Delivery Examples (for a pdf version click here)
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
|