Barley Growers: Cargill and CWB are Welfare Bums

[parsley]

As far as I know, the CWB makes and signs all the handling agreemnets with the maltsters.

The Government does not sign the contract with the Maltster,

Would you agree?

Parsley

[parsley]

1. Cargill doesn't sign with farmer
2.Cargill doesn't sign with government
3. Cargill signs with CWB


Under the blankets.


Now, the next question is this:

Which prolapsed graymatter at the CWB signed the contract with Cargill?

Parsley

[nakodo]

My discusssions with one of the maltsters is they want to do the right thing, ie get good quality malt barley and are willing to work with producers to get it.

How much? lets do a contract farmer to maltster.....

[parsley]

real or mock?

[nakodo]

They tell me "lets do a minimum price" based on the PRO and lets agree on a seperate contract for a market based premium over feed prices.....

[Fransisco]

<blockquote>As far as I know, the CWB makes and signs all the handling agreemnets with the maltsters.

The Government does not sign the contract with the Maltster,

Would you agree?

Parsley </blockquote>

True enough, but does the CWB not sign on the governments behalf?

I am all for holding the CWB accountable, this is certainly their mess they should bear responsibility and full responsibility if that is possible. I'm just not so sure it's possible. The question is who is responsible for what and when and in what circumstances? How much of that is spelled out in the act and in the boards by-laws?

I don't know if this is a good analogy but what happens to an employee who racks up all sorts of bogus expenses on a company credit card? He either pays it back or is out on the street,but either way the company still has to pay off the credit card bill.

Now if it's the employee's own credit card and then he later bills the company for expenses its a different story. The company can say screw this, these aren't legitimate expenses you're on your own.

[chaffmeister]

Let’s back up a little.

Prairie Malt (Cargill) is in the business of making malt for brewers. CWB or no CWB, single desk or no single desk, they are in this business. When a brewer wants to contract for some malt, Prairie Malt has two choices: (1) tell the brewer they can’t sell them any malt because they don’t know what’s going to happen with the CWB (at the time, the plebiscite hasn’t even taken place), or (2) negotiate a deal with the CWB and sell the malt to the brewer.

It’s a commercial decision, either way. Either you piss off your best customer (a certainty if you say no to a sale - and for no apparent good reason at the time of the sale) or you might get embroiled in a mess (a definite unknown). You suspect that, if the government goes ahead with the open market, there’ll be a transition but you are uncertain just how it will play out. The CWB probably figures the same.

With the information in front of you, you make the decision to sell the malt and price the barley from the CWB – just like you have done a gazillion times before. You certainly don’t tell your customer you are unable to do business.

Fast forward to today. The plebiscite results are in and the government is going ahead with the open market. Cargill has undoubtedly been in discussions with the CWB about these contracts. Cargill wants to make sure its price is secure on the barley it has “bought” from the CWB. I heard that the CWB has suggested that it would not honour its new crop contracts in an open market – basically it threatened to walk away from them. Maltsters would be totally exposed and looking at potentially large losses.

There’s a very good reason why Cargill has been talking to the government about this. Actually, there are a few.
(1) LIKELY, the CWB told Cargill its hands were tied – and that there was no way it was going to run a deficit (by paying competitive prices) in order to make sure farmers delivered on these contracts. (Which it should.)
(2) The government guarantees all CWB payments.
(3) The CWB didn’t decide to shut down the single desk – the government did. When the rules get changed midstream, you go to the rule maker. In this case it’s the government.
(4) If the CWB is “out of business” it can’t roll contracts ahead like its done in the past.

Cargill is trying to protect its bottom line, and when this much money is at stake, you can be certain it will use every arrow in its quiver if it has to. I've seen no evidence that Cargill is trying to enshrine the single desk. I’m going to guess that Cargill would be very happy to see the CWB raise the initial and the PRO on 2row malt barley to entice farmers to deliver. No delays to the open market, no fuss, no muss. But barring that, it would be expected to go to the agent of change causing this situation – the federal government.

Cargill asking for the delay is just another way of asking the government to force the CWB to honour its contracts.

It seems to me that most farmers were clearly on-side when the government compensated farmers when it took away the Crow. To me, this is exactly the same situation – except the injured players aren’t farmers, they happen to be maltsters. In both situations, the government changed the rules, and someone was going to be financially injured. In both situations, the government should make reparations. In my view, the best approach would be to force the CWB to honour the contracts and to pay competitive prices to do so. If it runs a deficit, so be it. The government guarantees are still in place.

I don’t know how this is going to play out, but you can be sure that the government better think about the market environment its creating. If Chuck makes the wrong decision on this one, it could impact whether we get any more malt houses built in Western Canada. It’s called “sovereign risk” and you can be sure multinationals assess it along with other forms of risk before they enter a new market.

[parsley]

The CWB sold the malt barley at firesale prices.

There is enough malt in the bins to fill the contracts.

The farmers will not deliver the barley at firesale prices.

Farmers no longer have to sell at firesale prices.

When Cargill lobbies the Government to try and get a years' extension on the single desk, they have clearly sent out the signal that the single desk serves them best. The single desk also serves the Board itself best.

Therefore, neither Cargill nor the CWB have the farmers interests at heart, which we have known all along. Cargill and the Board are under thew covers

Cargill does not want to take the contract-loss, but they would like the farmer to be monopoly-forced for another year, so the farmer has to take the market loss.

Hmmm.

Now, let me see....

[parsley]

If the "contract is forwarded into another year, the problem is solved. This has been done before. Forwarding is not a contract breech either. Chaff seems to think the CWB will not comply.

A little reminder:

"1. Sections 3, 6 and 18 of the Canadian Wheat Board Act state:

Duty to comply

3.12 (2) The directors and officers of the Corporation shall comply with this Act, the regulations, the by-laws of the Corporation and any directions given to the Corporation under this Act.

6(1)(j) to act as agent for or on behalf of any minister or agent of Her Majesty in right of Canada in respect of any operations that it may be directed to carry out by the Governor in Council

Directions by Governor in Council

18. (1) The Governor in Council may, by order, direct the Corporation with respect to the manner in which any of its operations, powers and duties under this Act shall be conducted, exercised or performed.

Directors

(1.1) The directors shall cause the directions to be implemented....."

Fairly clear in a court of law, wouldn't you say?

Parsley

PS I'm surprised Cargill picks the CWB over farmers. It will come back to haunt them, I believe.

[chaffmeister]

Parsley: You said: “Farmers no longer have to sell at firesale prices.”

They never had to when it came to malt barley. They’ve always had that choice.


You said: “When Cargill lobbies the Government to try and get a years' extension on the single desk, they have clearly sent out the signal that the single desk serves them best.”

I disagree. You can’t rationally leap to that conclusion. This arguable has nothing to do with the single desk – its all about CONTRACTS and honouring them. All they are trying to do is make sure the contracts on the books are honoured. As I said before, that includes the CWB PAYING COMPETITIVE PRICES TO FARMERS TO ENTICE THEM TO DELIVER to satisfy the contracts. How does that injure farmers? How does that make Cargill the enemy?

What are contracts for Parsley if not to provide commercial security of transactions? If you have someone threatening to be non-compliant with a contract, what do YOU do?

You also say: “Cargill does not want to take the contract-loss, but they would like the farmer to be monopoly-forced for another year, so the farmer has to take the market loss.”

It seems you don’t understand the current malt market. The farmer does not take any “losses” if they don’t deliver. And they have that choice. Right now they are exercising that choice – they are selling into the feed market and not to the maltster. So, if the CWB paid up COMPETITIVE PRICES farmers would actually see COMPETITIVE PRICES. This would solve Cargill’s problem too. How is this bad for farmers?

You say: “I'm surprised Cargill picks the CWB over farmers.”

In Roberta Rampton’s article, Cargill is quoted: "We can push (the date) back, or the wheat board and the government, I suspect, will be held fully accountable for the liability this is going to create in terms of costs," Meijer said.

<b>The wheat board and the government will be held fully accountable</b> How do you figure Cargill is choosing the CWB over farmers when they state that the CWB will be held fully accountable?

Don’t get me wrong here – I’m not in favour of extending things any more than you. But don’t aim your vitriol at Cargill. We all knew there’d be bumps along the way, especially early in the transition. There is no evidence at all that I can see that says Cargill hates farmers, or are doing this to harm farmers, or anything like that. Further, this does not even suggest that Cargill favours the CWB system.

[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