Barley Growers: Cargill and CWB are Welfare Bums

[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

[cropduster]

Parsnip...haven`t called him yet but is this the same Rob Meijer who used to work for CFIB?

[chaffmeister]

Tom - 'twas me that said "these sales were made too low with no backstop".

I guess I should have said too low RELATIVE TO THE CURRENT MARKET, AS IN NOW.

I didn't mean too low RELATIVE TO THE MARKET AT THE TIME of the sale. There's a big difference.

No doubt about it - these sales were made AT THE MARKET at a time when many factors were pointing to higher prices.

[TOM4CWB]

Chaff,

Who in their right mind would sell someone elses product and property:

a)below the cost of production,

b)without any backstop a year before it is produced,

c)knowing with a high probability they were going through a radical structural change that would fundementally change their ability to supply in any event,

d)knowing without being competitive at the time of delivery from producers they couldn't get supply in any event...

e) that have bylaws governing them saying they are to respect Commonlaw rights of the producers they are supposed to be maximising returns for which include, but are not limited to:

i) That for every wrong there is a remedy,

ii) The end does not justify the means,

iii) Fundamental principals cannot be set aside to meet the demands of convenience or to prevent apparent hardship in a particular case,

iv) Ignorance of these laws is no excuse for breaking these laws,

v) Two wrongs do not make a right, and

vi) One can enlarge the rights of the producers, however they cannot be taken away without their informed consent.

What CWB sales person, and CWB manager and CWB DIrector responsible...

In good faith...

Would do what was done and say they were "maximising" the value of growers assets and earning ability of those they claimed to be working for; CWB "designated area" barley producers?

[TOM4CWB]

Chaff;

The CWB obviously had the ability to create this market... because they signed contracts selling this grain.


Therefore You could make the claim you just made.

That CWB management didn't have the legal or moral authority & right to make these sales in the first place...

Is certainly a question that needs to be answered!

ANd for Maltsters that are on the other side of these "contracts"... they no doubt had to know what an awful P.R. and moral dilemma they would be placing themselves in...

And that holding such a contract would have a large "cost" in "good will" with the very grain producers, they need serve, to be in business in the future.

[charliep]

Is the discussion about old or new crop?

Old crop - Farmers should be delivering the amount they contracted this last fall. If they don't, the CWB/maltsters should be chasing them (including assessing penalties/taking legal action). If the CWB/maltsters are short the market (don't have enough contracted with farmers to cover their sales to breweries/exporters), they need to get a price signal out that is competitive with the feed market. If they want to add additional sales, ditto the comment on being short - they need to signal marketing opportunities to farmers. In every sense, the market is functioning the way it should.

New crop - Everyone has 6 months to organize their business for the new world. There are lots of contracting risk management strategies that are/can be used. If prices go up, obviously the maltsters will want to act on the CWB contracts (both need a strategy). If they go down, the issue will be a mute point (depending on their risk management strategy). The big thing is to get the decisions made and allow people/businesses to adapt.

[GrainVac]

Isn't the contigency fund designed to off-set hedging/sales problems like this one?(haha) Clearly not, but I'm willing to bet that the money goes to offset some of malt barley sales/contracts that no producer seems to want to help the CWB fulfill at this time. Maybe cost-share proposal from federal government like all their other ag programs???50/50 or 70/30

[parsley]

charliep logic 101:

"Old crop - Farmers should be delivering the amount they contracted this last fall. If they don't, the CWB/maltsters should be chasing them (including assessing penalties/taking legal action). If the CWB/maltsters are short the market (don't have enough contracted with farmers to cover their sales to breweries/exporters), they need to get a price signal out that is competitive with the feed market.

If they want to add additional sales, ditto the comment on being short - they need to signal marketing opportunities to farmers. In every sense, the market is functioning the way it should."


Have you tried patenting your logic, charliep?

Parsley

[chaffmeister]

The only thing missing in the old crop market Charlie is the CWB putting those proper price signals out there.

[TOM4CWB]

Charlie,

My comments were respecting 07-08, which Prairie Malt says Maltsters are going to be short nearly $100m to buy...,

from "Designated Area" barley growers...

The contacted barley they signed for in the fall (OCT) of 06 with the CWB.

OK, a bad decision was made to sell the 06-07 crop early in July 06, that was one thing...

07-08 sold in October 06 appears very vindictive and hurts barley growers if they are expected to take the almost $100m hit on malt alone.

This kind of sale can suck down all domestic feed prices... and has the probability of a huge multiplier effect that reduces other feed prices in the economy.

And anyone wonders why SM5 supports the CWB?

CWB=CHEAP FEED PRICES.

[charliep]

Perhaps should ask the maltsters where the number comes from. You take whatever the number is and divide by annual domestic maltster purchases (plus some sales to the US) to come up with a cost. Under the arguments presented, this is a net drag/loss to the 2007/08 pooling year. Farmers should be happy to walk away from this business (after all you didn't sign the original contract). Don't know why the tax payer would be asked to pay either.

In a more positive note, I think the March 2007/08 malt barley PRO was realistic and accurately reflected the price maltsters paid for new crop. The value is supported by the innovative minimum price contracts maltsters offered over the past winter (I assume there is some logic to $4/bu 2 row malt barley).

So the real issue is how the maltsters and the CWB package the business on the books and market this program to farmers. Both can use appropriate hedging/other tools to manage their risk using tools like the futures markets. The farmer will not to forced to do this for them anymore.

I also note wd9 discussion on grading/selection issues. These issues will have to be dealt with as well versus the current view that I (the CWB and maltsters/exporters) can pick the best 2MMT out of potential 6 to 8 MMT of production. Maybe the results of the barley plebiscite reflecting frustration here as much as the issues around single desk.

A final note is the assumption that maltsters and the CWB are great buddies. Been at enough meetings with both to note this is not the case. Necessity makes for strange bedfellows.