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26- PORT PERRY STAR - Tuesday, December 17, 1996 protect farmers from price r re-sold at any time or simply left to expire. goal If prices decline, producers are protected at privat the level they have selected. ducers. Feedlot producers can benefit from higher prices but also know they are protected from price reductions. With most forecasters expecting cattle prices to peak at the beginning of the new year, this winter could be a good time for ranchers to investigate the possibility of reducing financial risk through the Cattle Options Pilot Program (COPP). COPP is a risk management tool designed to assist cattle producers in hedging against price drops. The program allows producers to buy as much protection as they need, when they want it, without the currency risk normally involved in dealing with the U.S. live cattle market. The program takes the exchange rate into account and therefore eliminates the risk and expense of buying separate options on the Canadian dollar," says Bobby Matheson, head of Agriculture and Agri-Food Canada's risk management section. "COPP also allows ranchers to buy contracts for only 10,000 pounds of cattle, compared to a mini- mum of 40,000 pounds on the Chicago Mercantile Exchange." Low transaction fees and fixed option prices make the program accessible and user-friendly. If prices rise, contracts can be Matheson cautions that one limitation of COPP does not protect against basie risk, the difference between the local market price and the Chicago futures price. First in the world - With world agriculture trade forecast to become even more competitive and volatile, the advantages of a more flexible and trade- compatible risk management tool becomes important. COPP is the first currency- translated option offered to agriculture pro- ducers anywhere in the world - good news from a trade perspective. Who Can Buy Options? To prevent speculation, the COPP pro- gram is available to cattle producers only. In addition, the number of contracts that can be purchased is limited to the equival- ent of the producer's annual herd size. In its first year of operation, a total of 1,842 con- tracts, representing about 15,000 cattle were sold. - . _ Privatization ~ inthe Plan COPP was developed in partnership bet- ween government and industry with the We at McLaren's wish you a happy and safe holiday and look forward to serving you in the New Year! MAAREN\ DAIRY SYSTEMS LTD. Port Perry, 985-9838 « 1-800-264-2122