Malting barley could be most profitable crop for 2007-08, analysts say.
But with the malting marketplace in confusion because of the results of the barley plebiscite and the war of words over the Canadian Wheat Board’s monopoly, can farmers afford to risk growing the crop this year?
Most analysts, grain companies and malting companies say yes, although details are unknown about how selling the crop in an open marketplace would work.
“It’s just business as usual,” said Errol Anderson of Pro Market Communications. “The market will iron itself out.”
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Until now, malting barley could be sold only through the Canadian Wheat Board, but federal agriculture minister Chuck Strahl has said he will eliminate the barley monopoly by Aug. 1.
Then farmers may have a choice about whether to sell through the board or through grain companies.
Or they may have no choice but to sell through the grain companies if the board pulls out of the market.
It’s a situation of confusing politics but it will be less confusing for marketing, Anderson predicts.
“I really expect it will be quite smooth,” he said.
“The offerings will just evolve. The board will lose its position and the grain companies will develop their deferred delivery contracts and their specifications for what they want and it’ll evolve fairly quickly.”
Anderson said within two to three months an entire nonboard system of contracting should exist.
Adviser John Duvenaud doubts the political controversy over the wheat board monopoly will make it difficult to market a malting barley crop this autumn.
But there could be problems for grain companies if their financial backers don’t believe they can hedge malting barley contracts with maltsters or purchases from farmers.
“Can you hedge it?” Duvenaud asked.
“Is the feed barley futures contract (on the Winnipeg Commodity Exchange) good enough to allow banks to lend money to grain merchants to finance malt barley trade?”
The Winnipeg Commodity Exchange recently revamped its feed barley contract to more accurately reflect an international price for barley rather than a feedlot alley Alberta price. It hopes volume in the contract will increase as the open market takes over more of the high value barley trade.
“I think we see great growth potential, but it will take time for everyone to review internally to see what the actual steps will be towards dual marketing,” said Will Hill, the exchange vice-president.
“We think it’s going to serve as the marketplace and grow as people become more and more interested in using that both domestically and internationally.”
Farmer adviser Brenda Tjaden Lepp said she isn’t too rattled by the political furor surrounding barley marketing. With feed barley prices so high recently, she hasn’t been promoting growing malting barley to her clients.
If the changes to malting barley marketing mean more open and transparent contracts for farmers, that will be a good thing.
“The malting companies have an opportunity here to improve upon their systems,” said Tjaden Lepp, of Winnipeg’s FarmLink Marketing Solutions.
“Without the selection contracts and all the hassle and all the paperwork and all the steps and the processes, if we can somehow move to a more clarified environment where (you know what you will be paid for what you grow) and you can just sell it in a more straightforward manner, then I might get more interested in this crop.”
