The Canadian Wheat Board’s new program to acquire feed barley from western Canadian farmers is unnecessarily reducing prairie feedgrain prices, says the Western Canadian Wheat Growers Association.
“The upfront payments that farmers can expect to receive for their barley under the CWB’s new guaranteed price contracts are well below current market values” says Kevin Bender, President of the Wheat Growers. “While farmers might receive a subsequent payment, there is no such guarantee. Regardless, the failure to fully reflect global values to farmers means that prairie feedgrain prices are lower than they should be.”
In a special feed barley update released on Monday, the CWB indicated that its latest tender was awarded at a value of $215 per tonne, basis Vancouver. Based on 2009/10 average deductions for freight and handling, that equates to an average elevator price of $3.43 per bushel in Alberta and $3.23 in Saskatchewan. According to various market sources, global barley values and CWB sale values, basis Vancouver, have been in excess of $250 per tonne. This means that country bids are at least $35 per tonne or 75 cents per bushel below true market values.
“The Wheat Board monopoly system is keeping a lid on domestic feed barley values,” says Bender. “In an open market, we’d be seeing these world values fully reflected on the prairies.”
The Wheat Growers note the CWB’s decision to mute the price signal reflected back to farmers will have the greatest impact on off-board feed barley prices. The domestic feed market is expected to consume about 6 million tonnes of feed barley in the current crop year. If the price is suppressed by $35 per tonne, that would mean a net loss to prairie farmers of more than $200 million, not counting losses on feed wheat, feed oats, corn and other feedgrains.
The Wheat Growers also note that suppressing the off-board feed price means domestic maltsters will not have to bid as high to attract malt barley supplies. In fact, the Wheat Growers suspect that one of the reasons the CWB is not reflecting world values on feed barley to farmers is to ensure ample supplies remain available to meet existing and future malt 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,” says Bender. “Masking the world price signal only serves to reduce the income that we would otherwise earn from the marketplace.”
