Barley futures looking bright:
Price up $12.50 a tonne since Monday, Strahl's marketing proclamation discounted
Wed Jun 13 2007
By Larry Kusch
BARLEY futures prices on the Winnipeg Commodity Exchange have soared in the wake of the federal government's announcement Monday that the Canadian Wheat Board would lose its sales monopoly Aug. 1.
The WCE's October barley price reached the $7.50 daily trading limit on Monday and was up another $5 on Tuesday for a two-day rise of $12.50 a tonne. Tuesday's $168 close for October barley was a contract high.
The October contract was introduced last July and is designed to accommodate the new dual market for barley.
Will Hill, senior vice-president of the exchange, said while barley supplies are tight and world prices are climbing, the government's announcement that farmers would be free to sell their barley outside the wheat board seven weeks from now was obviously endorsed by the market.
"I think it's more than coincidental that we're up here $12 or $13 following the announcement," he said, noting that it's been rare to see barley rise "limit-up" in recent years.
On Tuesday, Winnipeg barley prices were up strongly across the board, but corn was down and beans were down, Hill noted.
However, Winnipeg market analyst Greg Kostal said he doubted that Agriculture Minister Chuck Strahl's announcement had a large impact on WCE prices, arguing that the grain trade was well aware of the government's intentions.
Kostal said crop problems in Ukraine, which represents 25 per cent of world barley trade, and strong Middle East demand have driven up world prices significantly in recent days.
He said it was largely "coincidental" that the Winnipeg price rose as much as it did this week after Strahl's announcement Monday morning that the government had passed regulations ending the wheat board's sales monopoly over barley.
Kostal said any uncertainty over Canada's barley marketing system, in the light of the minister's announcement and a subsequent court challenge to the manner in which Ottawa is carrying out the change, is also unlikely to be driving prices higher. If anything, the legal wrangling should be having a dampening effect, he said.
Meanwhile, a wheat board official said Tuesday that the grain-selling giant is still working out details of how it will function in an open-market environment for barley.
Ward Wiesensel, the board's chief operating officer, said job No. 1 is working out the logistics to ensure that the board is able to attract sufficient supplies to meet the "significant" sales the CWB already has on the books for the new crop year.
"The concept of an annual price pool is definitely not on at all," Wiesensel said, although the board is unsure of exactly what will replace it.
"It could be a very, very short pool, a very small pool, and we have not determined what the length would be." Currently, farmers' barley returns are based on the value of Canadian Wheat Board sales, less expenses, over an entire crop year.
The wheat board's directors held a special conference call early Tuesday morning to discuss Strahl's announcement the day before that barley marketing rules would change Aug. 1, but board chairman Ken Ritter said the group reserved its decision on what response it would make.
"We felt it prudent to give some time for not only directors to think about this, but also for us to gather more information before we make a decision (on a possible legal challenge)."
Also Tuesday, Manitoba Agriculture Minister Rosann Wowchuk confirmed that the province had donated $20,000 to Friends of the Canadian Wheat Board to help the group mount its court challenge against the federal government.
The organization has filed suit in Federal Court saying that Ottawa is acting illegally in removing the wheat board's sales monopoly through regulation, as opposed to passing legislation.
The Friends, a loosely organized group of up to 500 farmers and city residents, are confident they can raise the $40,000 to $50,000 they say it will cost to mount the legal challenge, spokesman Bob Roehle said.
larry.kusch@freepress.mb.ca