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

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    #11
    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"?

    Comment


      #12
      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

      Comment


        #13
        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.

        Comment


          #14
          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.

          Comment


            #15
            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.

            Comment


              #16
              bgmb,

              "find a way to blame it on the CWB Tom"

              What did that mean?

              Comment


                #17
                I had forgotten about the maltster/exporter malt
                barley production contracts.

                All need to read contracts before signing.

                1) Was the production contract between the
                maltster and the farmer against an actual brewery
                sale? If it was, then the price the maltster paid
                was high (the CWB would have seen to this). We
                don't know how much the CWB has forward sold
                maltsters for export business into the pooling
                system and how much is sold under the cash plus.

                2) If the production contract wasn't offsetting a
                sale, did the farmer/maltster use another risk
                management tool to cover risk? At the same time
                that the minimum price contract was being offered
                for malt barley, something close to $5/bu was
                available in the feed market. Being creative, a
                maltster could have offered a relatively high valued
                malt barley price and if it didn't meet specification,
                a good feed price as well.

                3) Did the maltster put the contract specifications
                in the contract? What were the terms around
                rejection of a sample/contract?

                Comment


                  #18
                  Tom:

                  Here’s some numbers that are getting kicked around (by the CWB):

                  2.5 mmt malt barley production this year (meeting high malt standards)

                  1.8 mmt malt barley pool expected (not yet sold) (The average over then last 5 years is 1.9 mmt)

                  1.6 mmt malt barley already selected (not all with a home yet – remember, “selected” does not necessarily mean “sold”)

                  This means that, according to the CWB, there will be 700,000 tonnes of malt quality barley that won’t make it (2.5 minus 1.8).

                  But to get to 1.8 mmt, the CWB is going to have to sell. And according to price indications they have in the market, they aren’t going to do it. But, if they’re telling farmers to store til Aug 09 (a dangerous practice with malt) or take feed price, this means they want to reduce the pool size. The only reason for this is to protect the PRO.

                  If this is right – if the CWB is trying to talk guys out of their malt selections - it sounds like they’re concerned that they won’t be able to sell even the 1.6 mmt of current selections – and keep the PRO from totally collapsing.

                  The more I read stuff like this the more convinced I am that the CWB is aiming for a smaller malt pool to keep the PRO up. The only reason for this is that they seem to think they get judged on price alone, and not total returns.

                  Does selling selected barley on an EPO guarantee the CWB will take it? If so, maybe accepting $291.25 (yesterday's 100% EPO instore Vancouver) is better than hoping to get $327 (the PRO), with the very real possibility of only getting feed value.

                  All in all, it’s a totally dysfunctional mess.

                  Comment


                    #19
                    The only way to get out of this gracefully for the board would be to open a second pool however without the ability to close the pool and open a second pool to reflect current values and or do only cash plus offerings the board is in a untenable situation here, they've been here before and haven't learned.

                    Comment


                      #20
                      A big reason for the big malt crop is the weather, but that's always the biggest factor. Cool temps make for plump, low protein barley. Actually, the barley merchant I talked to suggested that there were roughly 5 million tonnes of malt quality barley in western Cda. The points about the CWB needing to make sales are very valid though. In any case, the malt PROs will be heading lower. It's just a matter of when.

                      Comment

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