CWB Barley Contract

[pickarock]

Hey could someone shed some light on the CWB Barley contracts they were talking abt on Jim Fisher today. Started Sept 2 and goes till Sept 30. They were promoting it as a good one. What do ya think.

[rain]

Depends where you live. Take 90% of the Feed Barley PRO less your deduction (grain company Stuff) $2.00 administration charge. Gives you a net price. Fine the best nonboard barley price and compare.

EX. ($157*90%)= $141.30-$42-$2.=$97.30/MT or $2.11 minimum Price.

Nonboard $121.00 delivered Strathmore AB - Truck freight.

I am hearing down here up to $10.00 trucking incentive for CWB Feed Barley

[charliep]

The only program I know of is the guaranteed delivery program combined with an early pricing option.

Details of the CWB web site are as follows.

The CWB is again offering a Guaranteed Delivery Contract (GDC) with an Early Payment Option (EPO) for feed barley. Farmers who commit their feed barley to this program will receive delivery calls by November 30, 2003 along with the option of receiving earlier payment for their deliveries through an EPO.

The CWB guarantees 100 per cent delivery acceptance on the contracted tonnes. Farmers are responsible for delivering their committed tonnage under the GDC through delivery calls specific to this program. The CWB may offer similar GDC's with sign up deadlines in subsequent months until enough feed barley supplies are committed by farmers to meet marketing opportunities.

Farmers have until September 30 to sign up for a feed barley GDC. The CWB reserves the right to cut off the program once sales requirements are met. Eligible grades for delivery under this program are Nos. 1 and 2 CW barley. A minimum of 20 tonnes must be offered.

The PRO is $156/t at Port or about $110/t based Alberta elevator. Current feed barley prices at Portland are $190/t and Great Falls - $137/t. As indicated in other threads, the feed barley market is high priced now because of the drought in the EU/other parts of Europe but Australia will start to sell aggressively starting early in 2004. Actual CWB returns will be 100 % dependent on CWB sales timing.

If you are going the CWB Guaranteed Delivery Contract, I would ensure I use the 90 % EPO. The discount is $5.50/t resulting in an up front payment of about $90/t ($1.95/bu) with a promise of another $15/t.

Should farmers consider this signing this contract?

[charliep]

Interesting comment on trucking premiums for grain company deliveries. There are also extra dollars if you load a producer car.

Just as a note, industry sources indicate the the CWB has tendered and accepted about 2200 cars of feed barley from the grain companies. At 90 tonnes/car, that is 200,000 tonnes of feed barley for export. Sounds as if farmers have been signing CWB contracts fairly aggressively but there still is likely a net short to current committed tenders.

An interesting world we live in. Farmers selling feed barley without a firm commitment on price. Grain companies blowing their brains out on tender discounts and paying trucking premiums to get volume up the drive way. Someone will have to explain this logic to me.

[rain]

Charlie the problem is lack of demand by feedlots and uncertainty about buyers’ solvency. If you throw in the EPO at 90% go the CWB and still be open for the CWB lottery.

[charliep]

I appologize for throwing some numbers into this discussion but I thought might provide some of the supply demand stuff for your decision.

Total supplies for 2003/04 crop year - 13 to 13.5 MMT (July 31 carryin - 1 to 1.5 MMT [watch Monday], production 12 ish MMT), seed - 500,000 t, domestic malt - 1 MMT, CWB exports 1.5 to 2 MMT, comfortable July 31 2004 carryout - 2 MMT. That leaves 8 MMT available for feeding. Our normal feed consumption has been around 10 MMT. Implication - feed grain supplies are tight to the point Alberta/western Canada could be a US corn importer again in 2003/04.

Implication - the export market is the market to go to right now. The kink in the armor is the fact farmers are not getting the full export price signal and from there your faith in the CWB to shut off the feed barley taps when/if prices come off this winter as the Aussie gets more aggressive selling. If the CWB is successfull at attracking supplies this fall and cattle start filtering into feed lots this spring (there is still lots of mouths out there to be fed this winter) creating demand, the domestic market is likely to respond with higher prices this spring. The health of the feeding industry that Rain talks about is something that will have to be watched.

My assumption is the border will open for finished cattle before feeders. A consulting company I have a great deal of faith in suggested this may happen in the opposite order - feeders first. Feeder cattle would flow south like crazy with feed demand disappearing for Alberta barley as well. This is my worst nightmare.

Some interesting times ahead.