Canada: Winnipeg Commodity Exchange’s barley prices higher than CWB’s projections

The Winnipeg Commodity Exchange on Tuesday began posting what it says are more accurate – and significantly higher – international barley prices than projections offered by the Canadian Wheat Board (CWB), Reuters reported January 30.

But a senior CWB barley marketing official said the comparison was unfair, charging the WCE's price reflects only spot prices for limited volumes into premium markets.
Reuters Pictures

The exchange said feed barley was worth C$223.20 ($189.15) a tonne, basis Vancouver on Jan. 25, 17 percent higher than the CWB's projected pool return of C$190 a tonne, basis Vancouver.

Malting barley was worth C$249.10 per tonne, basis Vancouver, 21 percent higher than the CWB's projected return of C$205, the WCE said.

"The price signals coming from the (wheat board) are not a good indication of where world values are," said Will Hill, the WCE's senior vice-president.

"If the wheat board is achieving extra returns through pooling, as their studies say they are, how come they're not reflected in bids?" Hill said.

The WCE plans to post new international prices on its Web site each Friday, Hill said.

Agricore United (AU.TO: Quote, Profile , Research), Canada's largest grain company, began a similar initiative for feed barley last week, posting an international price on Jan. 25 of C$233.70 per tonne, basis Vancouver.

The CWB's pool return outlook is lower than the Agricore and WCE barley prices because it represents sales over a longer period into a variety of markets, explained Bob Cuthbert, senior marketing manager for barley.

The agency pools the sales, then returns revenue to farmers, less expenses, at the end of the pooling period.
Reuters Pictures

The WCE and Agricore feed barley spot prices reflect values for limited sales opportunities into Japan, Cuthbert said, while the WCE malting barley price reflects U.S. bids for limited supplies of the crop that U.S. farmers grew outside of production contracts.

The CWB's price pooling system smoothes market spikes and dips, he said.

"At times, when you reach the highest spot price ... the highest spot values can make the (pool return outlook) not look that good," Cuthbert said. "But at other times, like the beginning of the year, the (pool return outlook) was well above the spot price."

The Canadian Wheat Board is one of the world's largest grain marketers, with barley accounting for about 10 percent of its C$3.3 billion in the year ended July 31, 2005.

The salvos over barley pricing comes as barley growers prepare to vote on whether they think the federal government should end the CWB's monopoly on barley sales to maltsters and export markets.

The CWB has pointed to a recent study by Canadian and U.S. university researchers showing farmers received C$59 million more per year on average from CWB sales than they would have from an open market, using sales data from 1995/96 to 2003/04.

Hill said the WCE was not trying to influence the farmer vote, but he acknowledged the exchange stands to gain trading volumes for its feed barley futures contract if the government ends the monopoly.

The WCE's barley futures currently reflect demand in southern Alberta's cattle feedlot region, rather than a blend of international and domestic prices, Hill said.

On Jan. 25, March barley traded at C$178.90 per tonne, basis Lethbridge, Alberta.

The futures price would likely be higher if the barley market was opened because of arbitrage with international prices, Hill said.

Cuthbert noted the WCE recently overhauled its barley contract because it was not properly tracking domestic cash values.

($1=$1.18 Canadian)

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