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Winnipeg Commodity Exchange Inc. (WCE) is confident that revisions made to the Western Barley Futures Contract that are effective with the October 2007 contract will result in the development of an international barley contract on the scale of the current canola contract when dual marketing is implemented. Winnipeg will become the price discovery and risk management center for international barley trade.
The contract is structured to function for producers, domestic and international consumers and processors, exporters, grain companies, investors and the Canadian Wheat Board. As with canola today the revised contract under dual marketing will price barley on the Canadian prairies reflecting both domestic and international market activity.
The current Western Barley Futures Contract has proven to be an excellent price discovery and risk management tool for domestic barley producers and consumers, however, because of the existence of the CWB monopoly, arbitrage opportunities between the domestic and export market cannot be fully incorporated in the price.
Today prairie barley farmers are not getting sufficient price signals from the export market. CWB PROs do not provide farmers with accurate and timely price signals for the current or deferred export market and therefore cannot be relied on by farmers as an indication of whether they are achieving a fair price in the domestic market relative to the world price. Under dual marketing the Western Barley Futures Contract would provide those needed price signals.
Farmers have come to rely on WCE to successfully hedge and price their canola. Canola production, exports and value added processing in Canada have steadily increased over the past two decades as producers have responded to visible price signals provided by the WCE canola contract. In addition market participants world-wide rely on WCE as the premiere price discovery and risk management tool for global canola and rapeseed. These same price signals are needed for barley if farmers are going to achieve the same results in marketing their barley crop.
Data collected and analyzed by Informa Economics (available on the WCE Website www.wce.ca) shows that the current PROs for feed barley understate the value of export feed barley in central Saskatchewan by as much as $34.00 per tonne. Farmers are able to respond to market conditions only if the appropriate price signals are received.
As a first step to providing these needed price signals WCE is providing weekly export price data on the Website at www.wce.ca. This price data can be used by market participants as an indication of whether they are achieving a competitive price in the domestic market or from the CWB PRO relative to the world market.
Winnipeg Commodity Exchange Inc., established in 1887, has been facilitating futures contract trading since 1904. WCE is Canada's only agricultural futures and options exchange and North America's first fully electronic commodity exchange. WCE offers futures and options contracts on canola, domestic feed wheat, and western barley.
