January 27, 2010

Saskatchewan to produce cattle price insurance for beef sector

Canadian province Saskatchewan is working on a cattle price insurance programme, which is expected to be a useful tool in certain market situations for the beef industry.

This scheme is not a programme that covers the cost of production for producers, but is simply a way to lock in favourable prices for a future date, when and if those prices materialise.

The programme would be completely voluntary, with cattle producers monitoring insurable prices and corresponding premiums and deciding when to act.

The insured price is determined by using forward prices from USfutures markets. This is adjusted for the Canadian exchange rate and for the basis, which is the difference that exists between US futures prices and Canadian cash prices.

Under the proposal, calves and yearlings would be insurable. There is no big volume of fed (slaughter weight) cattle produced in Saskatchewan, so it is proposed that Saskatchewan participate in the Alberta programme.