Close to $6 corn yet we are getting $3.75 for barley. The overseas price in the last 2 weeks has gone way up again and what are we getting.
CWB supporters. How can you defend this? We are losing at least $1 a bus. Here are some facts to chew on from newsletters most of us read.
In Summary
The best source of higher prices for Prairie feed grains at this
time is in the offshore...hands down, not even close...not our lower
priced domestic feed market.
But farmer access to these higher priced offshore markets is
restricted and contingent upon the speed by which the CWB sells.
Since the CWB pace of selling is currently slow, domestic feed grain
price grinds away as there is no need to match international valuation.
In essence, the manner of CWB program selling masks true international
market valuation...and when those global market prices rise above
domestic values, the lack of market transparency behind the single desk
veil in effect insulates the domestic market from responding with a
higher bid. And why should the domestic market raise bids if the local
market is protected from the higher prices of the offshore market?
That said, it's understandable that it takes time for farmers to
commit feed barley supply to CWB. (More on that below)
With corn price jumping, the CWB conveying bullish opinion about
corn (as per PPO update) and wide price divergence between our domestic
and world markets, the CWB has all the ammo needed to sell
aggressively. But will the Board do so?
In addition to what has already been sold, the CWB should be able to
sell a combined 2 MMT of feed wheat and feed barley in the coming 6
months. And yes, even if that means raising the transparent bid to
farmer by 50-75 cents/bu. That's what is needed to take domestic feed
grain prices another notch higher. But so far, the Board is refusing to
do so, despite international prices already offered up there.
As for marketing, you as a grower have a choice...
a) do nothing
b) sell barley to the CWB and "hope" the justified final payment pulls
materializes
c) assume or hope domestic price rises enough to catch up with today's
world price.
For those that need cash flow, need bin space, know that there is no
hope for attaining malt quality barley, you are distant from a feed
deficit point...consigning to the CWB delivery contracts is probably a
better bet, especially if the decision has to be made in the coming few
months. There's just no other legal means to access the offshore market
today.
Finally Thoughts
You perhaps have already seen some of the running commentary lately
produced by our friend John DePape. I've known John for many years. He
used to be a floor trader on the old Winnipeg Commodity Exchange and
held various grain merchandising positions with Cargill Limited and
worked for Informa Economics.
His work at Informa focused on grain handling and transportation in
Western Canada. He wrote a number of studies for both governments and
private clients, including the 2004 Canadian Barley Industry in
Transition. He was a consultant to the Auditor General's office on a
special audit of the Canadian Wheat Board and does consulting work for
the federal competition bureau.
He's been sending me a number of reports regarding the CWB and its
practices lately. I've refrained from using them, despite John giving me
permission to do so. But in this case of barley, he makes some
interesting, albeit controversial comments. So John, have at it...
More on feed barley exports
I know I've been here before but there's just so much of this that's
just not right. For instance, one thing I didn't mention before is that
the way the CWB operates in the export feed barley market may actually
limit how much volume it does.
The CWB first tenders to grain companies for supply. Only when the
barley is "in the showcase" does it sell the barley. In the time lag
between originating the barley and offering it for sale, the market
price can drop and that's why the CWB goes to the farmer with a
discounted price.
Talk in the trade suggests the CWB may have missed sales because of
this approach. By the time the tenders go out, the grain companies
respond, and the CWB tries to sell, the buying interest may have been
satisfied from other sources.
Let me summarize the situation (I have mentioned some of this
before):
1) The CWB is the only one that can sell feed barley for export.
2) It may miss business because of the way it operates.
3) It shows farmers only a portion of the price – as much as $50/tonne
is missing.
4) It won't guarantee that farmers who sold barley will get any of the
rest of the sale value. (Did you know that this is the third
consecutive year that the CWB has had this kind of cash program on feed
barley? And did you know that farmers never received the full sales
value in the previous years?)
The CWB buys barley through company-specific tenders with a specific
sign-up window. These contracts are not well promoted or widely
publicized, so many farmers don't know about them or even have access
to them.
Because the export price is not transmitted to the country (lack of
price transparency), domestic prices for feed barley and even feed
wheat are artificially held down. The loss to the western prairie
economy is well into the hundreds of millions. Even Jim Flaherty should
sit up and take notice.
I can accept losing business because you didn't have the right
price, the right quality or couldn't execute in the required shipping
period. That's the nature of the business. But to lose business simply
because of the way you choose to operate is unacceptable, especially
when you won't let anyone else try. Combine this with keeping a portion
of the value from farmers and the loss in real revenue at the farmgate
on all feed barley and feed wheat and this becomes downright mind-
boggling.
Anyone who either defends or deflects criticism of this program is
blinded by ideology. Make no mistake...the single desk has cost
farmers millions here and has been a drain on the western economy. I
can only hope that those that defend the single desk will see this for
what it is and will now engage in a more meaningful debate.
Even if you're a staunch CWB supporter, it's OK to be madder than
hell about this. Now that there's a CWB directors' election going on,
farmers should demand from candidates what they would do to improve
this situation for farmers – all farmers.
John De Pape
Winnipeg, MB
CWB supporters. How can you defend this? We are losing at least $1 a bus. Here are some facts to chew on from newsletters most of us read.
In Summary
The best source of higher prices for Prairie feed grains at this
time is in the offshore...hands down, not even close...not our lower
priced domestic feed market.
But farmer access to these higher priced offshore markets is
restricted and contingent upon the speed by which the CWB sells.
Since the CWB pace of selling is currently slow, domestic feed grain
price grinds away as there is no need to match international valuation.
In essence, the manner of CWB program selling masks true international
market valuation...and when those global market prices rise above
domestic values, the lack of market transparency behind the single desk
veil in effect insulates the domestic market from responding with a
higher bid. And why should the domestic market raise bids if the local
market is protected from the higher prices of the offshore market?
That said, it's understandable that it takes time for farmers to
commit feed barley supply to CWB. (More on that below)
With corn price jumping, the CWB conveying bullish opinion about
corn (as per PPO update) and wide price divergence between our domestic
and world markets, the CWB has all the ammo needed to sell
aggressively. But will the Board do so?
In addition to what has already been sold, the CWB should be able to
sell a combined 2 MMT of feed wheat and feed barley in the coming 6
months. And yes, even if that means raising the transparent bid to
farmer by 50-75 cents/bu. That's what is needed to take domestic feed
grain prices another notch higher. But so far, the Board is refusing to
do so, despite international prices already offered up there.
As for marketing, you as a grower have a choice...
a) do nothing
b) sell barley to the CWB and "hope" the justified final payment pulls
materializes
c) assume or hope domestic price rises enough to catch up with today's
world price.
For those that need cash flow, need bin space, know that there is no
hope for attaining malt quality barley, you are distant from a feed
deficit point...consigning to the CWB delivery contracts is probably a
better bet, especially if the decision has to be made in the coming few
months. There's just no other legal means to access the offshore market
today.
Finally Thoughts
You perhaps have already seen some of the running commentary lately
produced by our friend John DePape. I've known John for many years. He
used to be a floor trader on the old Winnipeg Commodity Exchange and
held various grain merchandising positions with Cargill Limited and
worked for Informa Economics.
His work at Informa focused on grain handling and transportation in
Western Canada. He wrote a number of studies for both governments and
private clients, including the 2004 Canadian Barley Industry in
Transition. He was a consultant to the Auditor General's office on a
special audit of the Canadian Wheat Board and does consulting work for
the federal competition bureau.
He's been sending me a number of reports regarding the CWB and its
practices lately. I've refrained from using them, despite John giving me
permission to do so. But in this case of barley, he makes some
interesting, albeit controversial comments. So John, have at it...
More on feed barley exports
I know I've been here before but there's just so much of this that's
just not right. For instance, one thing I didn't mention before is that
the way the CWB operates in the export feed barley market may actually
limit how much volume it does.
The CWB first tenders to grain companies for supply. Only when the
barley is "in the showcase" does it sell the barley. In the time lag
between originating the barley and offering it for sale, the market
price can drop and that's why the CWB goes to the farmer with a
discounted price.
Talk in the trade suggests the CWB may have missed sales because of
this approach. By the time the tenders go out, the grain companies
respond, and the CWB tries to sell, the buying interest may have been
satisfied from other sources.
Let me summarize the situation (I have mentioned some of this
before):
1) The CWB is the only one that can sell feed barley for export.
2) It may miss business because of the way it operates.
3) It shows farmers only a portion of the price – as much as $50/tonne
is missing.
4) It won't guarantee that farmers who sold barley will get any of the
rest of the sale value. (Did you know that this is the third
consecutive year that the CWB has had this kind of cash program on feed
barley? And did you know that farmers never received the full sales
value in the previous years?)
The CWB buys barley through company-specific tenders with a specific
sign-up window. These contracts are not well promoted or widely
publicized, so many farmers don't know about them or even have access
to them.
Because the export price is not transmitted to the country (lack of
price transparency), domestic prices for feed barley and even feed
wheat are artificially held down. The loss to the western prairie
economy is well into the hundreds of millions. Even Jim Flaherty should
sit up and take notice.
I can accept losing business because you didn't have the right
price, the right quality or couldn't execute in the required shipping
period. That's the nature of the business. But to lose business simply
because of the way you choose to operate is unacceptable, especially
when you won't let anyone else try. Combine this with keeping a portion
of the value from farmers and the loss in real revenue at the farmgate
on all feed barley and feed wheat and this becomes downright mind-
boggling.
Anyone who either defends or deflects criticism of this program is
blinded by ideology. Make no mistake...the single desk has cost
farmers millions here and has been a drain on the western economy. I
can only hope that those that defend the single desk will see this for
what it is and will now engage in a more meaningful debate.
Even if you're a staunch CWB supporter, it's OK to be madder than
hell about this. Now that there's a CWB directors' election going on,
farmers should demand from candidates what they would do to improve
this situation for farmers – all farmers.
John De Pape
Winnipeg, MB
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