CWB Final “Cashplus Offer” has Canadian Malting Industry asking “Where’s the Rest of it?”

[charliep]

Here is the CWB link. I find the $6.26/tonne administration and cost of financing/storage interesting. Still don't know the actual malt barley sales price on the CWB side so hard to evaluate. Will be an interesting annual report.

<a href="http://www.cwb.ca/public/en/newsroom/releases/2009/121109.jsp">cashplus payout</a>

[mcfarms]

I just sent Charlie a note on the storage on cashplus and based on what we received for our later delivered barley I actually can see the numbers being in that 6 dollar or so range for the storage . Based on my contract and the claim of 93 percent paid out the holdback on my contract then would have been in that 21-22 dollar range according to board figures. I suspect they were pooling the holdbacks with other sales to other markets and they were not consistant then based on comments from my customer on values paid out during the time that we were doing our cash plus. Did we get shorted? I suspect some but how much is open to discussion.

[parsley]

&lt;p&gt;&lt;/p&gt;
&lt;p class=&quot;EC_style8ptBK&quot;&gt;&lt;strong&gt;[URL="http://parsleysnotebook.blogspot.com/2009/12/profile-of-typical-farmer-who-endorses.html"](Typical CashPlus farmer?)[/URL]&lt;/strong&gt;&lt;/p&gt;

[chaffmeister]

A thought about the CWB's admin expenses:

The CWB 07-08 Annual Report states:

"Administrative expenses, less the expenses attributable to the distribution of final payments and costs related to the PPO program and organic wheat program are allocated to each pool, feed barley and designated barley cash trading on the basis of relative tonnage."

I think we should assume CashPlus is "Designated barley cash trading".

If the CWB's admin expenses in 08-09 were $6.26/t (as the CWB said in its release) and they are allocated on the basis of relative tonnage (as the CWB has said in the annual report) and the CWB exports and domestic sales totaled 22 million tonnes (as they said in their year end statement), then admin expenses were in the area of $138 million. (in 07-08 they were $76 million).

But that doesn't make any sense. It appears that the CWB did not allocate admin expenses "on the basis of relative tonnage" as they said they did in 07-08.

So the question is: why are CashPlus admin expenses so high? Or is something else included?

Enquiring minds want to know....

[chaffmeister]

Realize I should have included storage and interest in admin expense but thought it wouldn't be material. Interest in the malt barley pool (on inventory) is usually around $0.30/tonne or less. Should CashPlus have any inventory costs?
In the 07-08 malt pool, storage was $5.57/t. It'll be interesting to see what the breakdown will be on CashPlus.

It's a shame we don't know when they report the finals.

[mcfarms]

"The Canadian Wheat Board says critics need to examine the facts before attacking the CashPlus program.
Malting companies and groups like the Western Barley Growers Association are say they expected the final CashPlus barley payment to be at least double the $12.89 per tonne announced by the CWB.

Wheat board senior manager of barley marketing Bob Cuthbert says the avergae difference between the initial payment and the actual board sales was $19.15.

The final payment was that number minus $6.26 in costs for administration, storage and offsetting risk management.

Cuthbert says the average spread in the contracts signed by the malting companies was well below what the maltsters are saying the final payment should be.

Cuthbert acknowledges there was a wide range as earlier sales were close to $400 dollars per tonne while sales at the end of the year were closer to $200 dollars.

He notes it's possible the malting companies have based their expectations on the higher "



First off I like Bob Cuthbert have always found him to be decent and forthright and enjoyed sitting around a table with him in a fromer role I had. That said if I read this right it means that I am correct in my assumption that the board did in fact pool all the hold backs and distribute them evenly amongst all participants. So those that signed cash plus contracts at 400 then contributed 28 dollars a tonne to this pool whilst those that singned at 200 a tonne then contributed 14 dollars a tonne to this pool. Should the hold back be associated with your contract and the 400 a tonne guys be getting 21.50 and the 200 a tonne guys getting 7.50 seeems to be the largest issue here. I sold when I sold should I be getting the benefit or the penalty of when I sold or is this "pooling" acceptable within the cash plus? Thats a question that needs to be addressed in this program going forward.

[charliep]

Perhaps where cashplus can be faulted is the mechanics of the process from the time of a brewer/malster discussing price to the contracting process between the CWB/malster and finally the actual price signal to the farmer. A cumbersome and confusing process.

Other issues will be sorted away in the annual (or at least I hope). A CWB mistake in my mind is depositing the cashplus in the overall contingency fund versus treating separately in its own account. The accounting for activities could have been handled in the same envelope the cheque/payment documentation was sent in. Due diligence needs to be better in the current world if nothing else from an optics standpoint.

Still confused why the malt barley cashplus paid interest from the CWB versus having a part of the contract/being paid directly by the maltster/exporter.