Barley Top Up Payment

[charliep]

I'll add another complexity to the above.

As a grain company or CWB, would you short the market right now. I ask the question because I note the beginnings of some trade in western barley futures (not big open interest but at least a little bigger).

I won't under any shape or form short todays market. Therefore, I would likely try to cover risk if I was grain company or the CWB by using futures (if available). If we had a fully functional futures with good volume and members of the industry who used regularly as a risk management tool, I suspect there would have been a far quicker price response.

The current market shoves all the price risk back on farmers in spite of a significant volume of sales. The CWB and grain (they are both the same in this transaction) cover their by as close as possible going back to back on export sales/feed barley purchases from farmers.

Likely have lost everybody but the process of watching a sale come together from the price, delivery and logistics side is something that is facinating to me.

[chaffmeister]

Canada-goose:

I agree and disagree.

You said "Competition between the line companies for export sales would have reflected to the grower a more accurate feed barley price based on those export sales."

Agreed - that's the point I was trying to make earlier. But what seems to be lost in the discussion is the cost to the industry by not getting that export price reflected in local markets. It's huge. Am I the only one concerned?!

Next you said "farmers that signed up feed barley should be happy this time around. - they got the price they asked for & will get the cash upon or shortly after delivery (i think) and by the sounds of it a top up later."

You get $3.50/bu for something that is being sold for $4.50/bu and you're happy about it?!! Are you happy about it because you were told you might get a bit more (key word is MIGHT and if you do get a top-up, there's no guarantee that it'll be anywhere near $1.00/bu.)

AND - the price of the barley you're selling elsewhere - say non-CWB to the local feeder - would be much higher as well if the export values were properly transmitted to the prairies.

In the last month Australian DOMESTIC feed barley (local - farm to feeder) has risen $65/t due to export values. In Alberta - nada. Zip. Zero. Flat.

Every barley farmer out there is getting ripped off - EVEN THE ONES THAT SELL ONLY LOCALLY - and all we can talk about is logistics?!

Sheesh! It's no wonder we have a problem!!!

[chaffmeister]

Since you asked, Charlie.....

Since inception of the Contingency Fund (CF):

From PPOs ............ -48.4 million
From pool accts ...... 28.2 million
From cash trading .... 22.2 million
Interest earned ...... 2.7 million

Of the 28.2 million from pool accounts, 21.0 was from feed barley pools (75%).

Of the 50.4 million from pool accounts and cash trading combined, 43.2 million (86%) was from feed barley.

Interesting fact - all the money the CWB has taken from the feed barley pools and feed barley cash trading isn't enough to cover all the losses in PPO trading since inception.

When the PPOs and the CF were created, they were supposed to be self-sustaining. The only reason interest revenue from the barley pools was dumped into the CF was because in 01-02 the CWB had to remove interest revenue from the pool account or else have an embarrassingly large payment on an embarrassingly small pool.

How much of this latest fiasco will end up in the CF?

CF also stands for Cluster F___

[Canada-goose]

I'll try to end this - well on my end anyway
I don't think at the start of the export biz that anyone ever mentioned there MIGHT be a top up by the CWB. I never heard that.
I believe since there is a big price spread from what the farmer wanted on his GPO and got booked at, by the line companies (BTW which was better than prior domestic levels) compared to export sales price the CWB proposing to give some back to the farmer.
How CWB dispurses money & thier adm cost etc I won't get into that - too much debate how it'll be determined.

As for local domestic feed price well lots of factors are keeping the feed lot alley price from appreciating as quickly as the export.

Lots of other options for feeders to use - feed durum was a big a month ago, cheap corn DDG's offered weekly, cheap by-products (ie: mill run & malt sprout pellets), pasture's and hay in good shape. One of the biggest reasons cattle numbers are down in feed lot alley at this time, so demand is not there.
With late crops these feeders are not covered and they know higher prices likely are around the corner but they are hanging onto the thought of JACK FROST comming to town - which if a big feed wheat crop across the prairies does materialize what will the local domestic feed grain prices be now. Feeders won't give a crap about export barley price as they'll feed wheat and other choices.

The local cash market always takes time to catch up if export pricing sky rockets.

As for is he happy - probably not - but is he happy when he sells canola and the next day it jumps $.50/bu.

My point is: If you sign a contract/GPO and get the price you asked for you should be happy as it was your choice to put that price out there.(unless forced sell by the banker)

By the amount of tonnes reportedly sold alot of growers like the prices at that time.

Hopefully growers only sold 25% of production and have more to offer with a triger price of $4/bu and the export marketplace will continue to buy it.
Over & out

[IAMTHEMOLE]

At this point it is the overall lateness of the crop and the lack of combining by this date which keeps feedlots on the sidelines, not just the prospect of frost. Farmers should be motivated to keep harvesting and to minimize down time. Therefore if barley is harvested at a higher moisture and you can find an end user to take it the farmer will most likely do that as long as the price is not too bad....say 3.20 del lethbridge for 16 to 17 percent barley. Of course if the farmer has an unlimited access to aeration or grain bags this will not happen. Chances are that no tough barley will hit the export market.

[TOM4CWB]

Charlie,

It should be perfectly clear now... who the CWB monopoly works for. LIVESTOCK consumers, Millers, Malties, and the Eastern Establishment.

We must pool. Cash prices are evil.

[charliep]

Off the wall questions.

Can Guraranteed Delivery Contracts work without some type of price
signal involved (even if a muted and suspect one)?

Would the feed barley model (GDC and price via grain companies) work
for winter, prairie spring, soft white and extra strong wheats? Is this
the way the CWB will be going with changes in the future highlighting
that GDC will be the only way to contract/deliver some of these wheats?

[charliep]

Got an email from someone who asked why there aren't more questions on this issue.

From a newsletter I get.

Japan bought 2 large parcels from Canada on tenders past month for Sept/Oct last trading around USD $255-260 FOB. MY COMMENTS - WORKS BACK TO $4.50/BU ALBERTA.

CWB will continue to pursue export interests as long as they can source from domestic market. They have a built-in margin by keeping the lid on domestic market levels. MY COMMENTS - LESS LIKELY TO MAKE THEIR MALT BARLEY PRO/CASHPLUS LOOK BAD OR HAVE FARMERS WALK ON CONTRACTS.

[charliep]

More numbers.

Grain companies apparently did the business at about Cdn $210 to $215/tonne Instore west coast (likely Prince Rupert). Full cost rail, elevation etc back to Alberta elevator - $50 to $55 ish (full cost recovery/no risk). A further $15 at port for fobbing (handling/loading ship). Sale price loaded vessel $255 to $260 (not sure in previous quote whether Cdn or USD $). That leaves $25 to $30/tonne CWB margin to 1) cover bad says over the year, 2) paid back to producers who participated in the program, 3) paid into the pooling accounts as an administration fee or 4) transferred to the contingency fund.

[charliep]

Mistake alert

That leaves $25 to $30/tonne CWB margin to 1) cover bad SALES over the year,