Contracting and Grading of Malt

[wd9]

AS and Braveheart, agreed. The old 'culture' of production contract without risk days may be over. Like peas, there will be risk penalties on price for a 'what will I produce contract' as opposed to a more realistic 'this is what I have produced' and now make a contract.

Storage is a good point AS and will be a large part for malt. This is being discussed with canola too as consistent supply and being paid to keep it in storage will be important to keep customers. Almost supply managementish. Storage and transportation also are huge issues, beyond the scope of this thread, but very important.

There are many instruments that can be used for contracting malt in place that are used for other commodities. I think the mentality of the business needs to come around to what is 'business as usual' for other commodities.

This is an interesting year in terms of what a huge premium could have been potentially paid for feed barley going in as malt. When demand is high, supply is low, for the farmer it is all rosy.

Most years however, maltsters will need to specify colour, protein, plump and germ, have the product tested to those specs, a contract with delivery date and price and storage premiums defined and agreed upon. This is not the way it is today. With a contract, they bought it and must take delivery if it meets the specs in the contract.

JD4ME, you grow a lot of malt, what do you figure?

Any other issues?

[parsley]

Contract prototypes that can be designer-modified to suit the participants. Is anyone working on them?

[just_wondering]

IMO maltsters will build more storage much like Busch did down in Colorado my Cargill guy says they have the storage enough for two years to keep everything perfect, much like potato bins I assume.

If there is no premium for malt, no targets to reach for and no delivery dates, I guess I'll grow something else. Although on our farm we generally get malt quality on 90 % of the Barley we grow(One of the benefits of living where it does'nt rain

Problems Brewing as EU Farmers Switch to Bio fuels
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GERMANY: April 10, 2007


HAMBURG - European beer brewers may face increasingly tight malt supplies later this year as farmers switch to grains for biofuel production, the head of a leading German malt marketing company said on Thursday.


"Malt producers will have to change their thinking and accept that sufficient supplies of malting barley are not going to be automatic and that they will face increasing competition from biofuel producers," Jochen Mautner, head of Jochen Mautner GmbH, told Reuters.
A survey undertaken by his company estimates that European Union farmers were this year likely to plant two percent less spring barley, which is used for malt production which in turn is a key ingredient in beer brewing.

This is despite current high spring barley prices caused by last summer's poor crop which would normally have encouraged farmers to expand spring barley plantings.

Instead farmers were believed to have planted more grains for biofuel production.

"This trend is understandable as farmers do not have such quality concerns with grains grown for biofuels," he said. "Poor weather at harvest time can substantially reduce the quality of spring barley and so hugely cut farmers' earnings."

"With biofuels this risk is much lower, they can sell grains for biofuels even if it is poor quality following bad weather."

The move away from spring barley plantings is especially expected in countries with large biofuel programmes, said Mautner.


DENMARK, AUSTRIA PLANTINGS ALSO DOWN

He estimates German plantings will fall by five percent this year, Denmark's by 11 percent and Austria's by 14 percent.

The fall in Denmark was of special concern as the country is generally a major exporter to the rest of the EU.

"Brewers and malt producers are already facing competition from biofuels for their raw material supplies and this will get stronger as biofuels are expanded," he said.

"Malt producers and even beer brewers will have to change their thinking as there may not be enough spring barley for them to buy in the commercial market. They may have to agree more advance contracts with farmers to compel them to grow spring barley."

"This process is starting but it will have to be expanded."

Brewers and malt producers are already struggling with malting barley prices which have risen as much as 50 percent in the past year, while powerful supermarket chains and other big buyers are refusing to accept higher beer prices.

Old crop spring barley is currently quoted at around 240 euros (US$320) a tonne for April delivery in Germany. Despite mild weather so far this year which could herald a good harvest, new crop prices are also high at 195 to 200 euros a tonne.

"I have the impression much more of the new crop than usual has been bought in advance this year," Mautner said. "The spring barley supply outlook for the new crop this year is tight despite the good weather and some malt producers have decided not to get caught out by scarce spring barley again and have decided to secure supplies in advance."



Story by Michael Hogan


REUTERS NEWS SERVICE

[Burbert]

Wow dealing with malt barley in the new market, will be even more complicated than the old way. Guess that is another crop that can be tossed into the dumpster. along with emus, ostriches, elk, deer farms, chinchillas, bison, grass carp,mini horses and jackasses. Let freedom rain, let freedom rain, but not on malt grain. In the short term because of a shortage, the malters will pay, next year however when things return to normal, same old, same old. A line will be drawn, nothing North of it will qualify as malt, so forget it boys, feed is the future, after all that is what Alberta is all about anyway, cow food! I really hate what has happened to farming, how we've been manipulated sickens me to say the least!

[just_wondering]

Burburt:
I am trying to follow your thread R U comparing malt and beer which are well established markets to chinchillas and the rest?
We are producing a commodity in malt barley a higher value commodity but a commodity none the less. I look forward to calling up a malt house 8 months in advance of when the crop is harvested and putting in a bid for my product much more than looking at new crop PRO's in late Feb and then hoping the CWB knows what it's talking about. and getting final payment 18 months from harvest.
Give me a fixed price
fixed delivery dates
a spec to target and then I will know what to plant
for instance I can't grow to meet a Can- Oat spec oat, but I can grow a 2 CW for my local elevator. Match your markets with your production.
Maybe I did not catch your sarcasm?

[Burbert]

So now I have to contact a malt guy/girl and suck up to him/her to sell malt barley, that is if it meets their high standards. All the minor details, such as quality are now out the window. If for instance, I were to buy a bottle of rum, to accompany my sample, I would stand a better chance of getting it selected, or perhaps include a $100 bill in the sample. Guess what it got selected. Or will the great comedian grain commission come to our rescue and still demand high/mighty standards, as in the past?

[gregpet]

Burbert, does this mean you only produce wheat and barley on your farm since the other types of crops are not under the CWB control? I honestly feel most people are over thinking a simple situation and take advantage of the opportunity that is in front of us.

[parsley]

PRESS RELEASE:

"Western Canadian Barley Farmers and Industry support Barley Choice

April 11, 2007, Airdrie, AB: - In Calgary today, the board members of the Western Barley Growers Association met with
Big Rock Brewery’s President Ed McNally;

Bob Sutton, Vice President - Grains and Logistics, RAHR Malting Canada Ltd.;

and Rod Green, an independent grain broker.

Discussions surrounded the announcement from the federal government to end the CWB’s monopoly on barley August 1 of this year.

Ed McNally, a long time supporter of marketing choice welcomes the new era of marketing choice.

“As Alberta’s leading independent brewer, I have supported our barley farmers and see nothing but advantages ahead for our barley farmers.”

Bob Sutton, RAHR Malting, whose facility is located at Alix, Alberta, has advocated greater interaction between his facility and farmers for a long time.

“Now we look forward to building stronger relations with farmers. By doing this with out going through the CWB, we can obtain high quality barley and assure producers an equitable return for their work producing it”.

Rod Green, Central Ag Marketing Ltd., a grain broker out of Airdrie, Alberta sees the opening of the CWB barley market to choice as a win-win for all those involved.

“The CWB has a strong reputation as a marketer and will remain a strong choice for farmers after August 1.

Yet more choice for producers, whether it be contracting directly with end users such as the Maltsters or perhaps exporting to the US or elsewhere, opens many new doors for producers to receive better returns to the farm gate”.

“We (the Western Barley Growers) have come a long way” states Jeff Nielsen, President WBGA.

“WBGA has, for 30 years now, advocated choice marketing allowing barley producers the right to access whatever markets they deem best.

Now with marketing choice arriving August 1, many new opportunities are just around the corner. With that we see more work being done in barley research, end use development and all along continuation of supplying our livestock sector with top quality barley”.

“WBGA welcome the support of our industry partners here today. We would like to thank Big Rock Brewery, RAHR Malting and Rod Green for their support of western Canadian barley farmers and look forward to all industry partners and farmers to build an even bigger and more prosperous barley future” concludes Nielsen.

For more information contact:

Jeff Nielsen President Phone: (403) 556-303

Tom Hewson Vice President
Langbank, SK
Phone: (306) 538-4572

Doug McBain Past President
Cremona, AB
Phone/Fax: (403) 637-3880"


Looks like the Western Barley growers are showing admirable leadership.

And so is industry!

Parsley

[nashty]

Since this is a moot point as we are not likely to see the purposed dual market enacted as of Aug 1, why not grow a malt variety and hedge your bets via a production contract with a floor price guarantee? The production contract specs I have seen are fairly standard to all industry players and shouldn't hold any surprises. In my mind we should use relationships we have established with line companies and malsters dictate where we market our barley this year. Chances of someone radically altering their approach at this stage in the game and pulling a fast one to entice malt growers to sign a production contract only to manipulate them in the end potentially would taint their name in years to come. Here are a few things I would consider in signing a production contract:
1)Have your had a good relationship in the past with the contracting company? The malsters value growers who consistently produce a quality product and deliver a representative version of what is selected.
2)What is the pricing history of the company in question? Are they consistently equal to the competition in return or do they offer more? Are there additional risks that are involved in this incremental reward?
3)Are there provisions for delivery and what are the rewards for the company not adhering to the contract delivery specs?
4)Are there any secondary clauses if your barley does not make malt? (is there a sale of feed barley clause, some line companies would like first crack at your malt and feed, likely not in your best interests)

The net per acre return in our area, assuming the latest PRO is realistic, (I am ducking now as I hear things being thrown) should make malt one of the best bets this year.

In summary, I say seed it, cross your fingers that Chuck S and his posse can get things organized in a hurry, and hope like hell we get a chance to lock in good values before the bubble bursts!

[charliep]

Apologize wd9 but I have to vent after a strange day.

1) Went to Phil Thomas Alberta canola industry and heard a presentation on the Canola Councils business plan for 15 MMT by 2015. Watched the industry work together to take on a challenge. I think the goal is achievable.

2) Got an email from U of S talking the inability to get a low phytate feed barley registered. Most people don't know or care about the issue but will be an environmental factor in the future.

3) Read my western producer when I got home and see the headlines (firms urge gradual barley change). The references to the outstanding malt barley contracts to domestic maltsters are not a surprise/know they are there but the question is details/values of the contracts. I assume (tongue in cheek) the maltsters paid the same $27/tonne premium for the privilege of managing their risk that a farmer gets discounted for signing a fixed price contract/hedging their price. If the prices are at good levels and the CWB has the support indicated in the plebiscite, the CWB should have no trouble competing in an open market.

4) To date, no one (icluding the CWB) have dealt with the issues wd9 and others have raised in this thread. I see no creativity or innovation suggested in CWB contracts or pricing programs. I don't even see points for discussion.

5) And you are right, Parsley. A good article. A least there is some forward thinking people in the industry.