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

[Fransisco]

The CWB’s recent announcement of the final Cashplus payment to barley farmers for the 2008-2009 year has surprised and disappointed the members of the malting industry given the value back to the grower that was anticipated. The industry is now asking “where’s the rest of the payment?”

Maltsters purchased a significant volume of the Board’s Cashplus barley offering in 2008 – 2009 at much higher values, thus expecting the final payment to farmers to be at least double the amount of the $12.89/mt announced by the CWB.
“The figure is based on the price paid to growers and the “Cash” that the CWB held back in Maltsters’ contracts and presumably other barley industry member’s” says Phil de Kemp, President of the Malting Industry Association of Canada.

The final payment to producers reinforces the malting industry’s position that the program as presently managed by the CWB, continues to be uncompetitive, complicated, cumbersome, and extremely expensive to administer. There is also a concern that monies held back from farmers supplying the domestic malting industry may be used to promote sales of malting barley to our offshore competitors. The program continues to send non transparent price signals to farmers and that appears to be validated by the low payment announced by the CWB says de Kemp.

Costs attributed to the CashPlus program now in its second year continue to remain unclear and the industry is still unsure whether the program costs are required to be fully disclosed and itemized by the CWB to farmers. “I guess we’ll wait and see what the latest annual report shows. It will be up to farmer’s to decide if they think the costs are reasonable or excessive” says de Kemp.

The malting industry has always advocated that the CWB must maximize the amount of “upfront” payment to producers in the program to ensure as much price effectiveness as possible. The low final payment results were released to the industry last Friday in a meeting with the CWB. The CWB needs to provide greater price effectiveness, more accountability and significantly reduce the excessive administrative costs experienced by both the CWB and the value-added malting industry who are trying to remain competitive in a fiercely traded global market.

The industry is committed in trying to work with the CWB and other partners in the industry in a cooperative and proactive manner; in an attempt to provide the best possible marketing solutions as possible under a marketing system that constrains value-added activities.

The Malting Industry Association of Canada represents the four major malting companies in Canada. They include: Canada Malting Company Ltd with plants in Calgary, Thunder Bay and Montreal. Rahr Malting located in Alix, Alberta. Prairie Malt Limited in Biggar Sask., and Malteurop Ltd. located in Winnipeg. Collectively they are the largest customers of the CWB buying approximately 1.1 million tonnes (or 60% of the entire CWB pool) of malting barley annually. Canada has now fallen to the 3rd largest world exporter of malt behind the E.U and now Australia.

[Zaphod]

This Just In: The CWB is inefficient! Film at 11.

Good to see we're not the only ones complaining. So where did that extra money go? To farmers? Nope. The Black Hole on Main Street? Absolutely!

[Burbert]

Enough is never, enough for some people! Once again the evil, dastardly, crooked, mean spirited, corrupt, dirty, low life, scum suckers, at the CWB have AGAIN cheated the poor, helpless farming public out of their hard earned cash, by the Cashplus scheme, scam. This situation would be solved, by an open, dog eat dog, free market, where grain companies, being the honorable people they are, wouldn't cheat anyone, anywhere, anyway. Cause they know that the exist at the whim of the farming public, cause without farmers they cease to exist. Just think, more, more efficient railways would then be built to, to help farmers in every way possible, to feed the world all at a fraction of the current cost. Yup the future is bright once the CWB ceases to exist.............

[Fransisco]

I agree zaphod, hat's off to the maltsters for speaking up.

[Fransisco]

I wonder where the money went? Contingency fund maybe?

[Zaphod]

Burb, it's competition that keeps people honest, not bureaucracy or regulation. Even if you look at things from the worst perspective (which you seem to do), we could at least choose which crook to do business with. Currently, we have no choice about who picks our pocket. It's the CWB.

I agree that some of the extra money will end up in the contingency. It will be interesting to see admin costs for the 08/09 malt pool. Too much smoke and too many mirrors for my liking.

[charliep]

The extra money from the cash program was not accounted for separately in its account but rather handled in the overall PPO contingency fund. Documentation on how allocated and slippage into the overall contingency fund to cover the deficit in the 2008/09 crop year should be in the annual report released in February.

A place to follow again with be profits (assuming they have occurred) from feed barley cash sales. I often here about a cashplus program for feed barley in 2008/09 but never see any reference into how profit/risk is handled. Last year feed barley cash trading profits were deposited directly in the contingency and used to offset deficits.

[parsley]

A competent, confident Canadian Wheat Board Minister would formally request detailed, broken-down information from the CWB, and publish it in a Agric-Agri Food press release.

Producer organizations can have a media hay day with this, as well as coming to the support side of the Maltsters. Pars

[kato]

Ranchers is up and running again this morning. Sort of. Check you pm's.

[Fransisco]

For immediate release

<b>WBGA asks “Where’s the Money?”</b>

Airdrie, AB. – December 9, 2009: The recently announced final payment on the CWB’s CashPlus malt barley contracts has left some unanswered questions and uneasy feelings among farmers.

According to the CWB Bulletin, “2008-09 CashPlus participants will receive an additional payment of $12.89 per tonne.”

The Western Barley Growers Association (WBGA) has been informed that the estimated average hold back by the CWB on CashPlus malt contracts was $25.00 per tonne. “This is a long way from the $12.89 per tonne final payment that the CWB just announced”, says Brian Otto, president of the WBGA.

The additional payment is meant to be the difference between the upfront guaranteed cash price to farmers and the actual CWB sales returns, minus costs.

“What we’ve been told indicates that the CWB’s CashPlus “costs” are about $13.00 per tonne, compared to typical CWB administration costs of about $3.00 per tonne” states Otto. “Since there is no risk to be managed by the CWB on CashPlus contracts, there are no other costs involved, and $13.00 per tonne for administration costs is excessive, there’s something missing.”

“The WBGA is disappointed that, although there is no stated provision to allow it, the CWB appears to have diverted a substantial amount of the sales returns for malting barley to somewhere and someone other than malting barley farmers”, says Otto.

CashPlus is not living up to its promise and farmers need an explanation.

The malt business in Western Canada is struggling to compete in the global market right now. “It weakens our competitive position in the world to either assess excessive costs or to arbitrarily divert money from the growers of malt barley. I’m sure that was not the CWB’s intent, but that is the result”, says Otto. “How does this fit with the CWB’s stated goal of maximizing producer returns?”

It has become clear that CashPlus falls far short of the industry’s needs. The malt industry needs the freedom to deal directly with malt barley producers. Is it time for Market Choice? To build a strong and competitive domestic malt industry, the WBGA says yes.

Western Barley Growers Association is a strong voice for a vibrant, market responsive barley industry in western Canada.

[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.