The Canadian Wheat Board has its partial barley monopoly back, but it will have a tough time managing it to produce a change of mind in its critics.
The board has stated a renewed commitment to provide new pricing and delivery options to farmers and to increase its efforts to demonstrate how these programs can be used.
They’ll have to be pretty innovative options.
A global shortage of feed and malting barley has driven international prices to levels that are more attractive than the domestic market.
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As an indication, U.S. barley prices at port in the Pacific North West are about $198 US, up about $10 since seeding time and up $75 from year ago. The $198 price equals $208 Cdn.
In Australia, grain merchant AgraCorp was paying $283 AUS per tonne basis the port of Fremantle in Western Australia for feed barley. That is about $255 Cdn.
But the standard CWB system of initial and final payments and a six month pool makes it difficult to reflect market realities when they change quickly. This makes it hard to get the grain to take advantage of these strong offshore markets.
For example, the new crop initial payment for feed barley is set at $107 per tonne at port. When you back that off to the Prairies, you get a payment of about $52 to $36 per tonne depending on your distance from Vancouver. That is not much of an inducement to deliver.
The board has already asked the federal government to increase the initial, but that is unlikely to make it look more attractive than the domestic feed market. We’ll get a better idea of how the board views the export feed market when it posts a feed barley pool return outlook.
There is a similar situation in malting barley. Remember during the winter when the board had to release an early new crop malting barley PRO to show that the market had risen beyond the old crop PRO?
Then there is the problem that the board has signed some forward malting barley contracts at prices that seemed good at the time, but are behind the market now. These threaten to drag down the pool.
One way to address the situation is to devise daily price contracts for barley similar to the ones offered for wheat.
These offer farmers some flexibility and an opportunity to beat the pool. However, the wheat programs have not been widely adopted.
It is hard to say whether this is the result of a negative perception, perhaps tied to the steep risk margins the CWB charges on some contracts, or ignorance of how they work.
The board says it will provide training on how to use the programs.
That will help, but it is unlikely to silence the critics.
