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CWB screwing us on barley

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    CWB screwing us on barley

    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

    #2
    Trouble with this is that those who know this are not CWB supporters. Those who are CWB supporters will never know this. They have managed to keep their postition in the face of overwhelming evidence to the contrary in the past and will continue to do so in the future. Besides the CWB is good for Ont and Que and that is all that matters in Canada. Keep banging your head on the wall.

    Comment


      #3
      Barley and corn are being driven by 2 different markets. The ethanol industry is pushing the corn prices, while livestock is still the only market for FEED barley. Given the energy value of Corn verses barley, and the price of soybean/canola meal for the protein, is something not being considered when we compare the price of corn with FEED.


      No body is holding a gun to our heads to sell barley to the Board.

      Comment


        #4
        The CWB argues that the local barley price hasn't moved higher because there's available substitutes that are cheaper - like corn and DDGs.

        If corn and DDGs aren't cheap any more, what's holding the barley price down?

        Comment


          #5
          Dogpatch. There is only one market for feed barley then. You don't think the feedlot price doesn't follow the PRO? They know they have a captive market. If we here free to export the barley would be leaving as fast as they could ship it. Then the maltsters and feedlots would have to bid to get it. Would jump 75 cents over night

          Comment


            #6
            Well then why is it that when I had barley to sell the feedmills and feedlots told us that they priced their barley purchases with the price of corn? Thousands of bushels were coming into Alberta from points elsewhere because it was less expensive in comparision to the barley.

            Smoke and mirrors...... but the PRO prices for feed would have to be competitive in the export markets like Saudi, and lord knows where else that CWB is suppose to export to.

            This isn't suppose to be an argument, just a question?

            Comment


              #7
              Why won't feed barley move into the US? In days of $5.50 plus /bu corn futures, I
              suspect there may be opportunities to move feed barley into the California dairy
              industry.

              [URL="http://www.ams.usda.gov/mnreports/lswcagrain.pdf"]calif. feed barley[/URL]

              Perhaps my question back at you is what value the CWB brings domestic feed barley
              pricing? Corn moves north based on competitive feed pricing and yet western Canadian
              farmers can't make decisions/ship feed barley to the US/other markets based on the
              same signals in times when US feed prices are expensive/Canada is cheap.

              Comment


                #8
                I think the answer to your question is corn’s been cheap. Same with DDG’s. The PRO was meaningless as it often is. But now things have changed. Corn/DDGs have moved higher making barley more attractive to the mills. They’ll bid for barley only as much as they need to (at this point the PRO will be looked at as a guide). True export values aren’t finding their way to the prairies so they’re not a factor. vvalk is right – barley producers are captive.

                Charlie makes a good point - with current prices, barley should move south. I'll add this - if price signals were completely transparent and efficient, export values would have pulled local barley prices higher, attracting barley from the US to Canada. This would support both feed and malt barley prices in the US, which in turn would support Canadian malt prices (because our maltsters compete in the US). It would all be good.

                Doesn't the CWB say it doesn't distort markets? I think a case could be made that right now, its not only distorting Canadian markets, its distorting the US barley market.

                Comment


                  #9
                  Reading over De Pape's stuff, I caught this nugget:

                  "The CWB says they work for 75,000 Western Canadian farmers. But when it comes to barley, I figure with less than 2,000 farmers using the feed pool and 10,000 selling malt barley, more than 87% of the producers out there are not participating in the CWB’s activities in barley. (The CWB’s cash trading in feed barley doesn’t count; it’s a drag on domestic prices, hurting all barley producers, whether they sell to the CWB or not.)

                  Last June, the CWB surveyed 900 Western Canadian producers. In that survey, 48% said they “prefer” “solely the CWB” to be in barley marketing. But if 87% of producers aren’t even using the CWB for barley marketing, that leaves 13% that do. And we know that many producers that sell barley to the CWB would prefer not to.

                  It seems that instead of 48%, less than 13% of Western Canadian producers prefer the CWB in barley (demonstrated by actual deliveries).

                  So instead of survey results that show the CWB has 48% support in barley, I prefer to look at the estimated 13% of Western Canadian producers that market barley through the CWB as an indication of CWB support in barley. The other 87% either don’t grow barley or don’t find what the CWB has to offer as beneficial or attractive."

                  Comment

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