I think we need some answers to the following:
1. The recent CWB release states: "Deliveries to the feed barley pool in 2001-02 are estimated to be 56 000 tonnes, down from a four-year average of 416 000 tonnes. Given this situation, the board decided to assign enough interest earnings to the feed barley pool to maintain the return at approximately $180 per tonne."
"This value places producers who farm in areas where the CWB traditionally draws much of the feed barley it sells on a relatively equal footing with farmers who sold barley on the open domestic market," said Ritter. "The value is consistent with the price signal farmers were given earlier in the year and also ensures the feed and malting barley markets are not distorted."
Let's follow this through a little:
Take the CWB PRO for feed barley of $180 and take away the $45 interest kiss and you get $135. This means that the average selling price was $135 at Vancouver. Deduct roughly $40 from the actual selling price gets you the net CWB return from actual sales for Alberta of about $95; net return for Sask farmers would be closer to $85.
According to Winnipeg Commodity Exchange data, since June 1, 2001 the lowest CASH price for feed barley in Southern Alberta was $142. Figure that makes most of Saskatchewan at about $117 (using $25 truck freight). Not sure what this means for the Peace River region.
From this, it appears that the CWB sold into the export market, feed barley at roughly $47 (142-95) below the lowest Alberta cash price and roughly $32 (117-85) below the lowest Saskatchewan cash price for the year. Remember, this is comparing the CWB selling to the LOWEST domestic cash price reported for the period; if you compared it to the AVERAGE cash price for the year, it would look even worse.
In the CWB release, Ken Ritter is quoted as saying that the amount of interest they decided to place in the pool "places producers who farm in areas where the CWB traditionally draws much of the feed barley it sells on a relatively equal footing with farmers who sold barley on the open domestic market". From this I would say that they believe that those that sell export should get about the same as those that don't.
Here’s the question: What was the CWB's strategy when they were selling export cash barley at $40 (and worse) below domestic prices? If it is important to equalize export returns to domestic returns, shouldn't they have been thinking in those terms when they made the export sales in the first place?
The problem is that either (1) they weren't thinking in those terms, (2) they didn’t understand the market they were in or (3), they were counting on the interest revenue to boost the pool returns as it did.
2. The average export sale value of $135 (PRO minus the interest) is $11 BELOW the lowest PRO throughout the whole year. This makes the AVERAGE sale ($135) worse than the “market signals” the CWB was providing the market since Feb 26, 2001.
This suggests either (1) the CWB didn't know it’s market or (2) it knew it had the interest cushion.
3. The 2001/02 feed barley PRO started at $146 in Feb and worked its way up to $180 by Oct 25. It stayed at $180 till the end of the year - except on May 23rd when the PRO was dropped to $177 before going back up to $180 in July.
Surely they knew in May that they weren’t going sell more barley (which would make the pool larger, diluting the interest which would drop the PRO). What were they doing dropping the PRO in May?
4. On July 17th a special PRO announcement took the PRO up $11 per tonne. The CWB said: "Since the June PRO, the projected western Canadian barley crop has shrunk from 13 million tonnes to about 11.2 million tonnes. The reduced production is forecasted to result in a substantially lower amount of barley available for export exclusively to the highest return customers. The PRO has also been supported by strong, stable world demand and tightening European Union stocks."
Does the CWB really want us to believe that this feed barley pool consists of sales to “premium customers”? At those prices?! The CWB's premium customers paid less than the domestic market in Sask.
The evidence is starting to point toward the fact that the CWB knew that their export sales program was going to be tiny and that they knew the interest revenue relative to the pool size was an issue even last July.
5. Sept 17 - Another special increase to the PRO - up $10 to $175. The CWB states "Since the August PRO, tight stocks of North American barley, combined with a somewhat smaller U.S. corn crop have increased pressure on feed grain supply. The CWB will continue to focus feed barley marketing efforts on our premium customers."
What they should be saying is "Small pool = high prices". They must have known that they weren't making any more sales. Why would the PRO have increased?
6. Sept 27 - PRO goes to $178. CWB says "Feed barley values rose this month with barley markets expected to firm. European Union (EU) barley prices have been pressured by inexpensive barley at Black Sea ports, however supply from this region is expected to be short lived. In addition, small U.S. and Canadian barley crops, and limited Canadian export availability will help to support North American export values."
So, inexpensive Black Sea barley is pressuring export values, (in a market that the CWB cannot compete) but the PRO goes up! This sure suggests that as early as Sept of last year the CWB knew they would not make any more feed barley sales. But they had yet to sell anything close to the $178 PRO announced that day!
Conclusion: The only reason the CWB pushed the PRO from say, $149 (June 28, 2001) to $180 was because of the interest on a smaller pool - and not because of rising export barley prices!
1. The recent CWB release states: "Deliveries to the feed barley pool in 2001-02 are estimated to be 56 000 tonnes, down from a four-year average of 416 000 tonnes. Given this situation, the board decided to assign enough interest earnings to the feed barley pool to maintain the return at approximately $180 per tonne."
"This value places producers who farm in areas where the CWB traditionally draws much of the feed barley it sells on a relatively equal footing with farmers who sold barley on the open domestic market," said Ritter. "The value is consistent with the price signal farmers were given earlier in the year and also ensures the feed and malting barley markets are not distorted."
Let's follow this through a little:
Take the CWB PRO for feed barley of $180 and take away the $45 interest kiss and you get $135. This means that the average selling price was $135 at Vancouver. Deduct roughly $40 from the actual selling price gets you the net CWB return from actual sales for Alberta of about $95; net return for Sask farmers would be closer to $85.
According to Winnipeg Commodity Exchange data, since June 1, 2001 the lowest CASH price for feed barley in Southern Alberta was $142. Figure that makes most of Saskatchewan at about $117 (using $25 truck freight). Not sure what this means for the Peace River region.
From this, it appears that the CWB sold into the export market, feed barley at roughly $47 (142-95) below the lowest Alberta cash price and roughly $32 (117-85) below the lowest Saskatchewan cash price for the year. Remember, this is comparing the CWB selling to the LOWEST domestic cash price reported for the period; if you compared it to the AVERAGE cash price for the year, it would look even worse.
In the CWB release, Ken Ritter is quoted as saying that the amount of interest they decided to place in the pool "places producers who farm in areas where the CWB traditionally draws much of the feed barley it sells on a relatively equal footing with farmers who sold barley on the open domestic market". From this I would say that they believe that those that sell export should get about the same as those that don't.
Here’s the question: What was the CWB's strategy when they were selling export cash barley at $40 (and worse) below domestic prices? If it is important to equalize export returns to domestic returns, shouldn't they have been thinking in those terms when they made the export sales in the first place?
The problem is that either (1) they weren't thinking in those terms, (2) they didn’t understand the market they were in or (3), they were counting on the interest revenue to boost the pool returns as it did.
2. The average export sale value of $135 (PRO minus the interest) is $11 BELOW the lowest PRO throughout the whole year. This makes the AVERAGE sale ($135) worse than the “market signals” the CWB was providing the market since Feb 26, 2001.
This suggests either (1) the CWB didn't know it’s market or (2) it knew it had the interest cushion.
3. The 2001/02 feed barley PRO started at $146 in Feb and worked its way up to $180 by Oct 25. It stayed at $180 till the end of the year - except on May 23rd when the PRO was dropped to $177 before going back up to $180 in July.
Surely they knew in May that they weren’t going sell more barley (which would make the pool larger, diluting the interest which would drop the PRO). What were they doing dropping the PRO in May?
4. On July 17th a special PRO announcement took the PRO up $11 per tonne. The CWB said: "Since the June PRO, the projected western Canadian barley crop has shrunk from 13 million tonnes to about 11.2 million tonnes. The reduced production is forecasted to result in a substantially lower amount of barley available for export exclusively to the highest return customers. The PRO has also been supported by strong, stable world demand and tightening European Union stocks."
Does the CWB really want us to believe that this feed barley pool consists of sales to “premium customers”? At those prices?! The CWB's premium customers paid less than the domestic market in Sask.
The evidence is starting to point toward the fact that the CWB knew that their export sales program was going to be tiny and that they knew the interest revenue relative to the pool size was an issue even last July.
5. Sept 17 - Another special increase to the PRO - up $10 to $175. The CWB states "Since the August PRO, tight stocks of North American barley, combined with a somewhat smaller U.S. corn crop have increased pressure on feed grain supply. The CWB will continue to focus feed barley marketing efforts on our premium customers."
What they should be saying is "Small pool = high prices". They must have known that they weren't making any more sales. Why would the PRO have increased?
6. Sept 27 - PRO goes to $178. CWB says "Feed barley values rose this month with barley markets expected to firm. European Union (EU) barley prices have been pressured by inexpensive barley at Black Sea ports, however supply from this region is expected to be short lived. In addition, small U.S. and Canadian barley crops, and limited Canadian export availability will help to support North American export values."
So, inexpensive Black Sea barley is pressuring export values, (in a market that the CWB cannot compete) but the PRO goes up! This sure suggests that as early as Sept of last year the CWB knew they would not make any more feed barley sales. But they had yet to sell anything close to the $178 PRO announced that day!
Conclusion: The only reason the CWB pushed the PRO from say, $149 (June 28, 2001) to $180 was because of the interest on a smaller pool - and not because of rising export barley prices!
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