Agricultural Marketing Glossary - Marketing Terms and What They Mean

Advance Payment- A cash advance made to producers for farm-stored grain under the provisions of the Prairie Grain Advance Payments Act for which the Canadian Wheat Board acts as administrator.

Advance Quota - A quota opened up for emergency purposes, such as the delivery of tough or damp grain, which is usually debited against a subsequent quota authorized in the normal way.

AFFDA - Alberta Farm Fuel Distribution Allowance - Farmers who qualify are exempt from provincial sales tax on fuel and receive an additional rebate from the provincial government.

Amended Quota Area - A single revision in the assigned quota area which a producer may make prior to October 31, with the approval of the Canadian Wheat Board. This alters his original quota area assignment made in his permit book application before the beginning of the crop year.

Anticipatory Hedge - A short hedge placed in the expectation of a cash purchase, or a long hedge placed in the expectation of a cash sale.

APPDC - Alberta Pork Producers Development Corporation - A marketing board without the power to regulate production through quota systems (see marketing board). The APPDC acts as a central selling agent for slaughter hogs marketed in Alberta.

Arbitrage - Simultaneous purchase and sale of the same quantity of the same commodity in two different markets, either in the same country or in different countries. Used to take advantage of what is believed to be a temporary disparity in prices.

Assignable Area - A declaration by a producer in his Canadian Wheat Board permit book application of his land use, in the current year.

Assigned Quota Areas - An allocation by the producer in his Canadian Wheat Board permit book application of his total assignable area to the various quota grains that he wishes to deliver in the new crop year. Before October 31, the producer may make one amendment of his original allocation. The assigned quota area establishes the delivery quota base for each grain to which the kilogram quotas authorized from time to time are applicable.

At the Market - An order to buy or sell at the best price obtainable at the time the order is received.

Auction Market (Mart) - Facility for sale of livestock by auction in an auction ring.

B

Backgrounding - Feeding of calves over winter on a high roughage, low rate-of-gain ration.

Barrow - Castrated male hog.

Basis - The difference between the sale or quoted cash price of a particular commodity and a specified futures contract price for the same commodity. As used in the grain trade it is the difference between the net price the farmer receives and the futures contract price upon which the net price is based considering all marketing costs including transportation and handling.

Bear - A person who believes prices will fall.

Bear Market - A market where large supplies and/or poor demand cause a decline in price.

Beef/Hog Price Ratio - A ratio calculated by dividing the live cattle price by the slaughter hog price for a given market. A general indicator that compares market returns in the two industries.

Bid - An action that indicates a willingness to buy a specific amount of a commodity at a specified price (opposite of offer). The bid, unless otherwise stated, must be accepted immediately.

Block Shipping System - The network of 48 shipping areas or blocks into which the grain producing area of western Canada is divided. Each block represents a train run or railway subdivision or a group of such subdivisions on which are situated a number of shipping points within a fairly homogeneous production area. The shipping blocks are the units within which the Canadian Wheat Board allocates shipping orders among the companies operating elevators within the block. The elevator companies assign the orders to their elevator managers within each block, and this assignment governs the spotting of cars at the elevators for the loading of grain authorized by the shipping orders.

Board Grain - A grain whose marketing is under the control of a producer's marketing board. For example, western wheat and barley destined for the export market is delivered to the Canadian Wheat Board. Domestic feed wheat and domestic feed barley may either be sold by producers on the open market or delivered to the Canadian Wheat Board.

Board Lot - In the Winnipeg Commodity Exchange, 100 tonnes, equalling five units of trade - a full futures contract.

Boxed Beef Cryovac - packaged beef packed for shipment in cardboard boxes. Currently the staple commodity of the wholesale beef trade.

Bracken Formula - The allocation of Canadian Wheat Board shipping orders among the primary elevator companies on the basis of current business earned by each of them. As a result, the board allocates shipping orders on the basis of a 12-month moving average of the primary elevator receipts of each company.

Break - A quick, extensive decline in prices.

Breakeven
1. The feeder price which will ensure a cattle feeder that all operating and capital costs will be met, given a specific live cattle price.
2. The live cattle price which meets the previous criteria, given a specific feeder cattle price.

Breakevens - Manual or electronic worksheets designed to calculate returns from livestock feeding alternatives.

Broker - An agent entrusted with the execution of an order. He may be employed in the office of the commission house that carries the account or a floor broker or pit broker who actually executes the order on the trading floor.

Bulge - A rapid advance in prices.

Bull - One who believes prices are too low and will rise.

Bull Market - A market where small supplies and/or strong demand cause prices to rise.

Butcher Cows/Bulls - Cows and bulls sold for slaughter.

Buy on Close - To buy at the end of the trading session at a price within the opening range.

By-products - Animal slaughter products other than meat, including hide, blood, entrails.

By-product Value - A price indicating likely return to packers from byproducts for a given week, in dollars per cwt, based on an aggregation of market prices for principal byproducts.

C

Call Option - A financial contract giving the purchaser the right to buy a futures contract at a fixed price level on or before an expiration date.

Call Premium - The trading price of a particular call option.

Canner and Cutters - A term used in U.S. livestock markets for slaughter cows.

Carrying Charge Market - A futures market in which the nearby months are selling at a discount under the distant months.

Carrying Charges - The interest and storage costs associated with the ownership of grain over time.

Carryover Stocks - The stocks of grain in all positions at the end of the crop year.

Cash - The actual physical product or commodity as distinguished from futures. Also, known as "cash commodity," "spot commodity" or "actuals."

Cash Advance - A cash advance made to producers on farm-stored grain under the provision of the Prairie Grain Advance Payments Act for which the Canadian Wheat Board acts as administrator.

Cash Contract for Future Delivery - A contract between two parties for the purchase and sale of grain of a specified grade and price, to be delivered to the buyer by the seller at a specified delivery point and within a specified delivery period.

Cash Crops - Crops that can be marketed without quota restrictions.

Cash Purchase Ticket - A ticket issued in prescribed form showing the grade, weight, price and the amount payable for each delivery of grain received into an elevator. The ticket is a negotiable instrument and can be cashed at any chartered bank or designated paying office.

Cattle Cycle - The long-run fluctuation in the size of the cattle herd in response to biological and economic forces. The cattle cycle typically consists of a seven-year expansion phase, followed by a three-year contraction phase.

Cattle-On-Feed Report - Reports released by the USDA estimating cattle numbers in commercial U.S. feedlots. There are two types of cattle on feed reports:
1. Monthly 7-State Report which gives placements and marketings of the cattle on feed.
2. Quarterly 13-State Report which gives placements and marketings as well as weight breakdowns of the cattle on feed.

Cattle Inventory Reports - Reports outlining herd size by animal class. Issued biannually for January 1 and July 1 by both the USDA and Statistics Canada.

Charting - The construction and use of charts or graphs in the technical analysis of futures markets. Price movements, average price movements, volume and open interest is usually graphed.

CIF - An abbreviation referring to the costs, insurance and freight to port of destination, paid or included in price.

CKG - An abbreviation for 100 kilograms.

Clearing House - A separate agency or corporation working in conjunction with the commodity exchange to match up buy and sell orders and through which futures contracts are offset or fulfilled. The clearing house also ensures that financial settlement is made through its facilities.

Close, the - The period at the end of the trading session officially designated by the exchange during which all transactions are considered made "at the close".

Closing Price (or range) - The price (or price range) recorded during the period designated by the exchange as the official close.

CME - Chicago Mercantile Exchange.

Cold Storage Report - Monthly reports issued by the USDA outlining commercial stocks of frozen pork, poultry and other frozen commodities.

Colony - The bees in a hive. Typically a colony is one queen and about 65,000 bees in various stages of development.

Commodity Exchange Centres - where actual commodities or commodity futures contracts are bought and sold. All organized exchanges have definite rules to regulate the details or trading procedures.

Cost of Production Formula - Formula used to determine producer payment price for certain supply-managed commodities.

Contract Grades - Those grades of a commodity which have been officially approved by an exchange as deliverable in settlement of a futures contract (also called deliverable grades).

Convergence - The decrease of basis premiums and/or discounts until cash and futures prices coincide by the expiry of a delivery month.

Corner - Situation where a single buyer or seller holds a large share of the outstanding long or short positions in the cash and futures markets and therefore can influence prices in these markets to his advantage. In the extreme situation, buyers or sellers obtain more contracts that require the delivery of commodities or securities than actually exist.

Cover - The cancellation of a short position in any futures contract by the purchase of an equal quantity of the same contract (see Liquidation).

Cryovac - Plastic airtight meat packaging system.

Currentness - The percentage of A1 carcasses in the total A grade weekly cattle kill. An indicator of whether feedlots are holding back cattle in anticipation of a price recovery.

Custom Feeding - An arrangement for feeding cattle in a commercial feedlot, whereby the calf producer retains ownership of his animals and pays the feedlot a per diem feeding allowance.

Cutability - A measure of the yield of retail meat cuts from a carcass, expressed as percentage of total carcass weight.

Cutout Values - Daily estimates of the value of a beef (pork) carcass based on current wholesale market prices. A measure of the returns received by packers.

CWT - An abbreviation for hundredweight, 100 pounds.

Cycle Analysis - The identification and use of cycle patterns to predict future behavior.

D

Daily Bar Chart - A chart showing the daily high, low and closing prices.

Daily Continuation Chart - A daily bar chart that always charts the nearest futures contracts for a particular commodity.

Day Orders - Those limited orders that are to be executed the day for which they are effective and are automatically cancelled at the close of that day.

Dealer Car - A railroad car that is part of a grain company's share of allocated railroad cars. See also producer car.

Deferred Delivery Contract - A contract in which a seller agrees to deliver a specified quantity of grain or oilseed to a buyer for a specified price at a specified date in the future at a specified location.

Deferred Futures - Futures contracts that expire during the more distant months.

Deferred Pricing Option - Delivery of non-board grain to an elevator company with an option to price it at a later date.

Deferred Settlement Option - An option available to farmers that allows them to establish price at the time of delivery, but actual settlement is not made until some time in the future.

Delivery Month - A specified month within which delivery may be made under the terms of a futures contract. The day of delivery is usually selected by the seller.

Delivery Period - A specified period of time within which delivery may be made under the terms of a cash contract.

Delivery Permit Book - A permit book issued by The Canadian Wheat Board to each grain producer who applies, in which the delivery base for each quota grain is established and against which elevator managers record each grain delivery within the limits of an authorized quota.

Delivery Points - Locations designated by commodity exchanges at which a commodity covered by a futures contract maybe delivered in fulfilment of the contract.

Delivery Price - The price fixed by the clearing house at which deliveries on futures are invoiced. Also, the price at which the futures contract is settled when deliveries are made.

Delivery Quota - A stated number of kilograms per quota acreage base for each specified grain that producers may delivery while that authorized quota remains in force.

Direct Sales - Sale of cattle based on direct negotiation between feedlot and packer.

Dockage (Screenings) - The foreign material removed from delivery grain, used to arrive at the net weight of clean grain. Dockage is expressed as a percentage of the gross weight of the delivered grain.

Dressing Percentage - The yield of hot carcass (immediately after slaughter) expressed as a percentage of live cattle weight.

Dutch Auction - An auction system whereby prices are successively lowered until the first bidder agrees on a given price.

E

Electronic Marketing - A marketing system where livestock is auctioned by description to buyers participating via computer terminals, with no movement of livestock prior to the conclusion of sale (see TEAM).

Embargo - An artificial restriction or law preventing the flow of a commodity out of a country or into a particular country.

English Auction - An auction system whereby bids are progressively increased until only one bidder is left.

Equilibrium Price - The price at which the quantity supplied is equal to the quantity demanded.

Evening Up - When for any reason traders are completing their transactions by selling, in the case of longs, or by purchasing, in the case of shorts, they are said to be evening up.

Exchange of Futures - The simultaneous exchange of a specified quantity of futures for the same quantity of the cash commodity.

Exchange Rate - The cost or price of one currency stated in terms of another currency.

Excretory Shrinkage - The loss of contents of the belly, digestive tract and bladder in cattle after the first few hours of transportation or when cattle are off food and water.

Exercise Price - Strike Price - The price at which a futures position is taken if the option is exercised.

F

Fat Cattle (Fats) - Live cattle. Young (less than 2 years old) cattle for slaughter.

Feeder Cattle Futures (FC) - Futures contracts on the CME for feeder cattle, as specified under USFSP definition, to be delivered to one of several U.S. delivery points.

Feeding Margin - The amount of profit or loss from feeding animals, expressed on a per head basis.

Feedlot Sales - A method of auctioning feeder cattle in pens at a feedlot, rather than through an auction market.

Female to Male Disposal Rate - The ratio of females to males in the total cattle slaughter. An indicator of shifts in the size of the cattle herd (see cattle cycle).

Fence or Window - Term for a specific risk management strategy using options, designed to secure a higher floor price at the expense of putting a ceiling on price gains.

Final Payment - A payment, the amount of which is determined after the grain in a pool account has been sold, or most of it has been sold, that gives each producer who has delivered grain to that pool account an equitable share of any surplus which may have accrued in that pool account.

Finish - The amount of weight put on an animal. Cattle with a high degree of finish are those with a large fat covering for their body type.

First Notice Day - The first day of which notices of intentions to delivery actual commodities against futures market positions can be made or received. First notice day will vary with each commodity and exchange. It usually precedes the beginning of the delivery period.

Flat
1. To trade flat is to make a cash grain sale or purchase at a fixed price (flatted, flat price);
2. Direct sale carcass price for slaughter cattle negotiated FOB farmgate, regardless of actual grade or weight.

Fleshy - Cattle having what the trade considers an excess amount of finish.

Floor Trader - An exchange member who executes his own trade by being personally present in the place provided for futures trading.

FOB - Free on board. - Price effective at site of production, for example at farmgate.

Forward Price - An agreement between a buyer and seller that establishes price prior to delivery.

Full Carrying Charge - In futures transactions, the cost (storage, interest, etc.) of taking actual delivery in a given month, storing the commodity and redelivering against the next delivery month.

Fully Steady - A steady to upward-trending market.

Fundamental Analysis - The prediction of future price levels based on supply and demand factors.

Futures Contract - A term used to designate the standardized contracts covering the purchase and sale of commodities for future delivery on a commodity exchange. Also, known as "futures".

G

GATT General Agreement on Tariffs and Trade - is an international agreement whereby member countries have agreed to trade within the ambit of international rules. The GATT pledges its member countries to the expansion of multilateral trade through progressive improvements in market access (i.e., reductions in tariff and non-tariff barriers), and the reduction or elimination of trade distorting domestic supports and export subsidies. The agreement resulting from the latest Round of GATT negotiations, the Uruguay Round, was implemented on January 1, 1995, and is unprecedented in that for the first time in the history of the GATT, international rules have been applied to trade in agricultural goods and services.

Gilt - Female market hog.

Graded Delivered - Direct sale carcass price for cattle delivered to plant and meeting specific grade and weight range.

Graded Storage Receipt - A negotiable elevator receipt issued in respect of grain delivered to a primary elevator that entitles the holder of the document to deliver grain of the same kind, grade and quantity as the grain referred to in the document, at the location stated on it, upon surrender of the receipt.

Grading Certificates - Certificates attesting to the quality of a commodity graded by official inspectors, testers and graders.

Grain Sample - A representative sample drawn from grain at unload that is used in determining the grade, dockage and moisture content, and sometimes the protein content, of the whole parcel of grain being sampled.

Grassers - Cattle destined for summer pasture.

Green - Feeder cattle with a minimum amount of finish, well suited to feeding.

GTC - Abbreviation for good till cancelled. Usually refers to open orders to buy or sell at a fixed price.

H

Handyweight - Slaughter carcasses in the preferred (un discounted) weight range.

Hard Spot - An interval of strength in the market, usually resulting from considerable buying.

Harden - A term indicating a slowly advancing market.

Heavy - This is applied to a market when there are an apparent number of selling orders overhanging the market without a corresponding number of buying orders.

Hedging - A transaction to minimize the risk of loss due to adverse price fluctuations. In the futures market, a hedge is a purchase or sale of a futures contract usually made as a temporary substitute for a cash grain transaction to be made later.

Hive - The physical structure that bees inhabit. In nature it could be a hollow tree.

Hog Cycle - Fluctuation in the size of the pig herd in response to biological and economic forces. The hog cycle is of shorter duration and not as clearly defined as the cattle cycle.

Hog/Corn (Barley) Ratio - Ratio of live slaughter hog price to feed price, including any feed grain market adjustment programs in effect. Represents the bushels of grain that could be purchased with 100 lb of live hog, and reflects the relative profitability of feeding hogs.

Hog Inventory Reports-Statistical reports released by Statistics Canada four times/year, estimating the number of hogs on farms by province and by class of hog. USDA releases similar reports for the United States four times per year.

Hogget- An Oceanic term for sheep slaughtered between 1 and 2 years of age. Referred to as last year's lamb.

I

Index 100 - A hog scoring 100 on the Canadian grading system is known as an Index 100 hog.

Index 100 Grading System - A grading system used for slaughter hogs in Canada. It is designed to give producers feedback on the quality of hogs they have produced. Hogs with above average qualities receive a higher index. Settlement price is calculated on the market price multiplied by the index.

Initial Margin - The amount deposited by buyers and sellers of futures contracts to ensure performance on contract commitments; serves as a performance bond rather than a down payment. The rate of the initial margin is set by the exchange and varies depending on the commodity, the contract value, and the price volatility. See also Maintenance Margin.

Initial Payment - A sum guaranteed by Order in Council under the provisions of the Canadian Wheat Board Act which is the floor price guaranteed to the producer who delivers grain into a pool account. It is also an initial advance toward a higher final price in the event that the grain is sold at a higher net price, after deduction of marketing costs. The sum is based on a one tonne lot delivered either to Thunder Bay or Vancouver. It is set once per year under the provisions of the Canadian Wheat Board Act.

Initial Quota - The designation usually given to the first quota level established for each grain at the commencement of a crop year.

Inverse Market - A futures market in which nearby months are selling at a premium over distant months. These price relationships are characteristic of situations in which supplies are currently in shortage. Normally because of carrying charges (storage and interest) the highest prices are quoted for distant months. Also, known as "premium market".

J

Job Lot - A quantity smaller than the customary unit of trading.

L

Law of Demand - The relationship between the quantity consumers is willing to purchase and the price for each quantity. As prices rise the quantity purchased declines and vice versa.

Law of Supply - The relationship between the quantity supplied and price for each quantity. As the quantity supplied rises, prices fall and vice versa.

Life of the Contract - Period between first and last trade in any futures contract.

Limit - The maximum fluctuation in price of a futures contract permitted above or below the previous sessions close during one trading session, as fixed by the rules of an exchange.

Limited Order - Order in which the client sets a limit on the price as contrasted with a market order.

Liquidation - The closing out of a long position. It is also sometimes used to denote closing out of a short position, but this is more often referred to as "covering".

Live Cattle Futures (LC) - Futures contracts on the CME for 40,000 lbs choice grade live steers, delivered to one of several US delivery points.

Long - One whose net position of open purchases and inventory exceeds open sales. When one buys they are long in the market, which is opposite to being short in the market.

Lot - Usually any definite quantity of a commodity of uniform grade. The standard unit of trading in a futures market.

M

Maintenance Margin - The minimum amount of money a trader must have in his margin account at all times. A drop below this level will result in a margin call. Maintenance Margin is required once an account's initial margin has been reduced by some specified amount, generally 25 per cent or more. Should this occur, the client must deposit enough money to bring the account up to original requirements. This is known as margin call.

Margin - A deposit made by a buyer or seller of a commodity futures contract to assure good faith and fulfilment of the contract.

Margin Call - Demand for additional funds to restore the guarantee to "maintenance margin" levels because of an adverse price movement or some other contingency. See also Maintenance Margin.

Market Order - An order for immediate execution at the best available price.

Marketing Agency - A national or regional body established by proclamation under the Farm Products Marketing Agencies Act to administer a marketing plan for a regulated commodity.

Marketing Board - A provincial body set up under provincial legislation to co-ordinate or regulate the marketing of a farm product within a province. Most of the over 100 boards in Canada do not have power to regulate production through quota systems.

Marketing Commission - A compulsory, horizontal marketing organization for primary natural products, operating under government delegated authority. The compulsory feature of a marketing commission means that all everyone producing a given product in a specified region is compelled by law to adhere to the regulations of a marketing plan. The compulsory feature of a commission is generally a producer check-off or levy for the purpose of advertising, promotion, etc.

Montreal Wholesale Price - The weekly settlement price negotiated between packers and wholesalers for carcass beef shipped from western Canada to Montreal.

Moving Average - An average price calculated by adding a new price and dropping the first price in the series. For example, if a five-day moving average is being calculated, the average for the sixth day is calculated by adding the price for the sixth day and dropping the price for the first day.

N

NAFTA - The North American Free Trade Agreement, implemented on January 1, 1994, is a trilateral agreement between Canada, the US and Mexico. The purpose of the Agreement is to facilitate the free flow of trade and investment within the region. In the long term, other countries will be permitted to accede to the NAFTA, provided that they meet the membership criteria set up by the three founding countries. In terms of Canada's trade with the US, the NAFTA is an extension to the Free Trade Agreement which Canada has had with the US since 1989. The NAFTA does however also include bilateral agreements which govern trade between Canada and Mexico and the U.S. and Mexico.

Nearby Delivery - Refers to the nearest traded contract month.

Negotiable Warehouse Receipt - A legal document issued by a warehouse or elevator describing and guaranteeing the existence of a specific quantity and grade of a commodity in the warehouse or elevator. Facilitates transfer of ownership by endorsement of the owner of the receipt.

Net Position - The difference between the long contracts and the short contracts held in anyone commodity by an individual or group.

New Crop Lambs - 40-60 lb plump lambs off of ewe for sale.

NISA Net Income Stabilization Act. - Under this program governments match producer contributions to stabilize gross margins on farms.

Nominal Price - A declared price or quotation for a futures contract and for a period in which no actual trading took place.

Non-board Grain - All grain that is marketed through the open market system. This includes western domestic feed wheat, domestic feed barley, eastern barley and for the whole of Canada, all rye, flaxseed, oats, rapeseed, soybeans, corn, mustard, sunflower seed, buckwheat and peas.

O

Off - In quoting the basis, the number of points the cash price will be under a specified futures contract month's price. Example: 20 points off December.

Offset - The fulfilling of a futures contract by taking an equal but opposite position to the original trade.

Offer - An indication of willingness to sell at a given price. Opposite to "bid".

On - In quoting the basis, the number of points the cash commodity is above a specified futures contract month's price. Example: 20 points on December.

Open Contracts - that have been bought or sold and have not yet been closed by subsequent sale or repurchase, or actual delivery or receipt of a commodity.

Open Interest - The number of unfilled or outstanding contracts futures that exist at a particular time. It is either the total long or total short position.

Open Order - An order that is good until cancelled.

Open Quota - Denotes the removal of any limitation on the delivery of a grain that has been under quota regulations.

Opening Price (or range) - The price (or price range) recorded during the period designated by the exchange as the official opening.

Option - The right of executing or renouncing a transaction within a specified period on agreed terms.

Options - Financial contracts giving the purchaser the right to buy or sell a futures contract at a fixed price level on or before an expiration date (see call option, put option).

Options Premium - The price of a particular option, established by trading in the options market.

Overbought - A market price that has been driven too high in relation to the actual conditions of supply and demand.

Oversold - A market price that has been driven too low in relation to the actual conditions of supply and demand.

P

Panorama Sales - Feeder cattle sales conducted each fall in the interior of British Columbia.

Paper Profit or Loss - The profit or loss that might have been realized if the contracts had been offset as of a stated date.

Pelt - Unprocessed sheepskin.

Pencil Shrinkage - On direct sales of live cattle, the percentage of shrinkage negotiated between feedlot and packer.

Per Capital Disappearance - Total carcass production of a given meat plus imports and less exports, divided by total population. Per capita disappearance is not a good indicator of actual meat consumption, and it is being replaced by retail weight equivalent consumption measures.

Permit Book Application - The application form on which the producer describes his lands, calculates his assignable area and assigns his quota acreage as a delivery base in the crop year about to commence. The application is a prerequisite to the issuance of a delivery permit book.

Pit - The designated location of the trading floor of a commodity exchange where trading in futures contracts takes place.

Point - The minimum unit in which changes in futures price may be expressed.

Pork Belly Futures - Futures contracts on the CME for 40,000 lb of pork bellies (bacon), to be delivered at one of several U.S. delivery points.

Position - An interest in the market in the form of open commitments. For example, a producer would take a long position when buying a futures contract.

Pre-Conditioning - Preparation of feeder calves for feeding before sale to a feedlot. Certified preconditioning in Alberta consists of a specific series of inoculations and treatments.

Premium - The amount by which a given futures contract sells over another futures contract or the quality of a spot commodity over the quality of another spot commodity.

Price Inflation Index - An index used to remove the effect of inflation from a time series of prices.

Price Limit - The maximum fluctuation in price of a futures contract permitted during one trading session, as fixed by the rules of an exchange.

Primals - Carcass portions subdivided into major muscle groups for wholesale distribution, specifically: chuck, rib, loin, hip, full plated, and flank, in Canada. Boxed beef is shipped as primals or sub-primals.

Primary Delivery Point - In his permit book application, the producer must name the delivery point at which his grain deliveries will be made.

Private Treaty Sales - See Direct Sales.

Producer Cars - A railroad car that is loaded and shipped by producers. Producers applied to the Canadian Grain Commission to have a car allocated to them. This differs from dealer cars which are allocated to grain companies.

Producer Payment Price or Producer Pool Price - Average price of all hog sales by the APPDC less non-administrative marketing costs for a week beginning on Friday and ending Thursday. The price paid to producers marketing Index 100 hogs through the APPDC.

Public Market - See Auction Market.

Purchase and Sale Statement - A statement sent by a commission merchant to a customer when his futures position has been reduced or closed out. It shows the amount involved and the price at which the position was acquired. The amount by which it was reduced or closed out is shown respectively. Also shown is the gross profit or loss, the commission charged, and the net profit or loss on the transaction. Frequently referred to as a "P and Statements".

Put Option - A financial contract giving the purchaser the right to sell a futures contract at a fixed price level on or before an expiration date.

Q

Quota
1. A Canadian Wheat Board specified share of the market given to each eligible permit holder, designated in kilograms per acre or carload per permit holder.
2. In international trade, quotas are quantitative limits placed on the importation of specified commodities.

R

Rail grade - Method of sale whereby the producer is paid on the basis of carcass weight and grade rather than on a live weight basis.

Range - The difference between the high and low price of a futures contract during a specified period.

Reaction - The downward tendency of a commodity after an advance.

Replacements - Livestock sold for purposes other than slaughter.

Retail Weight Equivalent Consumption - A per capital consumption measure based on meat production alone, i.e., exclusive of fat and bone. The new standard for meat consumption measurement that will replace per capita disappearance.

Round Turn - The completion of both a purchase and an offsetting sale or vice versa.

S

Safety Net - A mechanism used by governments to assist farmers in stabilizing their income.

Seasonality - Seasonal fluctuation in prices in a 12 month pattern, typically in response to biologically-dictated production characteristics.

Seeded Area Quota - A quota for a specified grain which is applied to the area the producer has seeded to that grain year.

Selected and Accepted Oats and Barley - Oats and barley of high processing quality for which a sample has been submitted to a processor or selector designated by a processor, which has been accepted for purchase.

Settlement Price - The daily price at the close of the market at which the clearing house clears all trades and settles accounts between members for each contract month. Settlement prices are used to determine both margin calls and invoice prices for deliveries.

Shipping Block - A railway operating segment comprising one or more railway subdivisions. A block comprises a group of shipping points served by the same railway line, and all primary elevators situated at those shipping points.

Shipping Points - A point on a railway line at which one or more primary elevators are situated for the receipt, storage and loading of grain into railway cars.

Short - One whose net position shows an excess of open sales over open purchases and/or inventory (opposite to long).

Shrinkage
1. In livestock marketing, shrinkage is the weight of an animal lost during sorting, transportation, standing, or any situation that may cause a degree of stress. See also pencil shrinkage, tissue shrinkage and excretory shrinkage.
2. An allowance specified by schedule in the Canada Grain Regulations that is deducted from the gross weight of delivered grain to adjust for the normal loss of weight in the handling of clean grain.

Sideways - A market demonstrating no established price trend.

Single Desk Selling Agency - A system where producers pool their product and sell through one authority, creating, in effect, a market with only one seller.

Slaughter Index - The grading index for slaughter hogs in Canada, based on back fat measurements (see Index 100 Grading System).

Soften - A slowly declining market price.

Special Quota - A quota authorized to meet particular situations such as high-moisture grain and flood threats, also granted to estates or to producers retiring from farming.

Speculator - Anyone who is willing to invest his money and assume the risk of a price change in the hope of accurately predicting the direction prices will move.

Speculation - The person or act of buying or selling of a commodity futures contract for the purpose of selling or buying the futures contract later at a profit or at the risk of loss. In short, risk bearing.

Spot Sale - Spot sale or delivery means immediate transfer of title and payment. Also, referred to as cash market.

Spot Commodity - The actual physical commodity as distinguished from the futures market commentary.

Spot Price - The price at which the spot or cash commodity is selling. In grain trading it is called the "cash price".

Spread - The purchase of one futures commodity against the sale of another futures commodity of the same commodity but in different months.

Steady - A market with prices basically unchanged from previous quotes.

Steer/Corn (Barley) Ratio - Ratio of live slaughter steer price to feed price, including any feed grain market adjustment programs in effect. Represents the bushels of grain which could be purchased with 100 lb of live steer, and reflects the relative profitability of feeding cattle.

Stockers - Calves destined for a period of backgrounding.

Stocks/Use Ratio - The carryover stocks divided by the annual usage or consumption. The ratio is a measure of the relative tightness of the supply demand balance. It is usually expressed as a percentage.

Stop Loss Order - A standing order to buy or sell when the market reaches a specified price. A stop order becomes a market order when the commodity reaches the specified price. The purpose of a stop loss order is to limit losses or to protect a profit.

Supplementary Quota - An additional quota introduced in 1953 and extended to producers who had a high proportion of their cultivated land devoted to the production of one crop. Supplementary quotas were later used to increase the delivery of grains for which market demand was strong.

Supply Management - Regulation and control of production and marketing of a product through a quota system.

Switching - Simultaneously buying a futures contract for delivery in one month while selling a contract of the same commodity in another month on the same commodity exchange.

T

Tariff - Tariffs are taxes which are imposed on commodity imports. They may be levied and an ad valorem basis (as a percentage of value) or on a specific basis (as an amount per unit).

Technical Analysis - The prediction of future price levels based on the study of previous price and market behavior.

Technical Rally (or decline) - A price movement resulting from conditions developing within the futures market itself and not dependent on outside supply and demand factors. These conditions would include changes in the open interest, volume, degree of recent price movement and approach of first notice day.

Thin Market - A market with a small number of buyers or sellers or both buyers and sellers.

Trade Barrier - Trade barrier is a general term covering any limitation on the free exchange of goods and services. These barriers may take the form of tariffs, quotas, restrictions on the issuance of import licenses, or stringent regulations relating to health and safety standards.

Trading Hours (cash grain) - Twenty-four hours a day, seven days a week, 365 days a year.

Trading Hours (grain futures markets) - On the Winnipeg Commodity Exchange, trading hours are 9:30 a.m. to 1:15 p.m. Central Standard Time or Central Daylight Time, Monday to Friday, except on legal holidays.

Trading Limits - In the futures market the maximum advance or decline from the previous day's closing price permitted during one trading session by the regulations of the exchange.

Transferable Notice - Notice given by the seller of a futures contract that he has made preparation for actual delivery.

U

Undertone - A slight but a noticeable downward trend in a market's price.

U.S. 7-Market Price - An average hog price based on seven principal US hog markets, which are: National Stock Yards, Illinois; Kansas City, Kansas; Omaha, Nebraska; Sioux City, Iowa; So. St. Joseph, Kansas; So. St. Paul, Minnesota; Indianapolis, Indiana.

USFSP (US Feeder Steer Price) - A seven-calendar-day average of feeder steer prices from 27 states, based on auction and direct county sales for 600-800 lb feeder steers estimated to grade between 60 and 80 per cent choice when fed to slaughter weight. The cash settlement price for the CME futures contracts on expiration date, tabulated by Cattlefax.

V

Vertical Integration - A term denoting the trend for firms to expand into enterprises either above or below their currant link in the marketing chain. For example, if a packer purchases a feedlot, this vertically integrates the packer in the meat industry.

Visible Supply - The supplies of commodities in commercial positions.

Volume of Trading - The total purchase or sales of commodity futures contracts during a specific period. Since the number of purchases equals the number of sales, only one side is shown in published reports.

W

Weekly Continuation Chart - The same as a daily continuation chart except that the weekly high, low and close are used instead of daily prices.

WGTA Benefit (Western Grain Transportation Act). - The original Crow Benefit was translated into the subsidy paid to the railways under the WGTA. As of the 1995/96 crop year this benefit has been eliminated.

Agricultural Marketing Manual - February, 1999