How Do Canadian Wheat Producers’ Make Marketing Decisions?

The purpose of this paper is to investigate how Western Canadian wheat producers’ make their marketing decisions. In Canada wheat must be marketed through the Canadian Wheat Board (CWB), which offers several marketing contracts providing distinct combinations of return, risk, and cash flow. Pool pricing is the default alternative in which the CWB markets the grain for producers, while Producer Payment Options (PPO) represents instruments that producers can use to price their wheat outside the pool. Results indicate that previous use of a PPO contract tends to reduce its use in the current year. Previous performance is also found to be an important variable, with higher performance in previous year leading to more use of PPO contracts in the current year. In addition, producers seem to follow price signals to choose marketing contracts, specially the difference between the futures price and the expected pool price.