DePape/Morris Comment on Open Market

[parsley]

I will attempt to summarize some of their comments in Yorkton.

What are the Outcomes of an Open Market?

1. Increased trade with U.S.A.
2. Increased arbitrage between U.S. and Canadian markets.
3. Increased contracting with farmers.
4. Accurate and timely price signals.
5. Improved farm returns.
6. Lower cost marketing.
7. Increased investment in value-added on Prairies.

Parsley

[parsley]

What are some Producer Opportunities in an Open Market?

1. Higher selection rate.
2. Producers will be paid for what they grow.
3. Mor malt barley being shipped premium to feed.
4. Shipping spread out over year.
5. More transparency in pricing.
6. Contracting directly with enduser.
7. Long-term contracting.

Morris will source for GunnarSpeck-Interbrau...He presently has 100,00 tonne minimum request, and it could go to 1.5M tonnes.

Parsley

[parsley]

Likely Outcomes of An Open Market

1. Increased demands on grain companies to finance inventories and manage risk.
2. Increased private investment in plant breeding and varietal development.
3. More niche marketing.
4. Greater demand for risk amanagement tools, improved liquidity in WCE futures.

Parsley

[Burbert]

parsley, You are talking to yourself now. Does this mean, you are a legend in your own mind????????????????

[parsley]

What are some of the Concerns with an Open Market?

1. Where are we going to get our price signals?
a). Winnipeg Commodity Exchange
b). Maltsters
c). Grain Companies
d). Private Service Providers

2. Contracts will have to have teeth on both sides or it won't work!

a)Representative sample is so very important. Good condition grain relative to sample.
b) Malsters have to accept barley if it fits the contracted specs.
c) Farmer must deliver or pay penalties related to covering the short.

Presntly, inventory control governs selections and this leads to rejections. We need specs governing selections.

3. What about Storing Barley for Later Delivery only to have it Rejected?

a) Need contracts specs deliver at certain dates at agreed upon prices.
b)Greater premiums for deferred months.

Parsley

[parsley]

Just relaying some information provided at the Yorkton meeting that is pertinent. I should have had this posted last week. It's not my information; rather,it is the information that Al Morris and John Depape provided.

Parsley

[parsley]

What kind of Contracts would be useful in an Open Market?

1.Pre-Seeding Contracts
2. Post-Harvest Contracts
3, Forward Contract

1. Pre-Seeding Contracts

-Production sets standards
-Discounts for food
-Differnet levels of malt quality
-Unpriced Contracts(forward contracts with just a basis attached)
-minimum price contracts

2. Post Harvest Contracts
-Forward contracts (set volume, grade, specs, storage)
-Unpriced contracts
-Minimum priced contracts


3. Forward Contract

- High end malt barley contract at $40 over WCE futures delivery
-Discounts
#2 malt applicable at $30 over
#3 malt applicable at #20 over
High end feed applicable at $10 over

Futures allow you to store grain.

Sept delivery $40 over Oct
Oct/Nov $40 over Dec
Jan/Feb $45 over March
$47 over May


Parsley

[parsley]

How do we move forward into an open market?

1. Develop good relationships.
2. Value for quality production.
3. Representative samples.
4. Negotiate firm delivery schedules.
5. Negotiate storage payments.
6. No altering.
7. Penalties defined.
8. Negotiate a schedule for lower malt and/feed option.


Other Mentionables:

The Western Barley Grower's Association Ag Clearing House secures transactions. Defines delivery rules for both including ways of soritn out grade/quality disputes.


Malt barley buyers give incentives to contract.

Different companies may require different agronomic requirements and different varieties.

In China, a small malthouse requires 20,000 tonnes in a batch.A large malthouse requires 550 tonnes of malt in one batch!

There is a 14.8%/growth per year in China!

Vietnam has a 14-16% annual increase of beer consumption They have a young population.


Parsley

If I've made errors in my notes, for those attending the Yorkton meeting, feel free to correct them

[cropduster]

I see by those Asian numbers it is completly understandable why Cargill is upset with changes to our system.Long term supplies at $2 bushel, to the farmers here,would have me unhappy too!! NOW,there I go.....thinking it`s about marketing!!!!!

[wd9]

Parsely, do you know of the status of the Clearing House project that Carmen and crew were working on?