Comments in Old Crop Barley PRO Commentary

[chaffmeister]

AdamSmith was looking for solutions about the CWB in the barley market. The key to the CWB in the barley market is malt and it seems to me that the current market may be the solution. Current feed barley PROs don’t compete with current domestic feed prices – if the CWB had a problem last year, they ain’t seen nothin’ yet. Even the malt PROs shouldn’t attract much - 2Row at $207 at the port, using Charlie’s $42 to get back to Alberta makes it $165 vs a local feed barley price around $180. 6Row’s at $190 – 42 = $148. Who’s going to go malt at these levels?

I’m hearing that the export price for malt has not enjoyed the same run up as in other markets for whatever reason – such as being held down by EU subsidies. This relatively low price for export malt means the domestic maltsters need to source at relatively lower prices as well and probably can’t compete on price with the domestic feed market in order to serve the export malt market – about two thirds of their demand. If this is true, the maltsters are not going to do well this year – CWB or not.

So the key question is, how well will the CWB serve the malt industry this year? Will the CWB shift all interest from the feed barley pool into the malt pool - to give it a boost? Will that be enough to change the PRO enough to change some farmer’s minds?

[chaffmeister]

TOM4CWB:

What do you mean by "drained out as subsidies on sales of barley to the US..."

I'll take your word on the price levels but here's how I see it. If the feed barley buy-back was 155-160 this compares to the PRO at 180. But remember, $45 of the PRO is interest, so the REAL average selling price was about $135. If barley was going into the US at $155-160, this was somewhat better then offshore sales. (Makes the offshore stuff look even worse.)

[TOM4CWB]

Chaffmeister,

The Subsidies are the difference between the $180/t PRO and the buy-back price charged to recieve the CWB export licence, of say $155/t.

Now the CWB will issue, through the interm and final payment cheques, $25/t subsidy for shipping this barley to the US.

There is nothing in the CWB Act that ever authorised the CWB to PAY money to the person applying for an export licence, but in some cases in the past the initial price has been above the buy-back price from the CWB, and the CWB actually pays the person for issueing the export licence, even before interm and final payments.

As Parsley has correctly stated, this buy-back system is not supported by the CWB Act, but infact is fraudulent when the CWB Act in section 32 says "offered to the CWB".

If the CWB started following the CWB Act, and didn't FORCE producers to offer their grain to the CWB (which isn't offering the grain but simple extortion and expropriation), then the draining of the pooling accounts couldn't happen when the CWB selling price goes below value/t that actually exists in the pooling account.

It is obvious the CWB was meant to just issue export licenses to farmers who chose not to use CWB services, if the CWB Act was applied according to the way it is written.

Then the CWB would not buy-back barley at a loss to the pooling accounts, and to the detriment of "designated area" producers.

It is clear to me that the CWB has no legal interest in grain that has not been offered to them, therefore they have no obligation to apply the single desk monopoly to that grain.

Section 14 of the CWB regs then about the opinion of the Board, and looking after their interests, cannot apply when they infact don't have an interest in grain that is not going through the grain handling and export system they control.

I know this is all hard to understand, but hopefully you can see what I am talking about, can you?

Charlie,

The Topic Rod and I were chatting on, about CWB barley interest earnings, is the last topic; Does the CWB undertand marketing; that shows up on this site, I believe July 8 was the last chat date.

Interesting what a mess the CWB has got itself into by failing to follow the original intent and purpose of the CWB Act!!!

[TOM4CWB]

Chaffmeister,

The reason I got into this whole situation is the export of pedigreed seed.

Since Export Pedigreed Seed wheat and barley do not pass through CWB controled facilities, the CWB does not force the buy-back on those who export pedigreed seed, except for me of course... Pedigreed Seed is not under the Canada Grain Act, therefore the CWB usually leaves it alone... even though they could expropriate it in the same way they do unregistered varieties and organic grain that does not use CGC grades in the export sales contracts.

The same goes the wheat and barley that goes into manufactured feed, that is exported into the US, without a buy-back when it consists of over 25% of the total of the feed.

Does this help???

[chaffmeister]

What threw me was your use of the term subsidy. Really, what I think you mean is that, through the buy-back, you are buying grain from the CWB at 155 but selling it to the CWB for 180 (once all is said and done with final payments, etc). See, I don’t see the difference as a subsidy – it’s simply the difference between the US market value and the pool return. Says simply that the US price was below the pool price. But as we all know now, $45 of the pool price is interest revenue and the $155 price into the US is actually better than the average selling price of $135 in the pool. Sounds goofy but if more of you guys had bought your barley back at $155-160 from the CWB, the PRO would have actually been higher than the $180 !!

Can you buy barley from the CWB through the buy-back and not ship it to the US? In other words, could you have sold all your barley to the CWB at $180 (PRO), bought it back at $155, pocketed the $25 and then sold it into the local feed market? Or does the CWB make sure that you actually take it across the border?

[TOM4CWB]

Chaffmeister,

I see your point, however I have a hard time believing the CWB would charge the Japaneese less than $180/t, and if they did... they should look real hard in the mirror...

Without hard numbers on who the CWB sold to, and at what prices, it is impossible to figure out what they are up to...

Export barley bought back from the CWB is required to remain in the US, and cannot be exported, with required paperwork to assure it is consumed domestically in the US...

I cannot believe for a second that the CWB sold 51lb barley, (1CW Feed Barley test weight)because there are some premium markets that could be serviced at higher prices than $2/bu, I am sure...

Has the CWB just given up on the feed barley marketing side?

But Chaffmeister, don't you agree that the CWB shouldn't be bleeding off the pooling account to pay for exporting barley to the US?

This whole situation is frustrating and insane to say the least, why does the CWB need to control and spoil barley marketing?

[charliep]

Just a note that current feed barley prices in Great Falls Montana are Cdn $145/t. This is anywhere from $20 to $40/t less than Lethbridge prices (based on Alberta Grain Commission surveys). Montana barley moved north over the past crop and will do so again in 2002/03.

Another interesting comment is that there is at least some potential that domestic maltsters will import US malt barley in 2002/03. There is not enough malt barley (particularly given current PRO signals) to satisfy the domestic maltsters needs.

[charliep]

Tom4cwb

Actually, sorting out what happened on the barley pool would be less hard than you think. Look at when export feed barley shipments were made (CGC Monthly export report - likely 2 times 25,000 for a Japanese vessel). Look back at Portland feed barley price 1 to 2 months prior. Bingo.

[chaffmeister]

Tom, perhaps my question wasn't clear. Your response:
"Export barley bought back from the CWB is required to remain in the US, and cannot be exported, with required paperwork to assure it is consumed domestically in the US... "

I wasn't thinking about shipping barley to the US and then back to Canada (or anywhere else). I was thinking about (1) selling your barley to the CWB to collect the $180 pool return, (2) buy it back from the CWB at $155-160, pocket the change and (3) don't even ship the barley at all.

Does the CWB actually monitor barley shipments to the US to ensure that the barley they sold to you actually goes south and the export permit it issued is actually flashed at a customs agent somewhere??

[chaffmeister]

Charlie

Earlier today I tried to track down exports of feed barley as you suggested above. The CGC monthly shows barley exports by destination but makes no attempt to indicate whether it is feed or malt barley. Can't recall exactly (I'm at home, the CGC report is at my office) but I think Japan has taken more than the 56,000 tonnes in the pool.

Then it dawned on me, the barley pool is not based on exports, it is based on receipts.