Cold hard facts

This morning I wrote about appealing to emotion. This afternoon, it's all numbers.

The Winnipeg Commodity Exchange has announced that it is ready to provide international risk management tools for barley should the single desk be removed. In preparation, it is posting weekly international prices for feed and malt barley on its website. There is also market commentary provided by Informa Economics regarding the feed barley market on the WCE site.

The report seems to confirm some of my thoughts from the weekend:

Obviously, the lack of export movement from the CWB is having an impact on feed barley values in some regions of the prairies. Granted the Pool is based on an average of sales over the last six months of the crop year. However, since there are likely very few sales against that Pool yet, it is puzzling as to why the PRO is not more competitive than it is. The fact that feed barley is not being exported out of Saskatchewan does appear to be limiting non-board bids at this time.

And it's not only a couple of sales to Japan:

At the time that this article was written, Middle Eastern buyers were paying as much as US$246 per tonne for feed barley on a CIF basis. It would likely take about US$45 per tonne to ship barley from Canada to the Middle East, leaving the price at about US$200 per tonne at the St. Lawrence or Vancouver. Using a Canadian dollar of 86.5, that converts to about C$231 per tonne. If we assume about $16 per tonne for cleaning and elevation, feed barley would be worth about C$215 per tonne, in store Vancouver or the St. Lawrence.

Under our current system, this is a revelation. In a marketing choice environment, it's just business.

When will market signals reach us?

Today's big news surrounding barley is not about anything the CWB has done. Really. It's about what the CWB refuses to do.

Agricore United has begun posting an international feed barley price, representing what the company would pay farmers in a marketing choice environment. The price was posted at C$233.70/tonne, basis Vancouver. The board's latest Pool Return Outlook for the B Pool on feed barley gives a price of $190/tonne, also basis Vancouver. The Board acknowledges that the higher price is out there, but refuses to offer it to farmers.

Now, the Board can't use the excuse that it had made lower priced sales earlier in the year - there are two pooling periods for feed barley, with the B Pool running from February 1 to July 31. It can't say that the bottom is likely to fall out of the feed market. According to the CWB's PRO announcement from Thursday, "Global feed grain prices are expected to receive support from the U.S. corn market well into 2007, with U.S. corn ending stocks expected to be at the lowest level since 1995-96." If that is the case, why the huge disparity between sales that can be made now, today, at this moment, and the price it says it can deliver to farmers? Why not attract grain to the B Pool to meet this demand? A cynic might say that the Board just wants to make sure that its feed price stays below its malt price. The Board does not want to admit that it hasn't done the best job of marketing farmers barley. But we already know that; the evidence is plain as day.

The board has cultivated its image as a protector of Canadian farmers. If this is protection, being 'sheltered' from high prices, then count me out.