivery contracts.

Basis lock-in period

The basis lock-in period for the BPC program has been extended 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 29, 2010.

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 before the basis contract month expiry date. Futures-first BPCs cannot be rolled.

Buyout formula

The buyout formula for the FPC and BPC programs has been amended for 2010-11 to simplify the calculation and offset any costs with gains from the pricing components. The new formula (per tonne) is:

(current futures + current basis + current adjustment factor) – (producer's futures + producer's basis + producer's adjustment factor) + $2.50 adminstration fee

If the formula results in a negative value, no buyout cost will be assessed.

For FPCPlus the per-tonne formula is:

(Current FPCPlus – producer's FPCPlus) + $2.50 administration fee

If the formula results in a negative value, no buyout cost will be assessed.

Basis rolls

Producers can roll their basis between months as soon as a second basis contract month is offered. Previously, producers could begin rolling the basis August 1. For 2010-11, basis rollovers are available February 22, 2010.

2010-11 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. An adjustment factor is also applied to the contract at sign-up. The adjustment factor represents wheat that has already been priced by the CWB. It is applied at the start of the crop year. Before that, the adjustment factor is zero.

The FPC is a pricing alternative that offers a flat price for wheat. The flat price incorporates wheat that has already been priced by the CWB and the current market value of wheat that the CWB has not yet priced.

FPCPlus is a pricing alternative that offers a minimum flat price for durum. The price is calculated by deducting a discount for risk, administration and time value of money from the Pool Return Outlook (PRO). Producers are eligible for a rebate of any unused portion of the risk discount at the end of the crop year.

Sign-up periods

Program Sign-up begins Sign-up deadline
Wheat

Basis Price Contract - December 2010 futures only

September 1, 2009

9 p.m. CT (Winnipeg time) November 23, 2010

Basis Price Contract - March 2011 futures only

January 18, 2010

9 p.m. CT January 31, 2011

Basis Price Contract - December 2010 basis

February 22, 2010

9 p.m. CT November 23, 2010
Basis Price Contract - March 2011 basis February 22, 2010 9 p.m. CT January 31, 2011

Basis Price Contract - May 2011 futures and basis

March 22, 2010

9 p.m. CT January 31, 2011

Basis Price Contract - July 2011 futures and basis

February 22, 2010

9 p.m. CT January 31, 2011

Fixed Price Contract

February 22, 2010

9 p.m. CT January 31, 2011
Durum

Fixed Price Contract – FPCPlus

February 22, 2010

9 p.m. CT January 31, 2011

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

2010-11 lock-in deadlines

Producers must lock in their BPCs by the deadlines listed below. If either the futures or basis 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 2010

9 p.m. CT November 23, 2010

March 2011

9 p.m. CT February 18, 2011

May 2011

9 p.m. CT April 22, 2011

July 2011

9 p.m. CT June 24, 2011

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 market conditions warrant, the CWB may not offer prices or may withdraw them before the 9 p.m. deadline. If the CWB does not offer a price, no FPC or BPC transaction can 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

CWAD

No. 1 CWAD 13.0

All grades and protein except sample grades and mixed grain

Target pricing service

The CWB offers a target pricing service for the FPC and BPC programs that allows producers to place an order to fixed price, futures or basis. For BPCs, target orders can be placed to sign up a new contract or lock in an existing contract. 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 February 22, 2010, 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 before 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.

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 and Canada Western General Purpose.

Contract transactions

Producers can conduct FPC and BPC sign-up, lock-in, rollover and target pricing transactions online through e-Services under the Contract tab. Due to the change in the buyout formula, buyout transactions are not currently available through e-Services. 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 1-204-983-8031.

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 CWB delivery contract 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 on any priced tonnes. Otherwise, the additional payment will be issued with 10 days of the contract being priced.

After the start of the crop year, producers can instruct the CWB to apply deliveries previously applied to the pool to their FPC or BPC at the time of sign-up. Previous deliveries will be applied on a last-in, first-applied basis. If you want other deliveries applied, please contact the CWB by the business day following the sign-up date.

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.

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. There was a 50 000-tonne limit for CWRW wheat and a 150 000 tonne limit for the other six classes. The sign-up deadline for CWRW was December 11, 2009. The sign-up deadline for the other six classes of wheat was April 30, 2010.

Only 50 per cent of anticipated production of any class of wheat 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 wheat 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 per-tonne buyout calculation for FPCs and BPCs is:

(Current futures + current basis + current adjustment factor) – (producer's futures + producer's basis + producer's adjustment factor) + $2.50 administration fee

If the formula results in a negative value, no buyout cost will be assessed.

For FPCPlus the per-tonne formula is:

(Current FPCPlus – producer's FPCPlus) + $2.50 administration fee

If the formula results in a negative value, no buyout cost will be assessed.

Only certain components of the formula apply depending on the producer's pricing commitments. 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 29, 2011, using the buyout formula.

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2010-11 Basis Price Contract

User Guide

Worksheets

Information sheets


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