CWB Alerts Farmers To Feed Barley Sales Opportunity – for Sep. 2, 2010

Export barley prices have taken off, and the Canadian Wheat Board says farmers can take advantage of them through Guaranteed Price Contracts (GPCs).

Last week the CWB was offering $215 a tonne for feed barley in-store Vancouver. That translates into a take-home return of around $3.35 a bushel in central Saskatchewan, said Bob Cuthbert, the CWB’s senior manager for barley sales.

GPCs are a three-way contract between the CWB, grain companies and farmers and are akin to selling on a cash basis.

The CWB issues feed barley tenders to the grain trade. Winning companies bid secure the barley from the farmers and commit to supplying the CWB. Farmers accept a CWBguaranteed in-store price and a defined delivery period. Farmers negotiate the basis (freight, handling, trucking premiums) with the companies.

Few Manitoba farmers are expected to use the program because higher freight costs make it less attractive. Farmers can get more information by contacting grain companies or their CWB farm business representative.

RUSSIAN DROUGHT

The CWB has already sold around 200,000 tonnes of feed barley to Japan and Saudi Arabia using GPCs, Cuthbert said. World feed barley prices jumped last month more than $60 a tonne, moving as much as $30 a tonne (65 cents a bushel) in one day due to poor growing conditions in Eastern Europe and crop-shrivelling drought in Russia, which has banned exports.

“Some of the trade was short and they panicked a bit and were booking,” Cuthbert said. “It has gone kind of quiet now but there is still more coverage to be done, we think. The trade is waiting for the Saudi government to increase their import subsidy as well so we do expect more interest at pretty good numbers.”

The recent rally in feed barley, wheat and malting barley prices was reflected in the CWB’s latest Pool Return Outlook (PRO) issued Aug. 26. The feed barley PRO jumped $1.44 a bushel or 46 per cent to $4.55 a bushel.

CRITICISM

Cuthbert said GPCs allow the CWB and farmers to act quickly to capture higher international spot prices in part by providing farmers a price signal that’s more accurate than the PRO. But according to the Western Barley Growers Association (WBGA) the contract “fails miserably at translating export prices to farm gate returns for Prairie barley farmers.”

The CWB is offering farmers $50 a tonne less than the world price for feed barley, WBGA president Brian Otto said in a release.

The Western Canadian Wheat Growers (WCWGA) accuse the CWB of offering less than the world price to ensure ample supplies of malting barley to meet existing and future malting barley contracts.

“The Canadian Wheat Board’s role should be to ensure farmers get maximum value for the grain we grow, whether we sell it through the CWB or not,” WCWGA president Kevin Bender said in a release.

World barley markets are so volatile the CWB needs to protect itself, Cuthbert said, noting the CWB’s export price for feed barley exceeds the domestic return. Grain companies do the same thing, he added.

“You can go long (buy grain) one day and the market might drop 20 bucks a tonne before you can sell it. “Our intent is to pay back any surpluses… but with non-board crops that doesn’t happen.”

There’s even more risk marketing barley on a cash basis because there is no futures market to hedge risk. The CWB said in its PRO commentary that it expects domestic feed barley prices to increase, but distillers dried grains (DDGs) from American ethanol plants could fill some of the demand.

The CWB’s export price is also higher the domestic U. S. barley price, according to Cuthbert. That’s probably because buyers can replace barley with cheaper alternatives, including DDGs, he said.

The CWB isn’t sure if feed barley prices will remain high. Saudi Arabia needs barley but if the European Union releases barley from intervention that could cover some of the demand, triggering lower prices.

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“Some of the trade was short and they panicked a bit and were booking.”

– BOB CUTHBERT

About the author

Reporter

Allan Dawson

Allan Dawson is a reporter with the Manitoba Co-operator based near Miami, Man. Covering agriculture since 1980, Dawson has spent most of his career with the Co-operator except for several years with Farmers’ Independent Weekly and before that a Morden-Winkler area radio station.

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