from an Indian newspaper

[sask]

NEW DELHI: The State Trading Corporation (STC) is
likely to invite tenders this week for the import of 1
million tonnes of wheat to as measure against a
possible shortfall in this year’s procurement for the
Central government’s PDS and welfare
programmes, as well as for its food security needs.

This would form part of the 3 million tonnes of
wheat that food minister Sharad Pawar has already
said the government will import this year to bolster
its stocks. Recently, an empowered GoM told the
Cabinet that the Centre should place a cap on five
million tonnes of wheat imports overall this year.

The decision to go in for wheat imports for the
second consecutive year running after a prolonged
six year gap is viewed as ringing in a regime of
regular imports from now on in view of low yields in
comparison with burgeoning demand from a
ballooning population.

Sources said the STC’s move would be separate
from any wheat imports that procurement major
Food Corporation of India (FCI) may choose to do
using the call option in the global futures market.
That move, interestingly enough, is perceived by
the government as more to do with sustaining an
impression of abundance of wheat in the domestic
market to keep wheat prices down than to bolster
the Centre’s buffer stocks.

Already global wheat prices are in tight market—
uncertainty still prevails over Australia’s output this
year October and Russian wheat is yet to come into
the market—and have reportedly risen by $20 per
tonne over the last two days on news that India is
likely to enter the market for big imports.

Import prices currently reign in the range of
$225-240 a tonne cost and freight (c&f) but it is
expected that this can go up by 10-20%. Now, with
speculation over a significant shortfall in Australia’s
wheat production, world wheat prices are expected
to be propelled higher in the global market. That
would spell a strong likelihood that both cash and
futures markets will firm up.

For India, it would mean paying more for imported
wheat through any route, futures using call options
or through the spot market. At 15-16 million
tonnes (mt), Australia accounts for about 15% of the
global wheat exports but shortage apart, this year,
the carryover stock is a shockingly low 2.4 mt.

Among the companies that have already shown
immense interest in the likely imports by India are
the Canadian Wheat Board (CWB) which is
understood to have had a meeting with the food
secretary and FCI officials recently, the AWB and
Cargill. The US government has also been mounting
pressure on the Indian government to relax its
imported wheat quality compliance norms.

“The very possibility that India is planning to import
substantial quantum of wheat is likely to trigger off
competitiveness in price among companies and we
hope to use that to our advantage,” sources said.
Using the call option while sourcing wheat in the
global market was suggested by the empowered
group formed by the UTI Mutual Funds to coin a
comprehensive grain import policy for the FCI.

There are some reports that the FCI has chosen to
invite global bids under the call-option route to buy
1.5 million tonnes wheat. According to the reports,
the FCI plans to enter into two contracts of one
million and half million each, timing wheat imports
for June.

Entering the global futures market was part of the
overall new procurement policy mulled by the
government last year as well. As part of that, it was
suggested that import prices for wheat (foodgrain)
should not exceed more than 15-20% of domestic
wheat prices.
In comparison with added storage and
transportation charges for domestically procured
wheat, that would mean that imports at that level of
price would still be competitive and economical for
the government. Above that, however, it was felt
that domestic procurement would make better
economic sense.

[kamichel]

Could this mean some fixed pricing opportunities for us? And what types of wheat do they want?

[parsley]

The StarPhoenix (Saskatoon)
2007.05.02

Barley demand brews; Beer companies urge farmers to grow malt quality crops

Canada's beer companies put out a news release this week saying they want Prairie farmers to grow malting barley.

Considering that in an average year more than two million tonnes of malting barley are selected from barley grown by Prairie farmers -- and those farmers are expected to increase seeded barley acreage in 2007 -- encouragement from the beer industry may seem a bit unnecessary.

Monday's release quoted Howard Collins, president and CEO of the Brewers Association of Canada, as saying the association is committed to keeping "malting barley a viable alternative to other crops and ensuring that Canadian malt barley is globally competitive."

Canada's 14 breweries buy up about 350,000 tonnes of the malting barley selected, with the rest sold to global markets, the release notes. It concluded by saying Canada's brewers are "committed to forging stronger relations with growers and building value chains."

University of Saskatchewan agricultural economist Richard Gray says the system may some day evolve where beer companies pay a premium to farmers, but he says currently there is no mechanism for that.

Even if the brewers have to pay extra some day to encourage production, Gray says barley prices don't make a huge difference in the end price of beer.

"A bushel of barley makes about 300 bottles of beer, so there's 1.5 cents worth of barley in a bottle of beer," he said. "If that doubles, they (brewers) should add a cent and a half to a bottle of beer, but you could expect it to go up more than that."

A controversial plebiscite this past winter has removed the Canadian Wheat Board (CWB) monopoly on malting barley sales both domestically and abroad.

In the wake of the plebiscite, the CWB is refusing to price barley into the next crop year, which begins Aug. 1. Gray says that's adding to the uncertainty about the type of barley being grown this spring.

"There's a lot of higher-yielding, non-malt varieties out there and that way your yield will offset the fact that you won't get a malting premium," Gray said.

Saskatoon commodities expert Larry Weber says the news release makes no mention of any actual cash that could flow from brewers to encourage farmers to go to the extra trouble and expense of trying to grow malt barley.

In fact, Weber says the news release from the brewers misstates the actual size of the malt barley crop.

"They don't produce two million tonnes," Weber said. "Farmers produce nine million tonnes of malting barley, of which two million gets selected for malt, and these guys (Canada's breweries) get to pick the cream, or 350,000 tonnes, of that."

However, one brewing executive says there is a reason for brewers to send an encouraging word to farmers.

Ron Waldman, president and CEO of Saskatoon's Great Western Brewing Company and a board member of the Brewers Association of Canada, says the brewers association is only taking the first step to "open a dialogue" with farmers.

He says Western Canada remains one of the best places in the world to grow top-quality malting barley, but the beer industry is worried recent trends, such as farmers growing grain for biofuel production, will affect traditional agricultural land use.

"We cannot allow a system to evolve without having our voice heard," Waldman said. "Farmers have been growing and we've been brewing beer from the finest malting barley in the world.

"That rich history and that rich opportunity is not going to go away."

Jack Foster, who is in charge of barley procurement for Prairie Malt in Biggar, says grain and malting companies are just trying to encourage farmers to stick with the crop in a confusing year.

"Realistically, there is a shortage of barley in Canada and in the world for malt quality," Foster said. "So there's a hell of an opportunity for producers and we're saying, 'Don't miss out on that opportunity just because of uncertainty.' "

In the CWB system, export and domestic malting barley was pooled for farmer payouts, so an individual producer had rail freight rates to Vancouver deducted from their malt barley payment even if they grew their crop within sight of the Prairie Malt facility.

Under a free market, Foster says farmers will be getting direct signals about incentives being offered by grain buyers or by malting companies, whether that be Prairie Malt or Canada Malt in Calgary.

"Somebody growing barley a little south of Biggar should make more money trucking it to us than trucking it 300 miles to Calgary," Foster said.

Gray, a co-author of a past study that showed the former CWB monopoly was collectively worth about $59 million annually to Prairie farmers in recent years, doesn't expect farmers will end up gaining as much as the malting and beer industry in the post-CWB world.

In a free-market situation, Gray says farmers will see their neighbours as competitors.

"Under those conditions, are you going to let your neighbour sell his malting barley for a premium and not offer yours at a competitive price?" he said. "I doubt it."

mlyons@sp.canwest.com

[BennyHin]

Does this mean that once the CWB is out of the barley business that the price of selected barley FOB Vancouver will be at par with the price FOB Biggar? No freight cost to port anymore? (as Homer Simpson would say... Woh- Who!


By the way, why is Canadian exported NH3 selling at $200 per tonne cheaper in ND and MT than Southern MB, SK and AB? I thought we had marketing choice with this commodity? hhhmmmm?

[parsley]

Off topic, from the Globe and Mail...

"Montreal — French citizens turned out by the thousands at a Montreal school on Saturday to vote in France's presidential election."

“Even though I live abroad, what happens in France is important to me,” said Bourgine Soazig, a Montreal citizen since 2001.

......

This was the first time voters outside France cast their ballots before the mainland.

.....

"Meanwhile, French election official Emmanuel Marcilhacy said more than 33,000 people in Montreal, and about 46,000 across Canada, are eligible to vote."

Parsley