Comments in Old Crop Barley PRO Commentary

[TOM4CWB]

Cowman,

The Canadian Government feels it needs control on grain, because politically food is the most powerful tool for a government to use...

Just look at CWB PRO's for feed and malt barley, they are below the domestic barley market price... and the CWB keeps it this way so livestock producers have feed...

It is interesting to hear the inside comments from the feedlot industry in southern Alberta... they know the CWB is there biggest friend on procuring feed grains the exist...

I see the CWB lowering the new crop PRO CWRS by over 20/t to make CWRS go to the feed market over the last two months.

This has been obvious through the PPO contracts, every time the CWB takes more basis, it is obvious the PRO is undervalued even more...

THIS allows all the lower grades of CWRS to go into the domestic market, as we know from the past that 3CWRS is directly competitive with Hard Red Winter Wheat, now it appears that CPS red is worth more than CWRS of better milling quality...

The pools and the CWB are strictly in place to control inventories, when the government of Canada requests grain be held back... what is the mechanism???

The initial prices are not set by the CWB, they are set by the AG Dept, and the PM and Cabinet of Canada...

And the Minister of Finance approves the CWB's business plan, without his approval on what the CWB does, nothing happens at the CWB...

Now if this is western Canadian Farmers controling their destiny and marketing their own grain...

And then the CWB spends millions more on top to "educate" us foolish farmers that WE ARE IN CONTROL OF THE CWB???

How stupid do they think we are???

Please don't answer that question... cause at every CWB election in the past... we have done an excelent job of proving them right...

But there is more... and the main reason I continue the fight for honesty at the CWB...

Farmers are inherently trusting people, and they want to believe what they are being fed... from their own government and elected farmer reps.

And when 1 of the farmer reps has a conceince, and won't be bought off with big money, they try to get rid of him in any way possible.

And yes any payment over the 20thousand base the directors get, is just payoff money, except in the case of Chatenay, who is being paid for the cruel and unusual punishment he and his family are being subjected to...

Only in Canada you say...

[TOM4CWB]

Charlie,

I don't get how the CWB could possibly only get 2.00/bu from the market...

If the CWB wanted to maximise our pool returns, they could have shipped all the barley to southern Alberta, at $10-15/t less frieght, and a dollar a bushel more from the market...

Then 56,000t less corn would have come into Canada from the US, and the 2001/02 pooling account would have paid out 230/t instead of 180/t.

Now with what the CWB has actually done, how can anyone suggest that the CWB is extracting a premium with the single desk, when they are giving our grain away at 30% below fair market value?

If the CWB does this with barley, and thinks what they are doing just fine, exactly what are they doing with the rest of the grain they sell on our behalf???

[cowman]

I sort of lost you on how the CWB keeps the price low for barley. The fact is feedlot alley is about the highest market around. If real international prices are $2/bu. and through smoke and mirrors they jump the price up to $3 how is that keeping the price down? The fact is that 56,000t should be going into the highest market available-feedlot alley.
The export market for feed barley is sort of a farce. It has more to do with protecting jobs, prestige and ideology than the real economic world. Basically the whole thing rests on government credit. Consider this if the government sold all the feed barley to the feeders on long term credit just think of high it could go! Especially if the feeder didn't have to always pay it back! Why we could have $6 feed barley real quick! If the government can do this for Poland or Russia or whoever why not our poor old feeders in feedlot alley? We just might see the grain farmer make a big comeback?

[charliep]

Cowman

A couple of thoughts.

1) Timing of sales can have a big impact on the CWB pools. This relates to the price signals the CWB gives and when farmers are willing to contract. Last year, I would suspect all the CWB feed barley was contracted under the early pricing option last Sept. Sales were made in the fall.

2) International barley prices have been lack lustre at best. Eastern Europe and former Soviet Union crops were good/sold at cheap prices to the middle east (Saudi Arabia is the biggest feed barley market). Europe had a good crop as well. Australia is currently providing most of the supplies for the Japanese market. Our domestic market was short 1.5 MMT plus of feed grains last (thus the corn imports).

3) Tradition drives a lot of customers. When you force them to try something else either because of lack of supplies, poor quality or price, quite often they don't come back. A case in point is the California dairy market where they had a preference for a long period of time for barley (fibre/higher butter fat). A whole bunch of factors pushed them to corn and guess what - they now feed corn. The same thing is happening to other traditional international barley customers.

4) Just a reminder the sales for this occurred in seventies and early eighties. Lots of barley grown in western Canada and a smaller livestock industry. We gave away feed barley on credit and to add insult to injury, we threw in a transportation subsidy (method of payment).

[TOM4CWB]

Charlie,

Just like Cowman said, and I will say it again;

"If the CWB wanted to maximise our pool returns, they could have shipped all the barley to southern Alberta, at $10-15/t less frieght, and a dollar a bushel more from the market...

Then 56,000t less corn would have come into Canada from the US...

Since there is absolutely nothing in the CWB Act that prevents domestic feed barley sales, why, especially when the CWB knows volumes are small in their handle on feed barley, do they not sell into southern Alberta?

Further, did the barley pool get so bad, not because the price recieved by the CWB was so low, but rather because the CWB was paying out $25/t from the pooling account into CWB buy-backs, which would deplete the pool...

Is there any numbers on how much barley was shipped into the US through the buy-back system???

I know California dairy farmers would still love to buy our feed barley, if we would give an assurance that we would supply consistant quanity and quality product.

The CWB really messed up this market when they sold barley to them, and then bought it back rather than deliver...

The California market is still completely viable for barley exports, if a person would make a commitment to service that market fairly...

Does the CWB and Canadian gov. have an agreement with the US government to wreck our barley market and production... so we need to import corn???

How can what is happening continue, when it is so obvious this is a foolish unbelievably insane way to market grain?

[charliep]

Too many questions. Perhaps we can both agree the barley is best served by a fluid market that is based on price signals (they who pay best get) and an effective hedging tool.

[AdamSmith]

Let's talk about solutions boys.

We can all wail and stew over what has been done and it's valuable information as far as understanding the problem but...

Farmers need solutions, real meaningful long term solutions.

The CWB today can’t even be considered a serious choice as a marketing option for barley due to their inept recent past performance.

I support choice, providing that the options available are of value and the CWB as a barley marketer is of no value to anyone at all, and they have no one to blame but themselves. It’s too bad the CWB doesn’t understand that they’ve lost barley already and that they don’t have the ethical makeup to let it go so we as farmers can salvage what demand still may exist in the off-shore market place.

Let me say this as clear I possibly can, Barley must be removed from CWB jurisdiction with no regard for a dual market at all.

To carry on otherwise is not dealing with reality.

On the other hand with wheat we still have a chance to make a voluntary system work because the CWB can still be considered a meaningful option for those who make that free choice.

[charliep]

A question to chaffmeister or tom4cwb.

What happens if as a part of international agreements Canada decides to write some of this debt off?

I realize that the government guarantees this debt but I didn't realize it is still on the CWB books.

[TOM4CWB]

Charlie,

If the debt was written off, the CWB would simply lose most of the approx. 75mil/year churning income from these debts.

The CWB directors have been worried about this happening since they took office.

Really, any advantage the CWB has today in cost savings is from this churning income.

I agree AdamSmith on the CWB and barley, the CWB must get out of distorting this market place.

And to prevent CWB distortions may well mean that the only viable solution is to, get out of the market totally.

The CWB track history on barley is so bad that there destabilising effect and historical practices mean that almost no-one trusts them at all any more...


When do we have our vote on removing barley from the CWB?

[parsley]

Charliep,

The Canadian Government can go to the money markets and borrow again, but this option is hobbled by bullish interest rates, so this option is not a particularly appetizing one.

Would the "CWB-Government" (they are one and the same) offer the defaulting countries a contract revision with a deal that cannot be turned down, plus a request that some sort of minimum payment be made, with the defaulting countries unable to resist? This seems to be the template they have used for years.

A couple of boatloads of really cheaply-bought wheat to the debtor countries and a token debt-servicing payment made by them to the Canadian Government will:
1 Save borrowing on the money markets

2. Provide Canadians with a kinder, more giving profile, so we feel fuzzy all over (popular during political campaigns).

3. Wrack up a huge nation to nation credit sheet by buying wheat cheap as a Government and "donating" it at an inflated value

4. Provide more of an international profile. Think of the headlines. "Canada forgives 30M debt of Gorzoblodina" Living up to our give-away obligations. Easy to do when farmers roll over for $3.00/bu, with that wheat evaluated at $12.00/bu. on the foreign balance sheet.

Hope you don't mind me commenting, charliep.
Parsley

[AdamSmith]

TOM4CWB,

Here’s the part of the amended version of the CWB Act which deals with barley

PART V

OTHER GRAINS

Application of Parts III and IV

Extension of Parts III and IV to barley

47. (1) The Governor in Council may, by regulation, on the recommendation of the Minister, extend the application of Part III or of Part IV or of both Parts III and IV to barley.

Modifications

(2) Where the Governor in Council has extended the application of any Part under subsection (1), the provisions of that Part shall be deemed to be re-enacted in this Part, subject to the following:

(a) the word “barley” shall be substituted for the word “wheat”

(b) the expression “barley products” shall be substituted for the expression “wheat products”; and

(c) subsection 40(2) is not applicable.

When extension to come into force

(3) An extension of the application of Part III shall come into force only at the beginning of a crop year.

Definition

(4) For the purpose of this section, “product”, in relation to barley, means any substance produced by processing or manufacturing barley, alone or together with any other material or substance, designated by the Governor in Council by regulation as a product of barley for the purpose of this Part.

HERE’S THE GOOD PART, READ IT VERY CAREFULLY

Restriction

(5) The Minister shall not make a recommendation referred to in subsection (1) unless

(a) The Minister has consulted with the board about the extension; and

(b) the producers of barley have voted in favour of the extension, the voting process having been determined by the Minister


THIS PART TALKS ABOUT EXTENSION AND IS PART OF THE 1998 AMENDMENTS (BILL C-4)

NOW I DON’T KNOW ABOUT YOU GUYS BUT I DON’T REMEMBER VOTING ON EXTENDING BARLEY TO CWB JURISDICTION?

THEY TOOK BARLEY OUT IN 1998 AND DIDN’T REALIZE IT BEFORE IT WAS TOO LATE. SO THIS PART OF THE CWB ACT HAS NEVER COME INTO FORCE. WE’RE STILL OPERATING UNDER THE SAME RULES THAT ALLOWED CHARLIE MAYER TO PULL OATS OUT.

DO YOU THINK GOODALE WILL BE LIKE CHARLIE AND JUST TAKE IT AWAY FROM THEM?

IF GOODALE OR THE CWB SAY WE NEED A VOTE FOR BARLEY THEY’RE BEING DISHONEST,

[TOM4CWB]

AdamSmith,

If I recall, didn't we have a vote in 1997?

I know this section of the CWB Act has been looked at and interpreted many different ways, maybe a letter to Minister Goodale by one of the Barley growers groups might clarify exactly what he wants from us?

[chaffmeister]

To answer charliep's question: What happens if as a part of international agreements Canada decides to write some of this debt off?

To add to Tom's answer, it's my guess that the CWB would need to operate without the cushion of the $75 million in interest revenue. A few things come to mind:

1. The CWB wouldn't be able to play games in the barley pool anymore.
2. Wouldn't be able to play games in any of the other pools. (Hey, there's nothing saying that they haven't - if they're going to monkey around with one, who's to say they haven't monkeyed around with the others.)
3. Without the interest revenue, the CWB no longer would be able to do anything in the feed barley market. Period.
4. The CWB can't brag about earning more interest than the admin costs of the CWB anymore.


Here's another though about this year's 56,000 tonnes of feed barley sales. I don't have the greatest recall but it seems to me that the CWB was quite proud of a new LTA with Japan - which included barley. Could it be that this 56,000 tonnes went to Japan, a noted "premium" buyer of Canadian grains?

[TOM4CWB]

Chaffmeister,

This is why I asked the question about the buy back volume to the USA.

I checked many times during the past year, and most of the time the buy-back was 155-160/t. If the pool pays 180, then significant money would have drained out as subsidies on sales of barley to the US through the buy-back process...

I know the Organic people were VERY happy with doing buy-backs on barley this year...

[cowman]

Corn is coming in big time even as far north as Red Deer Alberta(probably even further north...). Now what happens when these feeders realize corn works better than barley? Cheap subsidized corn! Several years back I got a load of someones bull ration from my local feed company,by mistake. It was one third corn. I have never seen steers do so well! Will our feeders find that corn really works for them and cut barley out of their rations?
Last year when the corn came in some did not feed it. Western feedlots stayed with barley and paid about the highest price around. Why? Because their major end customer(a large restaurant chain in California) told them they wanted barley fed beef and if they fed corn they would just buy American beef.
When they scrapped the Crow, barley really became non-viable for the international(overseas) trade. It makes little sense to spend half of what barley is worth just to get it to port(which was how it was when prices were lower).That and European export subsidies. Why do you think we had such a massive buildup in the cattle numbers? I would suggest we needed a local market to consume the barley? Also barley producers bailed out and went for cows instead.
When I was a kid barley was basically THE crop north of Red Deer Alberta. Quite frankly our climate and soil favor barley production more than anything else. I would suspect about half our barley acres go into the silage pit in a good year! The end of the CROW changed our whole agricultural picture and has a lot to do with the mess we are in today.