CWB gong award for feed barley PPO

[TOM4CWB]

The Producer Payment Option for feed barley gets the GONG THUMBS DOWN AWARD!!!

AT $130.25 PORT POSITION, TAKING OFF:

$5/T TO 48LB/BU
$5.37/T CLEANING
$11.50/T ELEVATION
$24.00/T MULTI CAR LOAD FREIGHT FROM LAMONT AB TO VANCOUVER.

WE END UP WITH THE MOST OPTIMISTIC BASIS IF FREIGHT DOSN'T RISE OF $45/T.

THIS LEAVES A WOPPING $85/T FOR 48LB FEED BARLEY, ON $1.85/BU

A TERRIBLE BASIS TO THE FEED MARKET, OFF THE COMBINE, IS $2.15/BU. FOR 48LB BARLEY!

THIS SHOULD REALLY TANK CANOLA AND FEED BARLEY PRICES, OR DOES THE CWB EVEN MATTER?

WHEN SHOULD WE HAVE A VOTE ON REMOVING BARLEY FROM THE CWB?

[charliep]

Any other thoughts on the feed barley program?

The announcement on the barley fixed price contract didn't impact the market with reasonably good soil moisture and weather conditions in most of the northern hemisphere plus concerns about the demand side of the feed grains and proteings the major focus.

The reason for the wider adminsistration, time value and risk discount on the feed barley is the last cost - risk. MGE wheat futures give the CWB a reasonably effective hedging alternative to ensure the overall pool isn't affected by the Producer pricing options (volumes at Minneapolis aren't great but enough to run a hedging program with maybe use of the other two US wheat futures when warranted). The argument likely is that western barley futures doesn't provide the same alternative (volumes not as big so a major hedging program by the CWB would overwelm the market.

Other thoughts.

[TOM4CWB]

Charlie,

Please explain why the CWB could not run quarterly pools?

I believe that Vancouver Port in store prices are around $165.00/t, with the same 45/t basis we should be able to net back $120/t or 2.50/bu. Yet the PRO is $97.00/t with the 45/t basis removed to get barley to Vancouver.

We are missing $23.00/t today!

Why is the CWB marketing barley if all they do is reck the market and distort everything?

[charliep]

I should leave the question for Tom Halpenny but will give my two bits.

Some interesting numbers from this last year about how barley is allocated in Canada. Domestic feed barley - 75 % of this year's disappearance, malt barley (domestice and export) - 18 %, seed - about 3-4%, export feed barley about 3-4 %.

I'll throw questions back to the discussion group.

1) Should feed barley for export be exclusively through the CWB? Why?

2) Should the CWB be a full participant in the domestic/cash market (be able to offer daily cash prices to attact deliveries/sell to the domestic market if worthwhile)? Should they be a port buyer only (i.e. Vancouver/tender for supplies)?

3) Should the CWB be able to go with shorter pooling periods on feed barley - could be quarterly but also set up around their contracts)? The discussion around wheat would highlight the seasonally of exports through the east coast (seaway froze Dec. to Mar.) but barley is almost exclusively west coast movement.

Thoughts?

[TOM4CWB]

Charlie,

I believe the Western Grain Marketing Panel Report had it right.

The sensible approach would be for the CWB to be in the barley market on behalf of those farmers who want to sell through the CWB.

This would not stop the CWB from being in the domestic market, if another option outside the CWB for exports is avaliable, and the CWB does not spend contiengency fund money on distorting the market.

With great power comes great error, and this is exactly the problem we have today, great error in feed barley.

A 14 million tonne barley market that is distorted is a huge problem for western Canada. Something must be done, as it should have been done 5 years ago!

[cowman]

It has always amazed me why anyone sells into the export feed market. Now I will admit I have nothing to do with selling grain, but it seems to me when it costs over one third of the price of any commodity, to get it to market is ridiculous. Strike up a deal with a local hog farmer or feedlot. I bought some local barley in Jan. for 2.60/bu. Why bother with a bunch of government BS? Do you like making CPR rich or keeping all the bums working for the CWB ?

[TOM4CWB]

Cowman,

If you paid $2.60 in January, then you must farm somewhere in southern Alberta.

If a barley producer lives in the Peace River, or northwestern Sask. they are really being held at ransom by this monopoly, for your benefit!

This captive supply is held inside western Canada, and allows you to cherry pick the best barley, without having to compete with the rest of the world for the best feedstock on the planet to feed feeder cattle!

It is good that you can make a living doing this, but shouldn't grain farmers be able to make a reaonable living too?

Wouldn't it be fair if barley was priced commpetitively, and then you could access supplies from contracted CWB feed barley as well?

Why shouldn't the domestic feed barley supply be allowed to have a CWB pooled marketing component as well, for those producers who would like to sell pooled domestic feed barley?

[cowman]

Tom,
I do live in southern Alberta and that was the going rate around here. I believe the price paid in places like the Peace, Sask. etc. only reflects the cost of freight to Lethbridge, which is where the market is. It's a pretty simple example of supply and demand. I don't see how I'm holding anyone "ransom" as I'm obviously paying more than the CWB. Like I don't get it? Do you want everyone else to pay your freight because you choose to live far away from the market? I'm not trying to be ignorant here I just don't understand.

[charliep]

Cowman;

I remember how a real estate person defined price for me the last house I sold. Given the best information available, price is the value a willing buyer and seller agree to before saying sold. We have a very active cash feed barley market in western Canada that I would suggest that does a good job of establishing fair prices for both buyers and sellers.

Recognizing the portion of prairie feed barley used domestecally is 75 % and growing, the issue is getting better price signals/some level of arbitrage from export feed barley markets that would enhance this price discovery process. This would give feed barley producers another market for their crop. This is particularly critical for farm managers that don't have an active livestock feed market close by and are a long distance from the traditional feed market (S.AB).

As a barley user, how would you react to daily cash bids from the export feed barley market versus the current CWB pooling system?

[TOM4CWB]

Cowman,

Hope I can help with the freight issue.

Lethbridge and Grande Praire and Lamont all have about the same freight cost to west coast terminal position.

A few weeks back I checked with Charlie, and Vancouver selling price was $165.00/t

This means that if the Lethbridge feed barley price is $2.60, an export competitive price, it also must be $2.60 in Camrose, Lamont, Barhead, and Grande Prairie.

But it isn't that is the problem.

Time after time northern Alberta barley producers have the grid cost to transport feed barley to Lethbridge subtracted from the price they receive because the CWB price pooling system prevents sales at market value into the international markets.

Why doesn't the CWB allow grain companies the right to cash buy feed barley if I am wrong?

The Western Grain Marketing Panel proved that the CWB cannot extract a premium when marketing feed barley!

Are you really against Northern Alberta farmers recieving a fair price for their barley, because then you know you will have to pay more to get it into your feed lot?

What will you do when we become feed deficient and you have to pay an extra $45.00/t to import the feedstocks you need into southern Alberta?

[cowman]

Tom
The information on the freight was helpful. I will be the first to admit I don't know much about how the CWB operates. I do not own a feedlot, just background some of the calves from my cow calf operation. I only feed barley if it works out on paper so if it was much higher I'd be feeding something else. I quit growing any grain twelve years ago as there was no money in it.

[TOM4CWB]

cowman,

I appreciate your position, and you are right, many people do not understand the market who should.

I only hope when we do allow marketing freedom that adjustments can be made so cattle and hog producers can still make money.

I did a study with the Alberta Pulse Growers 5 years ago, and by substituting canola meal, peas, and forages we can move to a much more efficient feeding system, which will not cost feeders that much more per pound of gain.

I hope that we can allow the market to dictate economics and what we grow, rather than Government regulations.

THis way our Alberta Ag economy can grow and prosper, without the fear that a change in government regulations tomorrow will put a neighbour out of business.

If I live in fear, I will not invest and develop the same, as if I am living with the confidence that governments will facilitate and encourage efficient and good management decisions.