The CWB Misses the Point in Feed Barley Debate

[jdepape]

For those that want more detail.

In 2007-08, the CWB reported a total of 1.192 million tonnes of feed barley that traded through the CWB's Cash Trading activities.

In anticipation of an open market that year, about 900,000 tonnes of feed barley was sold in the export market by the private trade. However, prior to making the sales, the private trade negotiated terms with the CWB that would apply if the courts reverted the market back to the CWB single desk - which, of course happened. The agreement between the private trade and the CWB said that the trade would pay the CWB $4.00/tonne in return for allowing the trade to execute the sales.

Therefore, on this 900,000 tonnes, the CWB made $4.00/tonne, or about $3.6 million.

On the balance of the program, the CWB bought about 300,000 tonnes directly from the trade. Since the CWB reported total earnings from cash trading of feed barley of $19.938 million, on this 300,000 tonnes the CWB earned $16.338 million, or $54.46/tonne.

None of this money was paid to farmers. It all went into the Contingency Fund.

[jdepape]

One more thing.

About the 900,000 tonnes sold by the trade, the CWB 'release' says "...the CWB took over the execution of those sales to the end buyers."

According to trade sources involved in the deal, the CWB did nothing except provide rail car allocations. If the companies didn't pay the $4.00/tonne, the CWB didn't give them cars.

One trader I know referred to the $4.00/tonne paid to the CWB as "the export tax". Another called it "the CWB extortion tax".

Before you think this is good for farmers, don't forget that this money went straight into the Contingency Fund to cover losses in "discretionary trading" in wheat.

[charliep]

bucket

Perhaps it is a situation like compaction and cattle. Someone from the livestock but compaction occurs when an animal is fed something like straw. In cold weather when an animals nutritional requirements are high to keep body temperature up, the animal keeps eating in an attempt to meet its energy needs to stay warm. Not enough stuff goes out the other end of the animal and gradually their stomach fills up so nothing else can come in the front end (read mouth). The animal eventually dies of malnutrition and a plugged stomach.

Kinda like that in feed barley this year. In Alberta (not necessarily other provinces) a big carryover. Actually a good barley crop (again not SK/MB). Need to sell product. AS A GRAIN COMPANY THAT GENERATES PROFITS TO BE DEPOSITED IN THE CONTINGENCY FUND, it took advantage to buy cheap from the domestic market and sell expensive into the export market. Got caught with questions it couldn't answer and switched to the current guaranteed delivery contract with a low cost EPO.

The issue on the low GDC/EPO is only some elevators/grain companies (Viterra in Alberta) and hit and miss at best. The domestic market has responded with higher and as feedlots fill up will do so more later this fall (not much forward coverage by feeders).

The simple point someone asked me is why US corn is $5/bu plus and barley is under $3.75/bu. Perhaps even worst is feed wheat under $4/bu. Couldn't explain it. Can anyone else?

[charliep]

For those that don't think the CWB is relevant to the price of feed barley, I note elevator bids has slipped about $25 to $30/tonne off the top end this week.

[URL="http://canola.ab.ca/dailygrains.aspx"]AB feed barley elevator bids[/URL]

Suspect the main reason is the CWB has pulled the GDC/EPO programs off the table (may have the business they want to do filled).

Would also be interesting to be in a place to monitor the CWB execution on existing sales (is it on target in supplying feed barley to ships as they arrive).

[charliep]

The it in the reference to the GRAIN COMPANY is the CWB by the way.

[stubblejumper]

I see the blogspot has 3 followers one being larry webber.