Wednesday, October 6, 2010

The Feed Barley Pool B for 2009-2010 is a bust

Every month since November 2009 the CWB issued a Pool Return Outlook (PRO) for Pool B.  Starting at $152 in November, the PRO dropped to $150 in Feb and to $143 in March where it stayed until July.  With each PRO, the CWB commented on how the global barley prices were under pressure and not expected to move higher. The next release was the PRO final in Sept – but there was no B pool PRO reported.  At that time, the CWB explained it this way: “Due to low offshore values relative to domestic feed values, there were no deliveries to the 2009-10 feed barley Pool B.”

So, even though there was no barley in the pool, each month the CWB still published its estimated return – the PRO.

How can the CWB calculate a meaningful PRO when there is no barley in the pool?  Perhaps an even more important question is: Why release a meaningless PRO?  Right or wrong, good or bad, it is still a market signal.  In this case it’s a really bad one.

I know it must be tough to feel as though you need to put out a PRO even when there is no grain in the pool, but, really!?  The CWB should make it a policy that, if there is no grain in the pool, along with each PRO, it reports there is a zero balance in the pool.  That way we will all know just how meaningless the PRO really is and we can pay even less attention to it than we do now.  The way it is now, the PRO – as meaningless as it is – still runs the risk of distorting domestic prices.

Or better yet, don’t pool barley at all.

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