High costs for switching durum to new crop

The Canadian Wheat Board has something called the new-pool pricing option that allows farmers the choice to deliver wheat and durum in the current crop year and still get the new crop year pool price. It sounds like a way to take advantage of the higher prices expected in the new crop year, particularly for durum. However, it isn’t as good as it sounds. There’s a per tonne fee for each class and grade. On No. 4 and 5 durum, the fee is relatively small at $7.25 a tonne. However, on No. 1, 2 and 3 durum the fee is currently $69.75 a tonne, a hefty price tag. The CWB says switching grain from one year to the next creates uncertainty about pool size and affects the pool returns of both the old and new crop years. According to the board, the per-tonne fee offsets these impacts. The fee is regularly updated to reflect changes in the Pool Return Outlook and market conditions. If a producer just doesn’t deliver contracted grain in the current crop year, liquidated damages will be charged which will likely amount to about the same cost. While the board’s reasoning regarding pool integrity makes sense, and a contract to deliver is a contract, the big cost of pricing the top grades of durum into the new crop year is not going to be popular. Durum producers who haven’t contracted their durum for delivery are in the enviable position of being able to hold the crop until the new crop year without any fees or damages.

I’m Kevin Hursh.

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