CWB Expands Contract Options

WINNIPEG - May 14/02 - SNS -- The Canadian Wheat Board has expanded the range of contracts available to western Canadian wheat growers through the addition of a Fixed Price Contract (FPC) for durum and the availability of the Early Payment Option for all classes of wheat.

"Farmers told us that they value the choice and the flexibility that payment options provide," stated Ken Ritter, Chairman of the CWB's farmer-controlled Board of Directors. "We've listened and expanded these programs so that farmers have more control over how their crops are priced and when they receive payment."

The FPC for durum will be offered starting with the announcement of the Pool Return Outlook (PRO) on May 23, 2002. It will enable farmers to lock in a price on a portion of the durum that they plan to commit to CWB delivery contracts in 2002-03.

Like the existing FPC that the CWB offers for wheat, the FPC values for durum will be based on the PRO less a discount for risk, time value of money and program administration costs. The fixed price will be available daily via the CWB Web site, through Fax on demand or by calling the CWB toll-free line.

When farmers deliver to an elevator durum that has been assigned to an FPC, they will receive the initial payment. An additional payment, representing the difference between the initial payment and the fixed price, will be issued by the CWB within two weeks of delivery or settlement. These deliveries will be outside the durum pool and therefore will not be eligible for adjustment, interim or final payments.

The durum FPC will be offered as a pilot program in 2002-03. Limited opportunities for hedging in the durum market mean that contracted tonnage will be capped between 50,000 and 100,000 metric tons (MT) and accepted on a first-come, first-serve basis. It is hoped that in future years, contracted tonnage can be increased.

As well, farmers need to carefully consider the volume of durum that they will commit to an FPC. The CWB will guarantee that farmers signing an FPC will be able to deliver at least 75% of the durum that they assign to 2002-03 delivery contracts up to the total tonnage committed to the FPC. For example, a farmer who will have a total 1,000 MT to assign to CWB delivery contracts in the fall of 2002 should commit no more than 750 MT to an FPC for durum.

With the expansion of the Early Payment Option (EPO) to all classes of wheat (excluding durum) beginning August 1, 2002, farmers will be able to lock in 90% of the PRO for their crop, less a discount for risk, time value of money and program administration charges. Prior to this expansion, only Canada Western Red Winter and Canada Western Soft White Spring wheat were eligible for the EPO.

When farmers deliver grain committed to an EPO, they receive the initial payment. Then, within two weeks of delivery, they receive an additional payment to bring their total returns up to 90% of the PRO. Participants in the EPO remain in the pool account. If adjustment, interim or final payments rise above the value that they have obtained under the EPO, these farmers receive the additional payments.