August CWB PRO - the Real One

[wilbur]

CWB released the PRO today. Wheat ex durum up $15 to $19/t. Durum up $11/t across the board. No changes to malt or feed barley.

Full details at http://www.cwb.ca/payments/pro/2002-03/082202.shtml

Malt barley is the shocker. Given the current price signals and quality of this year's crop, the western Canadian malt industry is dead in the water.

[wilbur]

Malt barley is the shocker!! Obviously they've(cwb) got themselves locked into long term contracts or they would'nt have to make the following statement?
Quote from CWB site: "Designated Barley
The global malting barley market has been supported in recent weeks by the dramatic reduction in Canadian export supplies, coupled with on-going drought in some of the key barley growing areas of Australia. However, large carry in supplies in Australia and generally good harvest conditions in the EU are keeping pressure on global malting barley prices. In the next several weeks, North American harvest weather and Australian moisture conditions will be major factors for the malting barley price outlook."

Is a producer required to export when he does a buy back? I'm thinking do a buy back & then peddle it to the maltsters. Likely cost prohibitive if I have to take it across the border & import it back into Canada.

[wilbur]

You can hold out for a premium over the initial payment. There is nothing prohibiting the selector from paying you more than the initial payment at the time of delivery.

Tom

[charliep]

Tom

Are you suggesting the domestic malsters forward priced a lot of their malt barley needs this spring (at lower levels) and the PROs reflect this? The only way for the farmer to get the money out of the maltster is to squeeze for a premium (effectively make it a cash market)?

When the CWB prices new malt barley sales, are you pricing at European equivalent levels to maltster and allow them to pay premiums to farmers to reflect the north american market or still pricing at North America levels (assuming the malt product is destined to this product)? What about off shore malt product sold in competition with European product?

Am I right that there is no early pricing option for malt barley?

When the smoke all clears this year, the CWB is not going to have a lot of friends in the barley industry.

[wedino]

Charlie, I can tell you the cwb is asking North American levels. Aug 23 buyback for 2 row = $118, 6 row = $98. If my math is correct this makes 2 row $43 & 6 row $25 greater than PRO. I forgot to get feed buyback, darn.

[charliep]

Difficult times for a value added industry. Facts.

1) There is virtually no malt barley available in western Canada.

2) The world (at least to date/excuding any impact of Aussie draught) is well supplied with malt barley and malt barley product. The CWB continues to highlight this in there pro backgrounders. North American prices are higher which is the market we should be selling to. This signal is not getting into the pool return outlook.

3) The maltsters likely have pricing contracts with the CWB they priced last spring and used this information to forward contract malt product price (a good decision on all sides as mechanism to manage risk/margins). Now that we are in the drought, the CWB waffles using the reason there is none but maltsters can use premiums to capture what is there. Under the current situation, how big a premium would a maltster have to offer to get delivery on product?

4) The CWB will be pricing any new malt business at high north american malt barley prices - getting the last penny out to contribute to returns to pool. None of this new business translates into higher pool returns that farmer see. Farmers refuse to deliver malt barley because the feed market pays more. Maltsters have to pay premiums to be competitive. Margins are horrible. This situation is not sustainable from a maltsters standpoint. They shut down.

The thread has asked some pretty hard core questions about what the CWB contributes to barley (both malt and feed). The discussion needs to continue.

[AdamSmith]

I am 1/2 done a 320 acre field of Stratus 2 row barley. Test weight is 47 1/2 lb. I am straight cutting and it's going into air at around 14.5% moisture.

Early reports are that fusarium or vomi levels, in this part of MB (southwest),are low. (I’m waiting on the test results.)

Although I'm not a selector or buyer, I am a producer so maybe my bias is showing but this barley should sell with a premium for malting.

But the overwhelming evidence is that it won't.

Why? Because the malting barley marketing system as broken down to the point where we will have no malting industry in this country after this year.

The greatest flaw is the CWB grading discounts and that the pooling pricing system isn't responsive enough to reflect actual values back to the farmer.

The only, ONLY, solution is to let all barley trade freely.

CWB tinkering and jiggering are NO solution.

It very simple really. We either continue with Keansean Economics (a proven failed theory) or we finally adopt the economic theory of Fredrick Von Hyack (sp?)(free enterprise).

The rest of the world after experiencing the failures of Keansean economics found relief and solutions with Hyack. Why are we so different?

Let the buyers and sellers negotiate on malt because we’re negotiating on feed and it has proven to be the overwhelming choice amongst farmers.

[parsley]

Every farmer eying up the barley malt market should apply to the CWB for an interprovincial license to sell the barley directly to the maltster. The CWB Regulations state, "No fee shall be charged", so the Board's only option is to deny you the license.

At that point, ask for a written reason for the denial. Keep all correspondence. We'll compare notes. They're handy in a class action.

The CWB cannot deny interprovincial licenses
because you live in a certain town ,
because you have hangnails or
because your wife is ugly.

Don't take the first " no" for an answer.

It's all part of effective marketing.

Parsley