THE Canadian Wheat board has been under pressure for some time to become more responsive to farmers’ needs, while still obtaining the best possible returns for its farmer clients.
That’s why its decision to halt future major sales from its malting barley pool and move all new bulk sales into its CashPlus program is the right thing to do.
By stopping large sales through the 2008-09 malting barley pool, the wheat board can protect higher prices it earned earlier in the crop year.
Based on a Saskatchewan farmgate price, the wheat board projects the pool will return a record of $5.50 a bushel to farmers in the pool.
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Since that price level, the malting barley market has dropped by $2-$3, due primarily to oversupply.
The decision to shift to CashPlus protects the returns of those who were sage enough, or fortunate enough, to contract their barley during the price peaks.
CashPlus offers farmers money up front based on market prices for malting barley. The CWB establishes a guaranteed price (not including freight and handling), allowing companies and farmers to negotiate premiums and discounts before establishing a net price. The program pays 93 percent of the money up front to farmers, with any additional revenue paid at the end of the crop year.
By selling through CashPlus, farmers can gain speedier access to cash flow than they would through the pool, at a time when many are looking to buy inputs for the coming spring.
Another factor that plays favourably to the wheat board’s decision is that in a slow moving barley market, the risk of crop downgrading in the bin increases with time. Farmers may be able to avert such issues if they can find their own sales.
Though lower than early in the crop year, malting barley prices are still higher than feed prices and the board hopes to attract through the Cash Plus program 200,000 to 400,000 tonnes, preventing that quantity from being dumped on the feed market.
However, the decision is not without critics. Using CashPlus for the rest of the year, makes it impossible for those who missed the higher prices earlier this year to buffer some of the recent price decline.
There has also been criticism that the wheat board shielded market signals from farmers. The Western Barley Growers Association argues that, had farmers been able to see sooner that the malting barley market was becoming oversupplied, they could have decided to sell their barley into the feed market when prices were higher.
However, it is difficult to see how those who passed on the CWB’s high barley Pool Return Outlook that reflected price peaks would have made a different decision under an open market system.
While there are still some bugs with CashPlus, including disagreements over contract terms between grain companies and the wheat board, the decision to go this route addresses frustrations farmers sometimes express about the CWB’s ability to deliver more money more quickly.
And given today’s market environment, in which the federal government has taken the CWB monopoly off the table for the time being, it presents the best option available.
Bruce Dyck, Terry Fries, Barb Glen, D’Arce McMillan and Ken Zacharias collaborate in the writing of Western Producer editorials.
