CWB Name Your Sources Challenge

[Fransisco]

Charlie asked the questions below in a different posting but I thought it deserved its own thread. Its based on the following CWB release.

<blockquote>David Anderson, Parliamentary Secretary to the Minister for the Canadian Wheat Board, claimed Feb. 14 in the House of Commons that western Canadian producers are receiving $1 per bushel less for malting barley than U.S. producers. The Feb. 2 issue of Barley Country, published by the Alberta Barley Commission, makes similar price comparisons.

In fact, this is not the case. About 75 per cent of the malting barley in the U.S. is contracted before seeding. This means that the vast majority of American malting barley producers are not benefiting from current higher prices for malting barley.

As well, Mr. Anderson’s price comparison relates a spot price to a pool value. This is not a valid comparison. A pool value is an average of prices achieved over an entire crop year, while a spot price is a price on a particular day. In a rising market, a spot price is by definition higher than a pooled price.

The relevant question is whether the CWB is capturing the current higher spot prices for malting barley. The answer is yes. Recent higher-priced malting barley sales will be reflected in the 2007-08 pool. In its first Pool Return Outlook for 2007-08, the CWB predicts returns to farmers of $35 per tonne higher than the current malting barley PRO for 2006-07.

A U.S. comparison: three-quarters of U.S. malting barley is contracted in the spring. The yellow line indicates the price at which most two-row malting barley was contracted in Montana. </blockquote>

[Fransisco]

The release with the accompanying chart [URL="http://www.cwb.ca/public/en/hot/mbprice/"] are here [/URL]

[Fransisco]

Charlies questions;

JUST A CHALLENGE TO ANYONE FROM THE CWB TO PROVIDE THE BACKGROUND/DATA FOR THIS QUOTE.

FIRST QUESTION, DOES THE CWB SPOT MARKET REFLECTS THE SPECIALTY MALT BARLEY VARIETIES THAT COORS AND ANHEUSER BUSCH CONTRACT AND THE QUALITY SPECIFICATIONS?

YOU CAN NEVER COMPARE A SPOT MARKET TO ANYTHING UNLESS YOU HAVE THE FACTS.

SECOND QUESTION, IS WHERE THE 75 % CAME FROM. CAN THE CWB VALIDATE THIS WITH A SOURCE?

[Fransisco]

I've got a couple of my own from this paragraph.


<blockquote> About 75 per cent of the malting barley in the U.S. is contracted before seeding. This means that the vast majority of American malting barley producers are not benefiting from current higher prices for malting barley. </blockquote>

I too am sceptical of farmers contracting 75% of their production before seeding. Its a pretty big gamble unless there is an act of god clause. Is there one?

Also did 75% of the producers lock in 100% of their production? The quote sure makes it sound that way.

[Fransisco]

Since we're looking at charts have a gander at [URL="http://bp1.blogger.com/_c28b1zhViU0/Rc0BbO_6vOI/AAAAAAAAACA/QS6AKloawS0/s1600-h/barley-price-comparison - February 02, 2007.jpg"]these.[/URL]

[Burbert]

Don't believe a word of it. The big bad devious, corrupt, boys/girls at the CWB are just trying to again deceive us by buying our votes away from the grain freedom fighters. Promising to give us malt growers a good price in the future, then again they'll rip the carpet from under our feet and say, so sorry, to bad so sad... Let freedom rain, let freedom rain, we all want the open market to sell our grain! The CWB what a pain. Oh me oh my, how should I vote. Free trade, free trade is good for all. How do we know, cause Mr. Bulroney told us so.

[Fransisco]

Wouldn't a better comparison be between the average pool price and the overall average of spot prices through the year?

[Fransisco]

Burbert its spelled 'reign' not 'rain'.

[Fransisco]

The comparisons I find most compelling are when the market is flat. Comparing the overall cash price with the overall pool price up til July. Looks like a good $10-15 sometimes $20 difference.

[Fransisco]

Then there are the cost differences to consider as well as the prices. We know according to the federal grain monitor our barley export costs are out to lunch by at least $20.00 tonne.

[Fransisco]

What are you thinking with this?

<blockquote> <i>Wouldn't a better comparison be between the average pool price and the overall average of spot prices through the year? </i></blockquote>

That's true if you want to compare just two different averaging schemes. There are many more than that.

Andersons original comparison is technically correct, under an open market scenario a producer is free to sell at whatever point he chooses.

If he is a 100% seller it could be (though would be unlikely)at the top of the market.

The most likely scenario is waiting until the price is first above ones cost of production and then selling incrementally from there. The size of the increments varies from producer to producer.

Its competition and choice that leads producers to decide what exactly works best for them and when.

Which is exactly what they don't have right now.

Besides which you're getting off topic, remember we're looking for the sources of the info the CWB used.

[TOM4CWB]

Fransisco,

There was a massive drought in the Northern US. The drought started early...

75% contracted... if it was this way... it was only because they grew 40% of a normal crop... which doesn't excuse the CWB for selling our "designated area" crop early when they knew the Americans and Ausies were in trouble.

Exactly how much Malt was sold in the spring through FPC? anything at all?

Shouldn't have this been a "little hint" that growers in the "designated area" didn't think the prices were high enough for Malt Barley?

The Australian 06-07 pool prices (there are a number of pools) for Malt, Port Adelaide, is between $291-299.35/t. Grain Corp prices last week were $275/t.

From my Ausie Callum Downs Newsletter Feb 13/07
"ABB Barley Pools Since our last newsletter ABB have
closed their No. 1 pools and opened new No. 2 pools.
Apparently Max Venning has been quoted as saying at silo
meetings that ABB received 110,00t of barley in their pools
this year in SA. Shipping schedules indicate that this, and
any carryover from last year, will move relatively quickly.

ABB Current Gross Pool Estimates
With shipping due from Pt Giles, ABB
have been
contacting growers with warehoused barley at Pt Giles to
try and entice them to either transfer to the new pool or to
sell for cash. Growers are reluctant because it will mean
taking lower returns than what they decided to reject back
at harvest time.
ABB Current Gross Pool Estimates
No. 1 Pool No. 2 Pool
Feed $246 $229
Malt $338 $333-338
At their last update of returns, Gary Spiel from ABB
suggested that there was more upside on malting returns,
but the feed market is stabilising."

ABB at Port Adelaide, Malt 1 Pool 1, was offering $296.47/t

The CWB statements are far fetched, and ring hollow especially after we examine what Australian growers pool values are.

Most Australian States are exempt from the "single desk" on Malt barley... why has this Dual market system performed so much better than the CWB did with the "single desk???

On Ausie Durum, Balak/Kulpara San Remo; D1 AH Based San Remo terms: $261/t Feb 13/07.

[Fransisco]

Could it be that the 75% number means <b>maltsters<b/>, not <b>farmers<b/>? And is for a specific time frame, say a month or two after harvest?

I could see where an individual maltster might want to lock up that much product for a certain time frame or when seasonally there is not a lot of product around.

There is a world of difference between maltsters and farmers. Is this another example of the wheat board playing fast and loose with the numbers, hoping that no one will notice?

Since no one has listed a source, what else can we assume?

[TOM4CWB]

Fransisco,

To Quote Sir Thomas Moore...

"Under the Law Silence is agreement."

Didn't help him much... they chopped off his head anyway!

[charliep]

Likely not a fair question for participants of the chat room - only the CWB could answer this question. Its their number.

Someone gave me heck for even making the question relevant. You have to go a lot deeper into the full malt barley contracting system in the US malt industry (Coors and Anheuser Busch early contracts are at a substantial premium to the plain Jane malt barley price). At the end of the day, a willing buyer and seller made an agreement last spring. The agreement has likely been kept/product has been delivered and additional supplies over and above the contracted volumes are now being sold at higher prices. I will let someone explain why the price of malt payments (noting projected payments) and feed barley (paid at delivery) are the same in western Canada.