Background: Producer comes to the bank wanting to purchase 100 back grounded yearlings at 600 lbs. and put them on pasture for the summer and sell in October at 850 lbs. He is applying for a loan with the expected cost of $738/head or $1.23/lb. He would need a total of $73,800 in a loan in order to purchase yearlings. This is what WCPIP would have offered to help cover his risk:
- 100 head X 850 lbs. (expected weight at time of sale) = 85,000 lbs. / 100= 850 CWT (weight intended to insure)
- 850 CWT X 136 (Insured Index $/CWT) = $115,600 coverage or an average of $1156/head expected price
- 850CWT X 2.00 (Premium $/CWT) = $1700 Premium or $17/head
The settlement index in the claim window (Average Alberta Market) is $140/cwt, giving the client no payout but he could potentially be getting $119,000 in the market place for these yearlings, $1190/ head potentially achieved in the market place.