CWB on malt barley... dump it and sell as feed...

[TOM4CWB]

Charlie,

I have heard numerous reports by barley growers this week...

That the CWB is expecting malt barley growers...

To deliver about 1/2 their malt into the feed market... at approx $3/bu...or... save till after Aug1/09


As there is too much malt...

and there must be a reduction in Malt supply...

For the CWB to retain market power and a premium...

Strange how the US malt price is rising again... I am told now way over the best of CWB contracts...

So why is it that the CWB 'single desk' protect everyone but the grower it was supposed to get a premium for in the first place?

[Burbert]

The HUGE barley crop grown this year, may cause some blips in the system. Cheap cow food is always in demand, however and the barley crop will likely get chewed up. Guess that the excited states, is getting thirsty for a cheap drink, ie beer, hence the malt price goes up. The CWB should be blamed for everything bad in agriculture I guess!!

[Zaphod]

I was talking to a barley trader yesterday and heard a couple of things. He said that there was a lot of good quality 2-row and 6-row barley this year. I was kind of surprised by that. What was even more interesting was that he said a vessel of barley had recently been sold to China as "feed barley with a germination spec". So the CWB can't even get malt barley prices, they have to knock it down to feed to make a sale. How's that for a premium marketer? It's clear that they are simply a price taker.

[Zaphod]

And a bad price taker at that. No market power of any kind.

[charliep]

Current European malt barley prices are about USD $175, than is down from highs of over $450/tonne this past winter. US prices remain higher with Montana malt barley selling for about USD $24/tonne.

That puts the CWB in a real problem. Choices are keep the pool malt barley pool small/payments up or expand volumes/risk a deficit.

Curious on the availability of CWB CashPlus for malt barley/price. What is peoples experience? My preference is to go this way on malt sales if possible (likely not in the current environment) - I would money in the bank versus a promise.

[charliep]

Oops. Forgot a zero on the Montana prices. Should be USD $240/tonne (USD $11/CWT)

http://www.ams.usda.gov/mnreports/bl_gr110.txt

[mcfarms]

Charlie
Haven't seen any more 08 cash plus have however seen a 09 cash plus price. Off around 20 or so percent from this years high cash plus offers.
That said canola is currently around 39 percent of it's highs and wheat is what 50 percent off its highs?

The maltster I deal with says they are fully selected for this year and I'm assuming all domestics are in the same boat so any further business will be export in nature at lower values.

As I've said for a number of years in a crop like malt barley a pool which encompasses sales made in some cases over a 18 month period cannot truely send market signals to the producer and is a mistake. Cash plus has the potential do offer a daily or weekly price but it sends a muted signal due to it's design.

[charliep]

Thanks mcfarms

I checked and no fpc on malt barley.

Would use the epo alternative (90 % although 100 % could be considered) to increase cash flow ($30 to $40/tonne more in your pocket) and protect against downside on the CWB malt barley payments.

[TOM4CWB]

Charlie,

The great lottery system must end!

Contract production is key... and the CWB wants the best of both worlds... as do the malties... without having to pay.

THIS IS WRONG.

SIGNALS must be sent... so folks don't gain unrealistic expectations in the spring... and grow and spend to produce malt... with no market on the other end.

THAT IS NOT FAIR.

Transparent market signals are key.. to the proper allocation of resourses.

Hard to understand how US growers are offered so much more for cash malt... what does that say about their marketers in charge?

How can the CWB possibly claim to be a premium marketer... when they do the opposite so many times.... and just discount?!!!

[chaffmeister]

Some price comparisons (offering prices in USD, basis origin):

Aug 1
EU.......US$315
Aussie...US$317
CWB......US$370
PRO......CD$360...(US$351)

Sept 1
EU.......US$285
Aussie...US$282
CWB......US$350
PRO......CD$348...(US$326)

Oct 1
EU.......US$229
Aussie...US$238
CWB......US$320
PRO......CD$335...(US$315)

Oct 29
EU.......US$175
Aussie...US$160
CWB......US$280
PRO......CD$327...(US$266)


Sure looks like the CWB is doing a good job for farmers - getting those premiums. In Aug they were about $50 over the competition, now its up to about $100. (And with ocean freight so cheap now, the freight differentials are too small to worry about.)

Isn't it interesting that the CWB selling price is always just over the PRO (in USD)? Perhaps they're more interested in protecting the PRO than actually making new sales.

One problem with this strategy. How much can they be selling at these prices? Watch for even lower malt barley prices and poor uptake (a small pool).

At these prices, EU barley is cheaper than Western Canadian barley shipped into Eastern Canada!!

Which is better: high prices with no sales, or lower prices and good sales?

[Hopperbin]

Chaff and why should the CWB be allowed to make that decision to lower feed price for some and improve malt price for others. In the past the CWB called poor malt prices "market buiding" So should we now call this "market destruction"?

[bgmb]

Here is what happened in the malt market this year.

1) CWB allows maltsters/grain companies to come out with contracts to tempt farmers to grow malt with high prices.
(These contracts are essentially an option to buy for the maltster)

2) Farmers overwhelmingly sign these contracts with min prices in the $6.00 range. Seeded acres are huge.

3) Maltsters now have their pick and in most cases choose not to select the high priced contracted barley and instead take other uncontracted barley in the pool.

End of story

But i`m sure you can find a way to blame it on the CWB Tom

[charliep]

bgmb

Make sure you have read over the contract and understand the cashplus. The contract is a three way. The price for the malt barley and the actual contract is between the CWB and the maltster with a payment option for the farmer as a third party. I note the contract is very specific with the maltster appplying against actual business to a brewer and the farmer committing to a supply agreement. The
CWB is there to guarantee pricing and ensure both parties meet their commitments.

To go where you want to take things with your comments, the CWB and maltsters would have to do one of the following two things.

a) The CWB lets the maltster walk on the high priced contract from the cash plus and replace with cheaper malt barley bought at current cheaper prices.

or

b) The CWB lets the farmer take the hit on the contract/price because they can't meet quality specifications etc but fills the real contract at the higher prices with malt barley delivered to the pool/returns deposited there.

For your information (from the CWB website).

Quote:

CWB is pleased to introduce CashPlus, a new cash-buying program that offers farmers an upfront, market-based cash price for their malting barley.

CashPlus works as a three-way transaction. The CWB negotiates sales price and volume with selecting companies and establishes a guaranteed in store price for farmers. Selecting companies and farmers then directly negotiate a contract between themselves. While the CWB sets a guaranteed in store price to use in these contracts, buyers and farmers have the flexibility to negotiate premiums and discounts, including freight and elevation/cleaning back off, before establishing the net price to the grower at a primary elevator location.

The CWB guaranteed price will be responsive to market conditions and CWB sales. The guaranteed price will change in response to sales and market conditions.

CashPlus also offers farmers the potential for a premium payout at the end of the year derived from any market spreads between the upfront guaranteed cash price and actual CWB sales returns for malting barley.

Farmers using CashPlus contracts will be outside of the pool. A malting barley pool will still be offered for farmers who wish to use it. Producer Payment Options will no longer be available for selected or feed barley.

End quote.

[chaffmeister]

Bgmb:

Your view of what happened in the malt market is a little off the mark.

Charlie commented already about CashPlus contracts – but I was thinking you were talking about some of the contracts that were offered independently (not a 3-way with the CWB) with minimum prices. They were aimed at “tempting” farmers to grow malt barley – the $6.00 price was slightly below the PRO. There was a great deal of fear that the PRO was too low and barley acres would shrink. This way they would have a contract with farmers, with the single desk or not.

BTW - barley acres did shrink – not “huge”. The market needed a price signal and these contracts helped, but not like you suggest.

You’re a little harsh on the maltsters. They have no reason to “not select the high priced contracted barley” because the minimum priced contracts are simple production contracts – the price the maltsters pay on those or any others is the price they negotiate with the CWB – not the farmer. The farmer gets the CWB-set price.

[TOM4CWB]

Charlie,

I am not getting the same interpretation from many malt growers as you present... selected barley is being turned down till after Aug 1/09... or being offered a flat price feed barley demotion by the CWB INSTEAD of being bought as Malt.

This obviously is price negotiation between the grower and the CWB... the maltie being the third party as Chaffmeister says.

I don't see how this is anything BUT the CWB running interference for the maltsters... to lower Malt prices to growers... to save the pool price this year.

Just as we were afraid of... this is NOT Cashplus... but Cashminus... for growers who must store into CY09-10 or drop the barley in the CWB feed pit. I am told the feed barley price being offered is $3.10/bu central AB at elevator pit.

Feel free to correct this info... was from multi-growers sources... IF I missed something.