Wednesday, October 6, 2010

Feed Barley Exports

You’ve probably heard by now that the CWB is selling feed barley overseas for as much as $1.00/bu more than what farmers are getting paid on delivery.

Holding back a portion of the sale price is the way the CWB manages risk – whether in the pool accounts, the Producer Pricing Options or through its cash trading.  On the latest feed barley program, the CWB has said that farmers will get “all the margin that’s in there” after the season, as kind of a “top-up” or dividend (net of costs and after all sales returns are pooled). 

Keep an eye on this one.  Past experience has shown that the CWB doesn’t always pay out all the margins made on these sales.  Two years ago, using a similar program (Guaranteed Delivery Contracts), the CWB kept from farmers about $1.00/bu from its feed barley trading program.  About $20 million from feed barley cash trading went straight into the Contingency Fund to cover losses from discretionary trading in wheat the year before.  Last year, it kept about $5 million from the farmers that sold malt barley through CashPlus programs.

There is a better way to do this that would provide farmers with more upfront cash and less (if any) would be diverted away from farmers and into the Contingency Fund.  The CWB needs to be open to new ideas.

1 comment:

  1. Arguing that the CWB should not be able to divert monies into the contingency fund would have other unintended consequences, would it not? Is not the contingency fund there to allow the CWB engage in higher-risk, higher-return marketing marketing strategies?
    Shouldn't the question be, "Is the amount diverted to the contingency fund commensurate with the risk and revenues represented by barley as compared to wheat?" Do you think it is?