You just can’t keep some public markets down.
Like zombies, they rip, tear and drag their way out of coffins and stumble across the land, hungry for fresh trading.
It may sound Halloween-like, but that’s how the public western Canadian feed barley marketplace appears to me: written off by many as dead, but able to repeatedly resurrect itself and shamble forth.
Two market experts are trying to revive public price discovery of barley in two different ways.
One, Errol Anderson of Pro Market Communications, is hoping to revive the Western Barley futures contract at Winnipeg’s commodity exchange, ICE Futures Canada, describing the contract as “at one time the best contract (of all crops) in North America.”
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The other, Dave Guichon of AgValue Group, is planning to expand a cash market trading system offered by his grain brokerage firm so that prairie farmers will be able to see live cash bids for crops, including barley.
He hopes to fill a need for information that he calls “absolutely critical, especially in this day and age.”
Futures and cash markets are related, but can live in different worlds. Anderson and Guishon are trying to establish different things that would be mostly used for different purposes, but they could compete for some of the same business.
They share the same underlying aim: to provide a visible market for real prices of some of Western Canada’s most important crops.
The absence of public price discovery of barley is a vexing hole in farmers’ marketing knowledge. There are ways to find prices for barley. A farmer can call an elevator, a grain broker or a feedlot. He can also look at the Canadian Wheat Board’s Pool Return Outlooks and contracts.
But when he looks at what should be the clearest, cleanest posted price for barley prices – the Winnipeg barley futures contract – he often sees “data not available for this time period.”
That’s because no one is trading the barley contract, so there’s nothing to show what barley is trading for in the real world.
That’s a gaping hole in the prairie crops market. Some crops have always had transparent markets, like most pulse crops. Others have drifted off the public stage, like flax.
But barley is a huge crop that virtually every farmer grows. Millions of tonnes trade across the Prairies every year. Yet there is no public price discovery. This is partly because barley is a market divided between the domestic feed market and the CWB’s export and malting market. There are wrinkles and complications to this division.
But there has also been a problem with the big users getting bigger and fewer, and not necessarily needing any public trading for their needs. Bigger grain companies and bigger feedlots often like to keep everything internal, and don’t necessarily want the farmer to be aware of the actual buy-and-sell bids and offers available.
Fortunately there are brokers and traders like Guichon and Anderson who want to resurrect open barley trading.
Anderson hopes to revive futures trading by talking with people who want to take the other side of buys or sells his clients want to take, then having both place orders at the price they’ve agreed upon at the same time. That would create a small amount of liquidity and inspire others with confidence to use the contract, he hopes.
He doesn’t need the contract to do the hedging his clients need, but Anderson is an advocate of open, public markets and thinks his clients and all farmers would be helped by reviving the futures contract.
“I would be very disappointed if Western (Barley futures) failed, because I think we need it,” said Anderson.
“We want this thing to work because it would be really too bad for Canadian growers to lose a contract that could be that valuable. If half a dozen big players in Canada began using it, it would go again.”
Guichon also thinks farmers need to be able to see true market prices for crops, and is also willing to try to make a public market where one no longer exists.
“What we want to do is bring the real cash market to the (farmer), with real bids and real offers of people that are real strong players in the marketplace,” said Guichon.
Both of these men’s businesses will benefit if they are successful in what they are attempting. So too will farmers who grow barley and sell it in the domestic market.
It’s a classic example of the “invisible hand” of the market trying to provide what individuals need.
Whether that hand ends up being a warm touch from the living market, or the cold, dead flesh of another market that dies and rots away remains to be seen.
But the life is not yet gone from the idea that domestic barley prices should be public knowledge for all farmers.
