Farmers who delivered feed barley to the Canadian Wheat Board this year
could have been looking at a huge payday.
But the board has intervened to keep the pool return at a level that
more closely reflects the reality of the market.
Normally, payments into the pool account would include all of the
interest earned from previous sales of feed barley, including large
volume credit sales made to customers like Poland and the former Soviet
Union 10 or 15 years ago.
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Those interest earnings will be around $8 million for 2001-02.
With only a scant 56,000 tonnes of feed barley delivered to the pool in
2001-02 (compared with a four-year average of 416,000 tonnes), putting
all that money into the pool account would have resulted in an
eye-popping price of around $270 per tonne.
That would have been well above both the domestic feed market and the
price of top quality malting barley.
Instead the board has put only $2.5 million of the interest earnings
into the pool account and deposited the remaining $5.5 million into a
contingency fund.
That kept the feed barley price at a more reasonable $180 a tonne and
in line with the price signals given to farmers earlier in the year.
“We were trying not to unduly disrupt the domestic feed and the malting
barley markets,” said Adrian Measner, the board’s vice-president for
marketing.
The board settled on $180 because it was just under the return that
six-row malting growers would receive, but was sufficiently high enough
to bring in some deliveries from the board’s traditional drawing area
of northern Alberta and northeastern Saskatchewan.
“It tried to establish a value that would attract some supplies but
still be reasonable in terms of where the malting market and domestic
feed market was,” said Measner.
The PRO for feed barley was set at $180 in December, then in May was
reduced to $177 due to a big drop in the domestic feed market.
Measner said if the PRO was too high, that would have attracted
deliveries out of the malting barley and domestic feed markets, thus
driving down the price outlook in the volume-sensitive feed barley
market.
“If we had decided earlier in the year to reflect the higher value (in
the PRO), then we wouldn’t even have attained the $180,” he said.
The board bumped the PRO back up to $180 on July 25.
As for the $5.5 million being put into the board’s contingency fund,
CWB chair Ken Ritter said the agency will ask producers what to do with
the money.
“The money is farmers’ money and we intend to consult with farmers on
what to do with it,” he said.
Possible uses include funding research into varieties with improved
disease or drought tolerance or market development work that would
result in higher returns for farmers.
The issue of how to deal with interest earnings was raised by the
federal auditor general in her report on the board earlier this year.
Sheila Fraser recommended that the total net interest earnings on
credit receivables should be shared equally among all farmers rather
than assigned to specific pool accounts.
Ritter said the board agrees.
“Since these sales were made so many years ago and have no direct
relationship to the marketers today, it would be a sensible solution to
average the interest earning amongst all deliveries to the pool
accounts,” he said. “It’s certainly our intention to take that request
to government.”
