CWB/Maltster initiative pays farmers more upfront

[charliep]

Just a note to highlight the CWB malt program. With apologies for not taking more time to go into, I will simply provide the link to CWB press release.

http://www.cwb.ca/en/news/releases/2002/101602.jsp

Thoughts?

[TOM4CWB]

Charlie,

What about the folks who already delivered Designated Barley, this crop year, can they participate?

[charliep]

Tom4cwb

Anyone who has delivered malt barley already will have to negotiate with their the maltster directly - it is not a guarantee/right to this program.

The program is being set up/financed by the malt industry directly in an attempt to attract supplies. The maltsters are still paying full market price when they buy malt barley.

In this program, the malster is advancing (almost like a bank) the difference between the initial payment and at least 95 % of forecast finals - there is no CWB involve in this program (as with the early pricing options). The way they will get paid back is by taking an assignment of any adjustment/final payments up to the amount they have advanced the farmer. The maltsters are also providing a minimum price contract in that they are at risk if total payments are below the this adjusted initial.

The program only applies to malt supplies delivered to the domestic malt industry (unless exporters want to fund a similar program).

You still qualify for any interest/storage payments provided by the CWB for malt barley selected this fall/not delivered until sometime early to mid 2003.

I find this program interesting from a policy standpoint (assuming a precident has been set now). Does this mean that other value added industries (eg. millers etc) can provide higher initial payments and then take assignment of finals? Can a bank/other credit institutions take an assignment of adjustment/final payments? Can this happen now (i.e. the farm manager nevers sees the final payment but rather the cheque gets mailed directly to someone else as occurs now in the case of crop share landlords)?

[AdamSmith]

Charlie the question I have is this, Is the Sept. PRO value the true market value for malting barley?

SW MB feed bids are $3.35-$3.60/bushel. Elevator bids are the lowest of course.

The malt/feed spread in ND is around $US 1.00/bu. that's $1.55 here. This is 6-row Robust as the benchmark, I would assume 2-row would be worth at least two bits more.

$3.35 plus $1.55 equals $4.90 for malting. $5.15 for 2-row

The price I was quoted today from Ag-Pro Boissevain under the new program for Special Select 2-Row was $4.22, Select was $4.11.

Again, where's that other dollar?

This program is an improvement to what we had but then again anything would be an improvement to what was offered.

I'm guessing that farmers will respond favourably to this new initiative, not because it's exactly what their looking for but because it's an improvment over what was there before.

On a scale of 1 to 10 I'll give this a 3. The old system was a .25.

[charliep]

Again the question comes down to comparing a pooled price to the CWB one. How much was foreward priced in the pool? Are there still export sales on the books at lower prices? Are there costs being absorbed by the pool in terms of bought out contracts the CWB is not able to fill?

The current price the maltster is paying is well above the posted initial payments. The pain the maltsters are enduring right now is they are paying the high prices you mention, funding the difference between initial payments and the amount paid out (realizing they will collect on adjustment payments during the year) and taking on the risk of having actual returns below the current forecast. Combine the above with poor quality barley crop and you have a disaster for maltsters. My expectation is that maltsters will be re-examining their investment decisions with a likelihood of loosing at least one.

Do you have a web source for N. Dakota malt prices? Montana is located at http://www.ams.usda.gov/mnreports/BL_GR110.txt

Current malt barley price at Great Falls is about $3/CWT or $4.60 Cdn.

Price at Minneapolis is about $3.50/bu or about Cdn $5.60/bu with the $1/bu about transportation cost.

source: http://www.ams.usda.gov/mnreports/MS_GR110.txt

[AdamSmith]

Charlie, with my DTN service I get the North Dakota Bids/Auctions pages which have very close to 100 ND terminals listed by town or county. They have price postings for all ND grains which are updated once per day.

I sometimes use a composite of 3 or 4 locations or if I have time I can work out an avg. price.

These prices are all quoted in bushels.

Rolla ND had $US 1.92 feed bly, $US 2.95 malt.

Rugby ND had $US 1.90 feed bly, $US 3.00 malt

[charliep]

Adamsmith

Can you help me explain why US feed barley is so cheap? Your DTN prices equate to about Cdn $3/bu. Montana barley is just a shade higher (Cdn $3.50ish/bu. Why isn't more US feed barley coming North into Canada? Are these prices (including malt) an accurate reflection of prices? Are there DON specifications on this product (i.e maximums on allowable microtoxins).

[TOM4CWB]

Charlie;

On the feed barley...

It sort of reminds me of feed peas...

A number of times the local elevator quotes $4./bu, yet none actually trades at this price...

When the trade seriously needs feed peas... then they offer $5/bu...

Then farmers sell... or they cut an unposted deal, like my flax sale was for the biggest part...

This is not transparent, but often marketing simply ends up being two parties meeting each others needs... through closed negotiation...

But you are one who knows these things... obviously I am not telling you anything new...!

[AdamSmith]

Charlie, with respect DON levels, I know the ND standards are not nearly as strict as in Canada. I think the base level is 2ppm vs. .5 in Canada.

Much of what would be feed in Canada would trade as malting in ND.

Feed is the really crappy stuff. Very high vomi levels or very low test weight.

My guess is that very little barley in ND is traded as feed.

This is all speculation but I could make a couple of calls and find out what's what with ND barley.