Protein payments for malting barley

[JD4ME]

This was just put on the CWB website when I went to look at the daily ppo's.

Commments??????



Aug. 18, 2005

Malting barley protein payments introduced by CWB

Winnipeg – The CWB announced today that it will pay protein premiums to farmers who deliver two-row malting barley to participating elevators and maltsters (see attached) in the 2005-06 crop year.

"Designated barley protein payments will more clearly communicate market signals to farmers," said Earl Geddes, CWB vice president of Farmer Relations and Operations. "Farmers who produce more precisely the quality that maltsters want will now reap the benefits of those efforts."

The premiums will range from $5.40 for protein levels of 10.9 per cent and lower to $0.60 for barley with 12.5 per cent protein, reflecting the relative value of these protein levels to brewers and maltsters (see attached schedule). Protein levels are one indicator of malting characteristics. Levels that are too high or low can affect malting and brewing quality.

"This program will reward farmers who manage their crops to produce the protein levels valued by the malting and brewing industries," Geddes said.

Having access to a larger pool of malting barley in the premium protein range will aid the CWB in expanding malting barley sales opportunities for western Canadian barley growers.

The program follows up on CWB protein payments for wheat that have been available for several years. It will result in a more clearly defined and equitable distribution of designated barley pool earnings to growers than the present grades alone allow.

Consultations with farmers had identified protein payments as an important issue. The CWB also consulted with the grain and malting industries to formulate the program. It will be a pilot program for the 2005-06 crop year and will be evaluated after a year of operation.

The CWB and participating industry partners will jointly administer the malting barley protein payment program. It has been made available to all grain handling agents and malting companies for the 2005-06 crop year. Those who have chosen to participate are listed on the attached sheet. Grain companies and maltsters that wish to join the program in the coming weeks remain eligible to participate.

Protein premium payments will be based on protein tests of delivery samples, as verified by a third party. Payments will be made within 30 days of delivery. The program is currently limited to two-row malting barley because its market has the most clearly defined relationship between protein levels and prices paid by end-use customers.

Controlled by western Canadian farmers, the CWB is the largest wheat and barley marketer in the world. As one of Canada's biggest exporters, the Winnipeg-based organization sells to over 70 countries and returns all sales revenue, less marketing costs, to Prairie farmers.

For more information, please contact:
Maureen Fitzhenry
CWB communications consultant
Tel: (204) 984-7747
Cell: (204) 479-2451



--------------------------------------------------------------------------------

Participating industry partners in the CWB protein payment program for two-row malting barley, as of August 18, 2005:

Canada Malting Co. Ltd.
Prairie Malt Ltd.
Delmar Commodities Inc. Seed-Ex Inc.
Fill-More Seeds Inc. Rahr Malting Canada, Inc.
Gambrinus Malting Corp. Westlock Terminals (NGC) Inc.
Great Northern Grain Terminals Ltd. Westmore Terminals Inc.
Mid-Sask Terminal Ltd.



Schedule of protein payments on 2005-06 two-row malting barley deliveries
Protein level Payment adjustment
(operated on the basis
of additional 30 cents
for each 0.1% below 12.5%) Comment
13.0% and above $0.00 Companies can still select
12.9% $0.00 Companies can still select
12.8% $0.00 Companies can still select
12.7% $0.00 Companies can still select
12.6% $0.00 Companies can still select
12.5% $0.60
12.4% $0.90
12.3% $1.20
12.2% $1.50
12.1% $1.80
12.0% $2.10
11.9% $2.40
11.8% $2.70
11.7% $3.00
11.6% $3.30
11.5% $3.60
11.4% $3.90
11.3% $4.20
11.2% $4.50
11.1% $4.80
11.0% $5.10
10.9% and below $5.40







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[silverback]

Can any of you malt growers please explain how you could keep protein below 10.5% and still produce enough bushels to be profitable? I was always taught that balanced nutrition with "just enough" nitrogen grows the best crop. In our area, even if you used no nitrogen, I don't think we could hit the max premium. Is it easier in Sk or Man.???

[charliep]

Also looking for thoughts. I am involved with a barley project that is looking at market signals.

What are others thoughts?

My comments.

1) What is the background to how the spreads were established? Wouldn't it be better to have a market based system where premiums are paid attrack supplies to satisfy a customers needs? This signal would draw specific protein malt barley forward as needed.

2) In a street malt program where selection/payment is the elevator driveway, why pick on this one very specific quality factor? What are costs associated with running this program keeping in mind the system is geared to blending anyway? When the smoke clears in the export market, it is the grain company that is likely to have made the sale (responsible to customer) and who will have to source from the farmer to meet the contract specifications (needs to provide incentives).

3) Does this move malt closer to a pull system for the domestic malt industry? This assumes that all customers what low protein/have similar discounts for higher protein. US markets (for the most part) can handle higher protein than export. Wouldn't it be better to have a system that reflected value that buyers placed on different qualities/characturistics and used this information/price signals to draw supplies forward as needed?

Silverback - I think you are right in that it will make the malt versus feed decision more clear. The reduced yields to make the protein specification has potential to make malt barley a less profitable crop unless the price side increases.

[silverback]

What is the percentage again of how many tonnes are selected for malt and how many are actually grown?

It just seems incredibly hard to justify trying to grow malt barley.

If anyone cares to help me understand it - I would be grateful.

[silverback]

Sorry, I just forgot to ask if the acceptance vs. production percentage of malt barley is getting better or worse over time? On the surface it appears it is much harder to get accepted than it was 5 to 10 years ago?

[charliep]

In Alberta, about 50 % acres are grown for malt according to AFSC survey. Saskatchewan is higher - I think over 80 % or more but I would have to get seek advice from somewhere there. Manitoba would be more like Alberta (keeping in mind Manitoba grows 6 row or at least did). Many of the 2 row malt varieties are also have very good feed characturistics.

If you assume 2/3 of western Canadian barley acres is seeded to malt varieties, that means about 8 mln tonnes of about a 12 mln tonne crop. The annual amount of malt selected is about 2 mln tonnes. End result is a 25 % selection or 1 in 4 odds. This is back of cigarette figuring but it gives an idea.

Just out of curiousity, what is the difference in yields between the best feed varieties and malt ones. Used to be 10 to 15 % but I am not so sure now.

[charliep]

A couple of other interesting notes.

1) None of the major grain companies have signed on. Any farmer who delivers to a street malt program (selection at the driveway/payments at elevator/blending to specifications) will not have the opportunity to participate - inland terminals who signed on may be different.

2) Between the Value-Added Initiative Program and the low protein premium , the is the ability to add up to an extra $8.40/tonne. In the case of the low protein premium, this will not represent new money to the overall pooling process but rather a redistribution of overall pool returns to individual farmers.

3) Because of the contracting process, there is still no signal (price or otherwise) about where the best place to deliver your crop. You can still only present your samples to one buyer. Something that is happening in Alberta is consultants who understand the different buyers needs, bin sample/grade a farmers product and then make the match to achieve the best outcome for all parties. This service will become even more valuable when there will be more distinct differences between malt contracted for an export sale and that to a domestic maltster.