Wednesday, October 6, 2010

Deferred Delivery Premiums

The May wheat futures contract in Minneapolis is about $6.70/tonne higher than the December contract – the market is willing to pay that much more right now for wheat to be delivered in May instead of delivered in December.

In its Fixed Price Contracts, the CWB pays an “incremental payment” to compensate farmers for wheat delivered in later months.  Farmers delivering CWB wheat on their FPC in May get $0.60/tonne more than those delivering in December.

If the market is paying a $6.70/tonne premium for deferred, why does the CWB only pay $0.60/tonne?

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