The Canadian Wheat Board’s new CashPlus program for malting barley provides farmers with a price as transparent as any commodity traded in the open market, says a University of Saskatchewan agricultural economist.
Under CashPlus, the board will offer farmers a guaranteed minimum price contract based on the price at which it is selling malting barley to domestic and overseas customers.
Richard Gray of the U of S says that’s the definition of price transparency.
“For a farmer to know that the selling price to customers on that day is, say, $212 a tonne, is transparent,” he said.
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Some critics of the program, including maltsters, grain elevator companies and a number of farm groups, say the program doesn’t provide a transparent price signal to farmers.
“All players in the barley chain – farmers, maltsters and grain handlers – say there must be full price transparency to farmers,” said Charles Anderson of the Market Choice Alliance.
However, Gray said the price contract price offered by the board through CashPlus is no different than the prices offered by private grain companies for canola or other nonboard crops.
“What’s the price of canola in Saskatchewan?” he said. “The basis varies among every elevator in the country, so what’s transparent about the price of canola?”
The board has indicated that any revenue from sales of contracted malting barley above the contracted prices will be distributed back to contract holders at the end of the year.
John Duvenaud, a grain broker from Winnipeg, said CashPlus inserts a “confusing, messy and expensive layer of administration” between the farmer and the end user, adding it masks the signals that the end user wants to provide to the grower.
He described CashPlus as a halfway system that doesn’t provide the benefits of either the open market or the single desk and adds no value for farmers.
However, Michael Brophy, the board’s senior program manager for malting and feed barley, rejected those criticisms.
“The contract has a guaranteed price that is directly reflective of the market. How much more transparent can you get?” said Brophy.
No other commodity offers farmers as much information about the price at which it is being sold, as the board will through CashPlus, he said.
Nor do marketers of nonboard commodities offer to pass on to farmers at the end of the year any additional revenue earned above the original contracted price.
“Grain companies sell canola to different customers and different prices and the farmer doesn’t demand to have his price adjusted to match a specific sale.”
Also, CashPlus allows farmers and selectors to directly negotiate any premiums or discounts beyond the board’s guaranteed price.
“We’re very confident this program will provide value to farmers and to our malting and grain company partners,” said Brophy.
Speaking to 250 farmers attending CWB Day at the annual Crop Production Week in Saskatoon, Brophy provided some previously unreleased details about the new program:
- Desired minimum quality specifications will be included in the contract.
- If the specifications are not met, the barley may still be selected, with a mutually agreed-to discount, with the first right of refusal going to the contracting company named on the contract.
- Growers must provide a sample. If their barley meets the contract specs, the selector is required to accept the barley no matter what.
- All three contract signers (the farmer, the CWB and the selector) are liable for full replacement default.
- The contracts will include an act of God clause, but the farmer is free to negotiate that away for a premium.
While no companies have yet agreed publicly to offer CashPlus, the board expects to offer contracts on a limited basis within the next two weeks.
