February 14, 2008

 

Market volatility causes Canadian Wheat Board to suspend wheat contracts

 

 

The recent volatility of the U.S. wheat markets has caused the Canadian Wheat Board to suspend its new-crop basis contracts, leaving western Canadian farmers with no real forward pricing options.

 

In a statement posted on its Web site Feb. 12, the CWB said it has "suspended 2008/09 BPC (basis price contract) December futures lock-ins due to extreme market volatility and expanded trading limits." The BPC is a forward pricing option for wheat that offers producers the opportunity to lock in a futures price up to a year ahead of harvest. Farmers could lock in the December 2008 futures from Sept. 4, 2007, until Oct. 31, 2008. The basis lock-in period runs from Feb. 25 through to the end of October 2008.

 

"The basis price contract programme is really the only option for western Canadian farmers to do forward pricing for new-crop wheat production," said Mike Jubinville, of ProFarmer Canada. "With the abrupt, unforeseen suspension of the programme, I find it particularly disturbing because it basically leaves the grower with no opportunity to do any forward pricing on wheat."

 

Jubinville said he understood the CWB's decision to try to protect itself in the face of a volatile market. However, he said it was unfortunate that "growers are the ones left holding the bag."

 

He noted that in an open market situation growers would have other options, making this recent move a potentially political issue.

 

Jubinville did say, though, that the Ontario Wheat Board and a number of eastern elevators have also pulled out of the U.S. wheat market for the time being, citing the volatility and increased daily limits.

 

However, US growers are still free to market their wheat as they see fit, he noted.

 

While the BPCs are a relatively new pricing option from the CWB, Jubinville said farmers had been making good use of them.

 

"In a year like this, where we're seeing the highest prices in wheat marketing history, farmers are very much in tune with this and are looking for an opportunity at the first signs of trouble to do some pricing," he said.

 

CWB officials were not immediately available for further comment.