With 2,200 acres of barley in the field and hot, dry weather on the horizon, Ted Cawkwell swallowed hard when he heard the Canadian Wheat Board’s new initial payment for barley.
For No. 1 feed barley, the figure is $95 a tonne, down from $137 one year ago. That works out to about $1 per bushel after freight and handling charges are deducted.
“I’ll go out and burn my crop before I sell it for under a dollar a bushel,” said the Nut Mountain, Sask. farmer.
“Prices don’t change that much within a day,” Cawkwell said, pointing out the initial price for barley was $145 a tonne July 31. “I don’t think our marketing system today is working at all for farmers, and this highlights that.”
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But Charlie Pearson, market analyst with United Grain Growers marketing service, said farmers shouldn’t decide how to sell their barley based solely on the new initial price.
“I think farm managers have to look specifically at pool return outlooks, which offer a better price gauge.”
The new initial price represents about 70 percent of the current PRO for 1997-1998, which has a mid-range of $136 a tonne.
Unfair comparison
Analysts also say comparing this year’s initial of $95 to last year’s $137 is misleading, since last year’s initial will end up being about 90 percent of this year’s final price.
Pearson said the low payment could prompt farmers to hold off signing wheat board contracts, limiting the board’s export program.
“Until they feel satisfied that it’s actually going to come up an elevator driveway, they’re going to have a very small program.”
Barley that might move into the export market will either be fed domestically, putting pressure on prices, or farmers will have to store it longer and hold out for a better price, Pearson said.
Delivery patterns could also come into play.
Consider cash flow
“Everybody has cash flow needs and only a certain amount of bin space, so you’re probably going to sell the crop with the least bullish outlook,” said Pearson, adding the outlook for oilseeds is brighter.
“You start looking at the oilseeds and farm managers are going to think things there look more optimistic.”
Wheat board chief commissioner Lorne Hehn said the initial payment of barley will be increased if world markets improve.
“The U.S. Midwest is starting to experience some drought and we could actually see quite a strengthening in the feed grains complex, and if that is the case, we’ll reflect it in a recommendation for an adjustment,” he said.
The board isn’t writing off this year’s export program, regardless of the low initial payment for barley, said Hehn.
“This is very early in the year. As crop conditions begin to firm up and harvest starts, we might have a whole different scenario there as well.”
According to Pearson, farmers should lock in some crop at the December Lethbridge futures price of around $131. And those who go with the board should sign contracts early, he advised.
Duncan McKinnon, a coarse grains analyst with Agriculture Canada, said the board will be monitoring the European malt barley crop before making major changes in its export program.
