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Do the recent changes to the way the Canadian Wheat Board feed barley pool operates meet the Alberta government’s requirements for a test open market?
How will Alberta be able to uphold the reputation of Canadian grain in world markets?
How will the CWB be able to accommodate its sales plan in an open market setting and be able to provide orderly marketing and maximize returns to producers who use the CWB?
Do the recent changes to the way the Canadian Wheat Board feed barley pool operates meet the Alberta government’s requirements for a test open market?
The Canadian Wheat Board (CWB) is making significant changes to the way they price pool and obtain deliveries of feed barley. These changes include: Dividing the crop year into two pooling periods (August 1 to January 31and February 1 to July 31) versus a one year pooling period for other CWB grains. Only contracting feed barley under a guaranteed delivery program versus open ended contracts with no delivery period commitment; and Acknowledging the board’s ability to buy in the cash market if required to satisfy market needs.
These are the most significant changes the CWB has made in recent years and may show the way changes will be made in the other wheat, durum and malt pools. Short term, the changes in the feed barley program will not have a significant impact on farmer willingness to contract/deliver feed barley to the CWB. World barley crops are large this year both in North America and Europe. International barley prices have dropped to extremely low levels. The pool return outlook of $127/tonne basis Vancouver (Alberta based payment of $80/tonne average) is an accurate reflection of how depressed international feed barley prices are. The local feed market will provide better returns in the coming crop year than the CWB market and will remain the preferred market alternative for farmers. Longer term, these changes open the door for modification to how the other CWB pricing pools are handled. Future modifications could include multiple pooling periods/early closure of pricing pools, contracts which include more specific delivery (and perhaps variety/quality specifications) commitments and the alternative of cash pricing within the current pooling system. However, the modifications proposed today for the feed barley pricing pool do not meet the Alberta government’s requirements stipulated in the Marketing Choice policy. The Market Choice objective policy remains that a farmer should be allowed to market their grain (in this case barley) to whomever they want (including the CWB) and at a full price that reflects the market value at that time.
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How will Alberta be able to uphold the reputation of Canadian grain in world markets?
While the CWB takes credit for branding western Canadian wheat and barley as high-quality, the Canadian Grain Commission and the grain trade play a much more significant role in maintaining Canada’s reputation than the marketing agency. The CWB does not, on its own, guarantee quality; rather, it relies on the other agencies in the system to ensure the grain meets contract specifications. Moreover, the non-CWB markets (canola, flax, peas, etc) also enjoy an excellent reputation for high quality on world markets – without the CWB’s involvement. In an Alberta test open market, nothing will need to change to maintain Canada’s reputation for high-quality grain. Grading would remain the same as it is now. A more direct relationship and the resulting accountability may make it easier to enter into more of an identity preserved market system and thus create more value for both the grain handler and farmer.
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How will the CWB be able to accommodate its sales plan in an open market setting and be able to provide orderly marketing and maximize returns to producers who use the CWB?
At the beginning of a crop year in an open market, Alberta farmers would still stipulate the amount they would sell to the CWB, through the current CWB contracting schemes or a similar process. Through this process, the CWB would garner as much detail about the volumes and quality of wheat it has available to sell as in a true single desk market. Assuming each Alberta farmer would not sell 100% of their crop to the CWB(much like they do not pre-sell 100% of their non-CWB crops), there would be a balance of wheat/barley that each farmer would then sell privately to the non-CWB market versus to the pricing pools. This process could actually enhance the CWB’s knowledge of what they will have to merchandise out of Alberta; when each farmer prescribes what he will sell to the CWB. The CWB will know (1) what is recorded in CWB permit books (both CWB and open market wheat), (2) what is offered to it (via contracts), and (3) it will have the benefit of both public and private crop estimates. The CWB will be able to determine with a fair degree of accuracy how much wheat is destined to the open market.
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