Barley Growers: Cargill and CWB are Welfare Bums

[TOM4CWB]

Chaffmeister,

You are right that there are responsible actions that both the Gov. of Canada... and the CWB can take to mitigate these problems.

A policy decision has been taken for Aug. 1/07 to be the change date.

Lets get on with the project, what action can be taken to fix this mess?

1.) The CWB could offer an 100% EPO pre-change price; on malt, "FREE" to the barley contract grower... and supply the maltsters with integrety.

2.) The CWB Directors need to negotiate the 2007-08 malt problem with their insurance brokers... and decide how to straighten out that mess.

3.) The CWB needs to hire a CEO that has the leadership ability and knowledge to resolve these and many other issues that threaten its very existance. CWB Managers are/have been obviously way offside, and need a profound change of heart and attitude!

THese folks at the CWB appear to be acting far from being; professional, commercial, and responsible business leaders worthy of management for a multi-billion Dollar industry.

[parsley]

One point at a time:

Chaff says: (Quote of the week, guys)"They never had to when it came to malt barley. They’ve always had that choice."

In case you hadn't noticed, the farmers choice was the Board, the CWB or the Canadian Wheat Board.

Maybe you thought they were all different companies.

Tip: they're not.

Parsley

[TOM4CWB]

Parsley,

In Chaffmeisters Fertiliser example... the $600/t example is an interesting one.

In a commercial system (WHICH THE CWB CLAIM TO BE RUNNING) a supplier must back the contract...

I tried to buy spring fertilizer for months... last fall but no one would sell me the product.

NO fertilizer producer in Oct, NOV, or the first 3 weeks of DEC. would back the contract my supplier was being asked to create for my spring fertiliser.

The price went up 30% before I could get a supply booked... thatis what happens in the "Commercial" world.

Obviously the CWB and our malt customers knew no sane reasonable "designated area" barley growers would sign these 07/08 malt barley contracts at 60% of market value willingly.

Now since this obviously was the case... what was the plan?

SUE the Government?

And this is commercial professional management of our industry?

[parsley]

"If you have someone threatening to be non-compliant with a contract, what do YOU do"


Tip: Threats differ from actions. Tell Management to wait and see if the threat matures.

[parsley]

"they are selling into the feed market and not to the maltster."

Whoopdeedoo
Farmers can sell into the local feed market!


BUT you omitted two tiny details:

1.Farmers cannot sell into the export feed market
2. Farmerc cannot sell into ANY malt market.

Who gains from CHEAP CAPTIVE GRAIN?

Not farmers.

Get a good night's sleep chaff. Your head will clear in the morning.

Parsley

[chaffmeister]

Not really sure where this “discussion” is going. It started with Parsley taking a verbal run at Cargill. Now I seem to be the target.


Parlsey, it is truly regrettable that you’ve chosen to use hyperbole and sarcasm when attacking my comment that farmers are not forced to take “firesale” prices, as you put it. No one’s saying that the barley market is rosy under the CWB – least of all me. And you of all people should know that. (In fact, I know you know it.) You serve no purpose trying to embarrass me by trying to twist my words to suggest something different. My point stands – farmers are not forced to take firesale prices on malt barley. Thankfully, there is an open market option. But that’s why this market has been so dysfunctional. FWIW – I think the CWB does a lousy job in malt, but I really believe that is a different discussion.


You suggest the best approach for a company facing a threat of not honouring a contract is to wait and see what happens. I would certainly want the managers of my company to advise “the other side” what responses those actions (or inactions) will elicit. This is not a threat, its called communication. I’ve been involved in a number of squabbles where the initial messages between lawyers were exactly that – if you don’t do X by such-and-such a date, then we will have no choice but to do Y. Act accordingly.” It’s a common tactic – I wouldn’t characterize it as a threat, but that’s just me. You’re free to see it any way you want. But it doesn’t say that Cargill supports the single desk.


Parsley – you comment: <i>whoopdeedoo</i>.

This started as a discussion about Cargill’s tactics facing the loss of their malt barley contracts with the CWB. This is not about the pros and cons of the single desk. Please stay focused.


You said yourself <i>Do you suppose Prairie Malt would be whining on the Government's doorstep all last week if the contracts Robert Meijer had signed with the CWB were paying farmers $5.00 per bushel?

Right.</i>

First of all, the contracts Robert Meijer of Cargill signed with the CWB has very little to do with the price the CWB pays farmers; these contracts only price barley to the maltster, not the farmer.

By your sarcasm I assume you believe that if the contracts supported $5.00 prices to farmers, then Cargill wouldn’t be “whining”. You’d be right. If the contracts were high priced relative to the current market and the CWB walked away from them, I’m sure we wouldn’t be having this discussion. Which supports the notion that this is all about the outstanding contracts – not the single desk nor about getting farmers’ grain at “firesale” prices.


Parsley, about the maltsters you asked: <i>Are they bereft of risk management options?</i>

Under the CWB system, they are indeed limited. They price with the CWB because they are legally obligated to. And as Charlie indicated, the CWB is ultimately responsible for ensuring these contracts are filled.


Parsley, you said: <i> Commitments towards Cargill's contracts from the pooling accounts is the issue. NOT farmer held grain.</i>

You’ve absolutely hit the nail on the head. That’s what I’ve been saying all along. So where did all this other crap come from? You just feeling like you want an argument?


Adam Smith, you said: <i> if they haven't figured out how to function in the open market by now, they have no future in the barley business anyway</i>

Open markets. Contracts. Honouring commitments. All these fit together. Where do you think Cargill – who is sending a message that it EXPECTS to be treated responsibly by the CWB as it would be treated in ANY OPEN MARKET – is not understanding an open market? If anything it’s the CWB showing that it has no respect for standard protocols of commerce which include standing behind contracts.


Tom – Your comments suggest that the contracts were made at 60% of market value.

To be fair, I’m sure the contracts were made AT MARKET VALUES at the time. The CWB made sales that it thought would prove acceptable. They were wrong. The market moved.


I’ll end this little tirade with a response to Charlie’s question:
<i>Any thoughts on what an effective transition process might entail?</i>

My answer: the CWB needs to run an open program for malt barley offering farmers attractive prices relative to other options (domestic or export feed, export malt) to ensure it can comply with its commitment to the maltsters. Looking at the current market, this will most likely run a deficit but, so be it. Neither farmers nor maltsters should be injured by this policy shift. Paying maltsters “damages” would allow the maltsters to then turn around and pay market prices for malt against these sales; however, this is not as good an option as forcing the CWB to make good on their contracts by paying market prices to farmers (even with a deficit).

[charliep]

Chaffmeister

Should put elsewhere but interesting to look at early payment option premiums to see what hints this gives about the way the CWB percieves risk. It may also reflect cost to a certain extent.

I will note the 100 % malt barley EPO premium dropped from $6.50/tonne on April 17 when the PRO was $200/tonne (Select 2 row port) to $1.25/tonne today when the PRO is $192/tonne (port). A $8/tonne drop in the PRO only means a $3/tonne difference in 100 % EPO returns. This would reflect the CWB view of risk/ability to manage. It is also an indication of pool size/the opportunity they see for additional sales.

Likely thinking this through too much but interesting all the same.

The most recent EPO graph is at (page 11 and 22):

http://www.cwb.ca/en/farmers/producer/historical/pdf/2006-07/epocharts_042307.pdf

[TOM4CWB]

Chaffmeister,

"Tom – Your comments suggest that the contracts were made at 60% of market value.

To be fair, I’m sure the contracts were made AT MARKET VALUES at the time. The CWB made sales that it thought would prove acceptable. They were wrong. The market moved."

How are you so sure?

The CWB Pool delivery year starts for 06/07 about October 1 for most CWB crops.

The CWB says over and over... they are to sell a certain percent per month... equally for the duration of the pool year... to get an average price for "designated area" growers that reflects disciplined pool sales.

We knew the Ausies and EU were in really big trouble by the last week of August 06. So did every other grain merchant who cared... as did the Brewers.

Why on earth did the CWB sell 2/3rds of the 06-07 malt barley early... and all the 07-08 malt pool 1 year early?

To be close to $100,000,000 short.... they appear to have sold the 07-08 crop before the CWB Minister even said we needed a plebiscite...

Many said "designated area" Barley would be released by Jan 1 2007.

I knew the CDN Malt industry was laughing at growers by October 06... saying that delay of delivery was not possible into fall 2007... because they had already bought the 07 crop as well.


I must respectfully disagree...

Any sane normal barley grower watching this CWB Action on sales... who was remotely concerned with uncovered CWB forward barley sales... especially after what happened... & what we should have learned from 2002...

Would conclude this was a deliberate intentional vindictive move by CWB managers to injure barley growers and the Conservative Government... both of whom are known as public enemy #1 to the CWB.

[TOM4CWB]

Chaff:

Do you remember who wrote this?

"The reason that the market is in “apparent” disarray is because the CWB is being stupid and vindictive, having exposed itself to the vagaries of the market by shorting the market in a big way. It is doing everything it can to extract the maximum pain on any players in the malt barley market. It has threatened to walk away from new crop sales because they are too low priced to be able cover in a choice market. (Contributing to Cargill’s position of delay the switch over to a choice marketplace.)

Even in a single desk environment, these sales were made too low with no backstop. Don’t forget – the CWB operates in a dual barley market already – so single desk or not, the CWB is snookered already for next year. Someone at Cargill needs to realize that even with the single desk in place, they will have a tough time getting barley from farmers this upcoming year. You know, just like this year."

[parsley]

Cargill went public to Reuters, so they obviously decided to go political.

Going political meant that quiet negotiation was not their option of choice.

Parsley