Changes in CWB Feed Barley Pool

[charliep]

Just a note to highlight the changes to the way the CWB will be handling barley.

"The CWB will split the crop year into two pooling periods instead of having one for the entire crop year. Effective immediately, the CWB will source barley from farmers through guaranteed delivery contracts (GDCs) instead of Series A, B and C delivery contracts.
"The board approved these changes so that the CWB can better capitalize on sales opportunities when market factors are positive," said Ken Ritter, chair of the farmer-controlled board of directors. "This will also help the CWB send a more accurate price signal through the pool return outlook to farmers."
The first feed barley pool will run until January 31, 2005. The second pool will run from February 1 to July 31, 2005 and a PRO for this pool will be issued a few months prior to the start date. In order to protect the returns of farmers in the pool, the CWB may limit deliveries through the GDCs. At such times, the CWB may move to cash buying, if required, to meet emerging market opportunities."

Thoughts?

[TOM4CWB]

Charlie;

What I do not understand is why the CWB did not go directly to a cash pricing system, with the pool an option signed into... which would be a simple average weighted for volume... of the daily sales by the CWB for the pool period picked by the farmer.

Why base prices on the pool at all, when we know this system distorts prices and does not allow the CWB to give relevant accurate international price signals the farmers?

[charliep]

No comments on this post except you Tom4cwb. This is the most significant change in CWB policy that I have seen in 20 years.

1) Since there are two pooling periods, the PRO now reflects sales during the first 6 months of the crop year. There will be another PRO for the last half of the crop year.

2) It is interesting to note the impact on the fixed price contracts and early payment options. Separating the pool into two half years and going to a guaranteed delivery situation should lower risk/result in lower premiums. On the FPC side, feed barley prices have dropped from $120 ish/tonne last week to $116/tonne this one. The premiums on the early pricing options are humungus - (100 % - $17.25/tonne, 90 % - $7.75/tonne, 80 % - $1.50/tonne). Any reduction in risk is not being reflected in these numbers.

3)Does the feed barley PRO have any relevance to anything now? Why not just go to a cash price that is posted daily and provide the alternative of a pooled price?

[charliep]

Just a note on current barley prices. Portland prices (not much volume) are around US $100 to $105/tonne. That is about Cdn $135/tonne (Japanese business). Depending on how you calculate costs, results in a price of $80 to $85/tonne - Alberta. Saudi business would be way less than both these numbers.