Cargill is expanding its ProPricing grain marketing program to canola and soybeans growers in Western Canada for the 2017-18 season.
Cargill has been offering ProPricing in Western Canada only for hard spring red wheat over the past four years, but felt it was a logical time to expand into other western Canadian grown commodities.
“Basically, there is customer demand that had us take the step to offer this program for canola in Canada as well and it was logical do the expansion into canola and soybeans at the same time,” says Tom Halpenny, product line manager for Cargill’s Risk Management Solutions.
How does it work?
When a grower signs up to ProPricing, they discuss their marketing goals with a Cargill sales representative and commit to sell a specific number of bushels — the minimum is 35 metric tonnes, or 1,286 bushels — through a ProPricing contract.
Halpenny says the program is intended to complement farmers’ existing marketing plans. “We wouldn’t want anyone to commit their full anticipated production because we encourage people to have a diversified grain marketing plan and this would be one of the tools that we would anticipate they would use, not the only one,” he says. “When they enrol in the program, they’ll make the appropriate judgement on what the proper amount is that they’re comfortable with committing on an individual basis.”
Cargill then trades the grain as if it were their own, which means growers have grain traders from Winnipeg and the Cargill World Trading Unit in Geneva working on their behalf.
“The pricing and timing of the market for a lot of people is something that they find challenging, and stressful,” says Halpenny. “This is a way to have Cargill, with their global footprint, be able to follow along and express their bias with that ProPricing contract the same as they trade their own book of business. Part of the benefit and the reason why Cargill is doing this is to provide the level of service that’s required by many different farm customers.”
Producers still have to select their basis (difference between the local cash price and the futures price) before the month prior to the delivery period and set the delivery date for the grain they commit. “ProPricing is a delivery contract where Cargill will work over a pricing period to establish the futures price part of that contract for the farm customer,” says Halpenny. “The farmer is still responsible to select the basis. Sometimes the farmer will fix a basis and a futures price at the same time.”
At the time of sign up, farmers indicate a delivery period and that will determine which futures program that their contract is associated to. There is an enrollment period up front and then a start trading date of approximately the last part of December, and it runs to the month preceding each of the different futures months.
There’s some flexibility to change the delivery date in the future and to price out a ProPricing contract weekly. “It creates transparency on where things are at because the producer always has the option each week to take on the responsibility of that marketing by pricing out of the contract,” says Halpenny. “They still have got the delivery commitment to Cargill but now, if they price out of the contract, we’ve got other contracts that they can use to enhance the contract or to express their bias in the market, so they have the opportunity to retake that ownership of the marketing until the time of delivery.”
In Western Canada, farmers can price out wheat and canola on Wednesdays and soybeans on Thursdays from 3:00 to 5:00 p.m. central time.
Cargill’s marketing professionals constantly track and analyze data on demand, supply weather, shipping and a number of other variables that affect markets and prices. That information is on to its ProPricing customers through weekly performance updates and webcasts.
Producers can log in online to see the status of their contract at any time. They receive payment for the bushels they have committed through ProPricing based on Cargill’s marketing performance and their delivery date.
Western Canadian wheat, canola and soybean grower have until December 15 to sign up for ProPricing.