Fusarium

[rain]

My thoughts on basis and puts(?) is I am the only one who thinks barley acres will be down this year, based on the seeding survey I did in Feb. Pre crop insurance, pre possible fusarium legislattion, pre moisture South Central AB. Next week it will be interesting to see what Stats can has to say.

[rain]

This may be a dumb question - but does a province have legal trade authority to impose a phytosanitary restriction on interprovincial or international trade ? Wouldn't the Feds have to get involved if we were to enact a zero tolerance on fusarium coming into the province - either from other provinces or from the US ? And finally, would a zero fusarium level on feed imports help Alberta feed demand or hurt it ?

[TOM4CWB]

bep

Alberta has the right to control disease and pests within our borders, there is a question to how bad corn fusarium infection spread is because corn has been imported for half a century.

If Alberta were to restrict imports, then a large home grown market would be available for Alberta grown feed wheat and barley instead of imports from Sask and Manitoba.

Feeders in Alberta can pay a premium, however they must have the ability to buy competitively or a bankrupt feeding industry will result!

Then we won't have a feed market.

It will be interesting to see how the AB Ag dept implements this!

[TOM4CWB]

Charlie,

I don't get the market response on the feed barley Lethbridge contract falling $6.00/t on fusarium restricted movement from Sask and Manitoba.

Shouldn't feed barley prices rise if there is going to be less supply into this Lethbridge futures contract next fall???

[rain]

Tom I don't think any thing has been announced yet has it? This fusarium legilstation change is not very well known yet. 2 out of 3 feedmills in Calgary new nothing about it.

I think barley futures crashed on the stats can forecast for 8% increase in barley acres.

[charliep]

Tom4cwb

I agree with Rain. There have been lots of other things in the market other than just the fusarium issue (eg. slack demand as feedlots don't bother to replace animals, lots of panicky barley producers who by passed good prices this winter only to watch prices headed down, feedlots who have booked US corn into the summer, expectations for larger barley acres, better moisture/a potentially later spring, a major drop in new crop CWB pool return outlooks for both malt and feed, etc. etc. etc. - lots indications that are not optismistic for barley).

It will have impact on western barley futures longer term. I won't get into the details of the new other than highlighting testing/certification will be at the seed level.

An example I think of in thinking of this is to compare it to AIDS. You have people who don't have any expression of the disease but are still carriers (not a topic for a Sunday afternoon but why you tell your teenage kids to use condoms). The testing of grain will be at this level. You have people who get very sick from the AIDS because of immune deficiency syndome - they become very sick because their bodies are not able to handle other diseases. The fusarium equivalent is fusarium head blight and high levels of vomotoxin (not healthy for humans or hogs at low levels/cattle at higher levels).

What impact on futures? Presence of the disease is not in the current contracts specifications. The implication is that grain could be delivered on the contract from outside Alberta which is acceptable to the contract but couldn't be brought into Alberta. My thoughts are that this will likely push futures prices lower (make sure delivery isn't an alternative). Basis is the wild card I don't have a handle on. Alberta basis will likely narrow/go to a premium to futures with Lethbridge plus premium for zero fusarium a reality.

Others thoughts.

[charliep]

Ianben

I don't know if you are tuned into this thread but I am interest in how farmers in the UK handle this disease?

Charlie

[rain]

Charlie let me get this straight. You think barley futures will get pushed down because of the threat of delivery of contaminated grain, even though delivery can not be made becasue of contamination?

[charliep]

Rain

Yes - keeping in mind one is delivery on a futures contract (having someone staying short into a futures month and delivering against the contract) and the other is the ability to physically move this grain into Alta (cash market). Your thoughts.

This is only one of the factors (maybe a minor one) for the most recent drop in prices.

[rain]

OK I assume you are looking at it that the short does not have to worry about anyone taking delivery because no one wants to take the contract because it is contaminated.
But who would buy the contract for the short to get out of his postition?.