BennyHin -- above you say "It should be noted, that even Blair Rutter, Policy Manager with the WCWGA agreed in this edition of the Manitoba Co-operator that the price premium for malting barley over feed will erode in the open market environment."
I'm afraid you've taken my comments out of context. The clip from the Co-operator reads as follows: "Rutter expects the premium for malting barley will narrow relative to feed, but more barley will be sold for malting than now. Therefore farmers will be better off.
I stand by my comment, although I should have said that I expect the "price spread" on barley sold through the CWB to narrow. In the past 10 years, the CWB's final price for 2 row Special Select barley has averaged 198.68 per tonne, basis Vcr. The CWB's final price for feed barley has averaged $147.54, giving rise to a (simple) average malt premium of $51.14 per tonne, basis Vcr. However, this overstates the true "malt premium" because CWB feed barley returns are generally well below returns earned for feed barley in the off-Board market. As you know, in this crop year, off-board feed barley returns in many places throughout the prairies have often been higher than expected malt barley returns under the CWB.
Under a marketing choice enviroment I expect the CWB's so-called "malt premium" to decline -- that is, the spread of malt over feed will more closely track the spread you see in U.S. markets. For the past 15 months, the malt premium in Montana has ranged from Cdn $60 per tonne in January, 2006 to about Cdn $20 per tonne over the past six months. (For the Montana barley price chart, go to: http://www.choicematters.gov.ab.ca )
In any event, I do believe that prairie farmers will be much better off in a market choice environment for several reasons, including:
1) I expect more barley will be selected for malt. This will be especially true in years of rising world prices (such as the 2006/07 crop year) where the CWB has a difficult time attracting malt barley supplies to meet good sales opportunities in world markets.
2) If more barley goes into malt markets, that means there will be less available for feed markets -- this in turn will strengthen feedgrain prices.
3) Farmers will have greater flexibility to deliver and price their barley when it best suits them. There's also less risk of downgrading losses. Moreover, the greater flexibility means farmers may be able to sell more malt barley off the combine, and will not be as pressured to sell their non-Board crops in fall when they are expecting a price rally.
I could go on, but suffice to say that I believe barley will now become a good "cash crop" and that we will see barley acreage increase over time, just as we've seen with oats after it was removed from the CWB. (Mind you, once we get marketing choice in wheat, I wouldn't be surprised to see a shift back into wheat, as it too will become more profitable to grow.) In my view, acreage shifts (positive or negative) are the best barometer of the impact of any policy change.
I'm afraid you've taken my comments out of context. The clip from the Co-operator reads as follows: "Rutter expects the premium for malting barley will narrow relative to feed, but more barley will be sold for malting than now. Therefore farmers will be better off.
I stand by my comment, although I should have said that I expect the "price spread" on barley sold through the CWB to narrow. In the past 10 years, the CWB's final price for 2 row Special Select barley has averaged 198.68 per tonne, basis Vcr. The CWB's final price for feed barley has averaged $147.54, giving rise to a (simple) average malt premium of $51.14 per tonne, basis Vcr. However, this overstates the true "malt premium" because CWB feed barley returns are generally well below returns earned for feed barley in the off-Board market. As you know, in this crop year, off-board feed barley returns in many places throughout the prairies have often been higher than expected malt barley returns under the CWB.
Under a marketing choice enviroment I expect the CWB's so-called "malt premium" to decline -- that is, the spread of malt over feed will more closely track the spread you see in U.S. markets. For the past 15 months, the malt premium in Montana has ranged from Cdn $60 per tonne in January, 2006 to about Cdn $20 per tonne over the past six months. (For the Montana barley price chart, go to: http://www.choicematters.gov.ab.ca )
In any event, I do believe that prairie farmers will be much better off in a market choice environment for several reasons, including:
1) I expect more barley will be selected for malt. This will be especially true in years of rising world prices (such as the 2006/07 crop year) where the CWB has a difficult time attracting malt barley supplies to meet good sales opportunities in world markets.
2) If more barley goes into malt markets, that means there will be less available for feed markets -- this in turn will strengthen feedgrain prices.
3) Farmers will have greater flexibility to deliver and price their barley when it best suits them. There's also less risk of downgrading losses. Moreover, the greater flexibility means farmers may be able to sell more malt barley off the combine, and will not be as pressured to sell their non-Board crops in fall when they are expecting a price rally.
I could go on, but suffice to say that I believe barley will now become a good "cash crop" and that we will see barley acreage increase over time, just as we've seen with oats after it was removed from the CWB. (Mind you, once we get marketing choice in wheat, I wouldn't be surprised to see a shift back into wheat, as it too will become more profitable to grow.) In my view, acreage shifts (positive or negative) are the best barometer of the impact of any policy change.
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