CWB shifts from pool to CashPlus

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Published: February 5, 2009

Barley growers hoping to dive into the Canadian Wheat Board’s malting barley pool this crop year are out of luck.

Instead, they will have to rely on CashPlus, the board’s year-old malting barley contracting program.

The board said last week no further selections will be made for new bulk export sales for 2008-09 through the designated barley pool.

“We need to make sure that our sales program is conducted as carefully as possible to maximize the benefits to farmers given the current situation,” said CWB chief executive officer Ian White.

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federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million

The move is designed in part to protect the value of the 2008-09 pool, which is projected to return a record Saskatchewan farm-gate price of $5.50 a bushel ($252.62 a tonne).

The price reflects sales made earlier in the crop year, when world prices were $2 to $3 above current levels.

The international malting barley market has recently declined as large volumes of high quality product have come on the market from other exporters, particularly the European Union.

Making future pooled sales at those lower prices would reduce the returns to farmers now in the pool.

CWB spokesperson Maureen Fitzhenry said the board has not formally closed the malting barley pool, and some small amounts of outstanding business, including some domestic sales, may go through the pool.

“But for the most part, all new business that we do will involve selection through CashPlus,” she said.

The other main reason for focusing on CashPlus is to provide price certainty to farmers as they consider their barley marketing options during the remainder of the year.

The CashPlus program provides farmers with prices based on the value at which the board is making sales.

The contract provides about 93 percent of that price upfront, with any additional revenue paid out at the end of the crop year.

Fitzhenry said farmers have consistently told the board that upfront price is one of the most important factors in their farm management decisions.

CashPlus has never been embraced by grain handling companies or maltsters, who dislike some of the contract language and say it should return 100 percent of the sales price.

However, after initially refusing to use it, resistance has softened to the point where about 370,000 tonnes was marketed through the program for 2008-09.

Wade Sobkowich, executive director of the Western Grain Elevator Association, said the grain handlers have recently had discussions with the board about ways to resolve their differences.

He said the companies will meet this week to consider the latest proposal from the wheat board.

“It appears we’re moving down the road on some of the major issues but it’s premature to say we’re there,” he said. “It could be resolved or it could remain at an impasse.”

Sobkowich said the grain companies are prepared to handle malting barley for the board either through the pool or CashPlus, if the details can be agreed on.

Barley market analyst Charlie Pearson of Alberta Agricultures said he thinks the wheat board has made a reasonable decision by turning to CashPlus for the rest of the year.

“There are malting barley sales available right now but probably levels that would bring down the value of the pool,” he said.

“So if a farmer can get a premium to the feed market through CashPlus, it’s worth looking at and probably booking something.”

He added that if the board sold another 200,000 to 400,000 tonnes of malting barley through CashPlus, that would mean less barley going into the feed market, which could provide support to the feed market through the spring and summer.

The board is projecting 1.6 million tonnes of barley exports, including a record 1.4 million tonnes of malting barley.

Pearson added the CashPlus contract is a pretty good deal for farmers, providing some significant cash flow benefits.

CWB director Jeff Nielsen, of Olds, Alta, (and soon-to-be-former president of the Western Barley Growers Association), said the board wants to move as much barley out of the system as possible at the best price possible.

“We know we could be going into a very big carryover and a lot of it is very good quality malting barley, so the more we can move out of the system, the better,” he said.

Nielsen was a strong critic of CashPlus when it was introduced a year ago, and still says it’s not the answer everybody wants on barley marketing.

“But if it’s all you have, you have to work with it,” he said.

WBGA vice-president Tom Hewson of Langbank, Sask., said he has no strong opinion on CashPlus.

“My view is we do need a program so that farmers who do have quality malting barley have an opportunity to sell it,” he said.

The association would still prefer an open market, he said, but in the meantime, CashPlus “goes some ways toward that.”

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Adrian Ewins

Saskatoon newsroom

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