CWB Response to the "Market Signals in the Canadian Barley Sector"

[charliep]

Just note the CWB put out their response to the study "Market Signals in the Canadian Barley Sector". The study was commissioned by a wide spectrum of the barley industry starting on the research, through to farm groups and finally barley users (maltsters, brewers, livestock feeder) as a part of the federal governments value chain round table. The CWB was a part of process but took exception to some of the results.

The original study can be found at:

http://www.wbga.org/market-signals.pdf

The CWB response can be found at:

http://www.cwb.ca/public/en/hot/barmarket/index.jsp?pf=1

Lots of reading.

I'll clip and paste one interesting section from the CWB release.

Beginning quote "Encouraging domestic “value-added,” particularly for malting and food barley processing, is a top priority. For this reason, the CWB has worked with Canadian maltsters and brewers to ensure supplies along with fair and consistent pricing. Prices for domestic brewing (approximately 350,000 tonnes out of a total of 2.1 million tonnes of annual average malting barley sales) are based on North American commercial prices, because that is the relevant competition for domestic beer production. Prices for export malt (approximately 700,000 tonnes annually) are based on the relevant competition in the export market. Usually, that competition is European or Australian malt. These prices can be lower than North American commercial values, but still attractive relative to feed barley values.

For malting barley sold directly to export markets, prices are based on the relevant competition landed in the export market. Premiums to the competition are extracted where possible, and may be based on demand for a Canadian variety generated from previous marketing efforts, knowledge of competitor supply and/or quality issues, timing of sales, or other factors. " End quote.

A admission the domestic malting industry does subsidize malt barley sales into off shore markets.

[winwin]

Charlie,the job of the cwb is to 'extract' the profit.This is a signal to all who might come here to invest that they will continually be having extractions done.We must keep the evil multinationals who might buy our grain and develope w.canada's economy OUT.This is the paramount job of Chief Ritter and council:keep outsiders off the reserve.By ensuring that there isw never any profit,then,there will never be any investment on our big western reserve.Keeos the band members down too.No property.No jobs.No hope.

[sawfly]

charlie
what about the cwb statement is wrong or contrary to getting the best returns.
or what is wrong getting the best returns where you can.
the domestic market pays a small premium for first pick or consistant supply.
are you saying market signals are bad and that malt is overvalued in farmers eyes . and that they should grow feed varieties instead.

on my farm the only way barley would be profitable is if its worth more than 3$ bushell, we dont get the yeilds to make dirt cheap feed barley pay.
if im dumb enough to grow barley it may as well be a malt variety,a 10%increase in yeild of a feed variety on a 42-65 bu crop will not make it profitable. a dollar a bush. for malt might.

[charliep]

My comment is that within the current malt barley pooling (as indicated in the quote from the CWB), the domestic maltsters consistently pay a premium over and above offshore export markets. Their needs are also higher (product 365 days a year, direct off farm movement/no blending, quality, agronomic, etc.). These market signals/requirments are getting masked in the current pooling system on the price side. Farmers and the maltsters are both the worst for this.

I agree a farm manager needs a substantial premium for malt barley to justify growing. The malster also has requirements for producing a consistent high quality malt for their customer - the brewer. This would suggest to me the necessity of having a value chain type of relationship. What is the purpose of the CWB if this was the business arrangement?

What is needed is direct contracts between domestic maltsters and farmers who consistently achieve malt quality barley. A part of this contract will be price (could be a basis with western barley futures). No part of this price should be related to an export price with value added or subtracted. Then a farmer can a better/more informed decision about growing malt barley. The maltster will have to compete for your acreage decision along with all the other crops including bio fuel ones.

[craig]

Sawfly
I would concur that $3.00 barley is needed to make barley competitive with other crops. However your $1.00 premium for malt over feed is just not happening even when feed values are in the tank. Two years ago I grew malt and the Pro for 2 row malt was at $2.48 bushel. How can anybody expect that producers can grow an identity preserved crop, go through all the hoops involved in growing malt, basically take all the risk for the promise of less than $2.50 a bushel.Anytime I can forward hedge feed barley at values close to malt values I am way further ahead. I know my price, I know my delivery period, I know it will be accepted and it's paid in full at time of delivery.

[TOM4CWB]

Sawfly,

Please tell me why a pool system MUST distort the market signals in Western Canada?

Access to cash barley prices was what was needed to draw high quality barley out of growers bins. Canada had the only uncommitted stocks globally.

Just because you didn't commit your resourses (land and assets) to growing high quality barley, does this make it right to prevent your neighbour from making a good profit when clearly it could have been avaliable?

Instead this barley goes to the feed market. The higher values and market are lost, replacement products substituted... year after year.

And if anyone dares to even challenge the CWB in court... the price is thousands upon thousands of dollars.

So the CWB uses fear, intimidation, envy, and market distortion to keep the price of barley down.

THis makes you fulfilled Sawfly?

[parsley]

charliep,

In helping to guide the CWB towards better market signals what better for them, than than mimicing Stephane Dion's clear approach:

" the necessity to speed up what we have to do is bigger than otherwise".

Parsley

[sawfly]

tom settle down
dont get upset, i was just trying to understand what charlie was saying.

and in his second post i get it.

your ip or grower contracts might work fine . but how much would domestic maltsters have to offer for contracts to get them.

the two competeing prices would be the feed price and the world export price (with 1$/bush freight and whatever handling backed off to the praires)
so in effect domestic malt price could be worse than it is now.

just look at the canola ip contracts preiuims , they may have started alright but now they dont pay a nickel more than they have too.

and also tom , i kinda thought it was suppy and demand and the winnipeg exchange that was keeping barley prices down.

certianly if i was the board , i would set the domestic malt price at the world price plus freight back to the praires.

[charliep]

sawfly

Just so you understand North America is over capacity in malt production. Many of the plants are small and use old technology so there has been an ongoing closing of malt plants and a replacement by bigger more efficient ones. There is also free trade in malt product within north america. Charging over the world market would shut down domestic malt plants in short order.

Coming back to what you said (as well as craig and several others) is that professional malt barley growers need at least a 25 % premium over feed to justify growing. Malters (domestic and export) need to be able to put that offer in front of you directly. Everyone (farmers, maltsters, brewers) needs ways to manage their price, quality and supply chain risk. As a participant in the group that commissioned this study and participated in the discussion, this is where the current system fails. The CWB is not 100 % the problem here but they are a significant contributor.

Everyone seems to want to grow a commodity here with barley the worst example. Something you can put in the last week of May with low inputs (ran out money by investing in canola that you seeded early) and play the malt barley lottery by seeding brown bag/own seed Metcalf (or whatever). The industry needs to indentify the people who will spend the time/effort to achieve the necessary quality and allow them to develop relationships with maltsters/grain companies directly (including price).

[sawfly]

charlie i knew what your response would be when i said stick it to the maltsters. and i understand

your contract system will only work if you have an independent gradeing body with power to force the maltster to comply with the contract , if the grain is up to specs.

[charliep]

So the issue is a grading issue and not necessarily a CWB one. An outside body to review the sample at contract signing time and at delivery to ensure they have the same quality characturistics. If they are similar, then the body would enforce the contract. Will leave for discussion.

My comment is that a maltster sale that requires you to hold barley for 10 months and an export sale that takes delivery in Oct./Nov. (also considering the latter is more likely to be blended) involves different risk and a farmer should be paid differently.