Two year study | Mandatory price reporting also recommended by barley growers’ report
A dual market may be the best option for prairie barley growers, a recent study indicates.
A two-year study on the optimal marketing structure for the Canadian barley sector analyzed why more people are not growing it and where new opportunities may present themselves.
Conducted by market consultants John DePape, Brian McKenzie and Russ Crawford, the preliminary findings were presented at the recent Western Barley Growers Association convention in Calgary.
The final work will be presented to the federal government. The study involved about 80 people from 60 firms that included producers, finance, government, brokers, importers and terminal exporters.
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Commissioned by the barley growers, the study started two years ago and assessed all market options before the government ended the Canadian Wheat Board monopoly.
It found Canada is probably heading toward a dual system with an open market and an entity like the board offering different pricing and risk management tools for pricing.
The study predicts under the new system starting in August, farmers will see more contracting and grading options from maltsters.
They should see some improved cash market transparency, more market development and better competition.
The study recommended mandatory price reporting and reporting on trade volume because voluntary reporting will be sketchy.
Improved cash market information is critical.
“It is absolutely fundamental to a good market. If you don’t have that information you don’t really have a market,” DePape said.
Under a new system more support is needed for varietal research and development to offer different grades of grain to different customers. Australia is beating Canada in the Asian market because it offers a range of grades for different purposes.
The study found Canada has a good reputation selling quality wheat and barley to the world. Farmers follow good agronomic practices and there is access to a world class grain handling and transportation system, especially in the last 10 years.
Malt barley competes quite well with other crops. It makes money and works well in rotations. However, the market is flat and there is inadequate pricing information.
There is a 20 percent selection rate for malt and the rest goes for feed. This discourages farmers from growing it. There are markets looking for different quality malting barleys so there should be a schedule for prices on each type.
Feed barley struggles to compete with feed wheat, imported corn and dried distillers grains depending what the market will pay.
“We have to remember it is a competitive market and there are substitutions,” DePape said.
The grain handling system is concentrated with Viterra, Cargill and Richardson International controlling 70 percent of the primary elevators and 80 percent of the terminals at the West Coast.
However, only 15 percent of the barley crop goes through these companies for export. Most goes to feeders and maltsters so concerns over such control should not pertain to barley.
“There are a lot of other markets when it comes to barley. Wheat may be a different story.”
Maltsters, grain companies and feeders should have to compete for the grain and pay accordingly.
“If farmers do not make money at it they are going to grow something else. That is what they have done over the years,” he said.
In the past, the wheat board may have found a good sales opportunity but was often hard pressed to find the supply quickly enough because barley could go in many directions. They struggled to compete with the domestic market.
“Guys in the grain trade will tell you our market velocity is going to go up,” he said.
