The sign-up window for the CWB’s FlexPro pricing option will be extended by six months, the CWB announced today, providing more choice and flexibility for farmers who use this popular program.
This change will enable farmers to fully assess the volume and quality of their crop before committing it to a FlexPro contract, if they choose. Previously, producers committed tonnage within a six-week window prior to the start of the crop year, and were then able to choose prices on any day throughout the year. For 2011-12, farmers will be able to sign up any time between July 18, 2011 and March 15, 2012. An adjustment factor will apply to contracts signed after the start of the crop year on August. 1.
“At almost every meeting with farmers, CWB staff and directors have heard requests for change that would allow farmers to take advantage of FlexPro pricing without being exposed to significant production risk,” said Allen Oberg, chair of the CWB’s farmer controlled board of directors. “These changes respond to that need.”
With severe weather conditions delaying seeding and harvest this year, the extended sign-up deadline could be especially valuable, Oberg noted, since farmers will still face highly uncertain crop prospects after July 31.
The CWB also announced today that the sign-up deadline for the Fixed Price Contract (FPC) and Basis Price Contract (BPC) programs will also be extended to March 15 for 2011-12. The previous deadline was January 31.
The adjustment factor – also used in the FPC and BPC – is designed to account for actual CWB sales activity. The CWB hedges the price risk of each contract from the time of sign-up to completion of CWB sales at the end of the pool period. However, pricing options like FlexPro do not operate in isolation from CWB pricing of actual grain sales. The CWB markets farmers’ wheat together, regardless of whether it is priced by a producer through a PPO or average-priced through the pools. The impact of the previously priced wheat must be reflected by the adjustment factor – which becomes increasingly important as the year progresses. More explanation of the adjustment factor can be found on the “PPO Primer” page at www.cwb.ca, located under the “Farmers” and “Producer Payment Options” headings.
Producer Payment Options (PPOs) were first introduced shortly after the CWB shifted to farmer control in 1999. The new board of directors – two-thirds comprised of farmers’ elected representatives – felt strongly that farmers who wanted additional choice besides pooling should be offered the ability to price their grain themselves and assume more of the risk.
Designed to introduce price flexibility, PPOs have evolved every year in response to farmers’ needs. They now include a number of different programs designed to serve farmers’ diverse business needs. “With both pooling and pricing options, producers now have the best of both worlds,” Oberg said. “They can keep all the benefits of the single desk, the risk management of pooling and have pricing choices too. In an open market, pricing choice is obviously there. But the other myriad benefits of the single desk are lost.”
Producers overwhelmingly approve of the pricing options and participate in large numbers when market conditions are appropriate. The CWB’s 2011 producer survey, released last week, showed 73 per cent of farmers believe the CWB has improved – with most linking that opinion directly to provision of the PPOs.
