Contract Price Option

Contract Price Option

Contract Price Option

Over the years, producer groups have requested higher coverage for higher value niche crops such as specialty oil canola. Niche crops can demand a higher price from the market when sold under contract, which sometimes leaves higher value contracted crops underinsured.

The introduction of MASC’s Contract Price Option (CPO) allows producers to blend the price from their contracted production with the base AgriInsurance dollar value to better reflect expected market prices. The CPO will be available on canola (excluding pedigreed) and field peas (excluding pedigreed and organic).

Producers who choose the CPO must submit their contracted prices to MASC by June 30. For more information, contact an Insurance Specialist.


CPO Calculation Examples

    Formulae Used
Blended Price   =  (percentage of commercial production x Dollar Value) + (percentage of contract production * Contracted Price)
New Premium   =  (standard Premium x Blended Price) / standard Dollar Value
Total Coverage   =  Coverage per acre x Acres
Dollar Coverage   =  Total Coverage x Insured Price

Scenario 1 - Multiple Contracts

A producer is growing acres of canola: acres at MASC’s dollar value of $ per tonne, and is filling three separate contracts: acres at $ per tonne, acres at $ per tonne, and acres at $ per tonne. The producer selects per cent coverage, which results in a premium of $ per acre and a coverage per acre of tonne per acre.

Total Coverage   = acres x tonne per acre
  = tonnes of canola
Production Ratio:
Commercial   = of tonnes
  = %
Contract 1   = of tonnes
  = %
Contract 2   = of tonnes
  = %
Contract 3   = of tonnes
  = %
Blended Price   = (% x $) + (% x $) + (% x $) + (% x $)
  = $ per tonne
Impact on Coverage and Premium
All Conventional Coverage   = tonnes x $ per tonne
  = $
CPO Dollar Coverage   = tonnes x $ per tonne
  = $
New Premium   = ($ x $) / $
  = $ per acre

Scenario 2 - Price Premium (basis)

A producer is growing acres of canola: 640 acres at MASC’s dollar value of $ per tonne, and is filling a separate contract on acres at $ per tonne ($ above the base price). The producer selects per cent coverage with a premium of $ per acre and a coverage of tonne per acre.

Total Coverage   = acres x tonne per acre
  = tonnes of canola
Production Ratio:
Commercial   = of tonnes
  = %
Contracted   = of tonnes
  = %
Blended Price   = (% x $) + (% x $)
  = $ per tonne
Impact on Coverage and Premium:
All Conventional Coverage   = tonnes x $ per tonne
  = $
CPO Dollar Coverage   = tonnes x $ per tonne
  = $
New Premium   = ($ x $) / $
  = $ per acre

Scenario 3 - Different Soil Zones

A producer is growing acres of canola: acres at MASC’s dollar value of $ per tonne on a soil zone that has a coverage per acre of , and is also filling two contracts: Contract 1 is for acres at $ per tonne on C32 soil (Probable Yield (PY) = ), and Contract 2 is for acres at $ per tonne on E32 soil (PY = ).

Total Coverage   = ( acres x tonne per acre) + ( acres x tonnes per acre) + ( acres x tonnes per acre)
  = tonnes + tonnes + tonnes
  = tonnes of canola
Production Ratio:
Commercial   = of tonnes
  = %
Contract 1   = of tonnes
  = %
Contract 2   = of tonnes
  = %
Blended Price   = (% x $) + (% x $) + (% x $)
  = $ + $ + $
  = $ per tonne
Impact on Coverage and Premium:
All Conventional Coverage   = tonnes x $ per tonne
  = $
CPO Dollar Coverage   = tonnes x $ per tonne
  = $
New Premium   = ($ x $) / $
  = $ per acre

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