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EXAMPLE OF FORWARD CONTRACT DELIVERY


Delivery Examples
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A producer forward contracts 100 hogs on July 11th, 2011 for delivery in December to January, 2012 at a base price of $161.05. The estimated monthly basis range quoted from Ontario Pork based on 10-year historical information is -$25 to -$9.

The producer’s average hog weight is 90 kg and the producer’s average index is 108.

The fee for the forward contract is $20.00 plus HST of $2.60, for a grand total of $22.60 for 100 hogs.

Scenario 1: Producer ships all 100 hogs on December 15th, 2011
Profit on Trade:
Producer Forward Contract Price: $ 161.05 /ckg DW
Forward Contract Closing Price: $ 166.15 /ckg DW
100 index Value/Hog: $ (5.10) /ckg DW
or… $ (0.0510) /kg DW
Total Weight (100 Hogs * 90kg) 9000 kg
Profit/Loss on Trade (100 Hogs / 90kg): $ (459.00)
Gross Value of Shipment:
Ontario Pool Plus Price (week of December 12-15, 2011) $ 163.12
Pool Plus /kg DW * 1.08 index * 90kg * 100hogs: $ 15,855.26
Profit/Loss on Trade: $ (459.00)

Gross Value of Shipment:

$ 15,396.26
Scenario 2: Producer ships all 100 hogs on January 12th, 2012
Profit on Trade:
Producer Forward Contract Price: $ 161.05 /ckg DW
Forward Contract Closing Price: $ 158.52 /ckg DW
100 index Value/Hog: $ 2.53 /ckg DW
or… $ 0.0253 /kg DW
Total Weight (100 Hogs * 90kg) 9000 kg
Profit/Loss on Trade (100 Hogs / 90kg): $ 227.70
Gross Value of Shipment:
Ontario Pool Plus Price (week of January 9-13, 2012) $ 161.64
Pool Plus /kg DW * 1.08 index * 90kg * 100hogs: $ 15,711.41
Profit/Loss on Trade: $ 227.70
Gross Value of Shipment: $ 15,939.11

Example of How Contract Purchase Dates Affect Payment Producer A forward contracts 100 hogs on October 4th, 2011 for delivery in February 15 to March 15, 2012 at a base price of $181.40. The estimated monthly basis range quoted from Ontario Pork based on 10-year historical information is -15 to -2. Producer B forward contracts 100 hogs on August 18, 2011 for delivery in February 15 to March 15, 2012 at a base price of $161.07. The estimated monthly basis range quoted from Ontario Pork base on 10-year historical information is -15 to -2. Both producers have an average hog weight of 90 kg and an average index of 108. The fee for a forward contract is $20.00 plus HST of $2.60, for a grand total of $22.60 for 100 hogs. Scenario 1: Producer A ships all 100 hogs on February 24th, 2012
Profit on Trade:
Producer Forward Contract Price: $ 181.40 /ckg DW
Forward Contract Closing Price: $ 167.10 /ckg DW
100 index Value/Hog: $ 14.30 /ckg DW
or… $ 0.1430 /kg DW
Total Weight (100 Hogs * 90kg) 9000 kg
Profit/Loss on Trade (100 Hogs / 90kg): $ 1,287.00
Gross Value of Shipment:
Ontario Pool Plus Price (week of February 20-24, 2012) $ 160.75
Pool Plus /kg DW * 1.08 index * 90kg * 100hogs: $ 15,624.90
Profit/Loss on Trade: $ 1,287.00

Gross Value of Shipment:

$ 16,911.90
Scenario 2: Producer B ships all 100 hogs on February 24th, 2012
Profit on Trade:
Producer Forward Contract Price: $ 161.96

/ckg DW

Forward Contract Closing Price: $ 167.10 /ckg DW
100 index Value/Hog: $ (5.14) /ckg DW

or…

$ (0.0514) /kg DW
Total Weight (100 Hogs * 90kg) 9000 kg

Profit/Loss on Trade (100 Hogs / 90kg):

$ (462.60)
Gross Value of Shipment:
Ontario Pool Plus Price (week of February 20-24, 2012) $ 160.75
Pool Plus /kg DW * 1.08 index * 90kg * 100hogs: $ 15,624.90
Profit/Loss on Trade: $ (462.60)

Gross Value of Shipment:

$ 15,162.30
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