Ag Clearing House

[parsley]

The Western Barley Grower's Ag Clearing House project is just about to enter Phase III, which is the workplan phase. This segment will deal with building a business case, for example, what to charge per contract etc.

The first two phases dealt with building the clearinghouse; whereas this new phase is about creating the business plan.

Parsley

[JohnKenneth]

this is a great project, very worthwhile, but i wish they weren't focusing on barley. there are 10 other crops' markets that need this kind of support and development worse. for example, i've been shopping around mustard lately and can't figure out where to go or what to make of the bids and contracts, not to mention the buyers themselves.

[parsley]

It does NOT only apply to barley, johnkenneth.

So far, I believe that wheat, canola, flax and oats are involved, to what degree of advancement, I'm not quite sure, but they are involved.. There is also interest by players with very undeveloped markets such as, ie deer.

I think the clearing house would be ideal for organics, as well.

What a good service for both parties
...making sure one party delivers and the other pays!

Parsley

[charliep]

Just to confirm what Parsley said, the ag clearing house project was set up to work for all commodities where transaction risk is present (risk of someone not getting paid and making/taking delivery).

Feed barley would seem to be the first candidate but I am not sure that pulses might be a more obvious test model. Bottom line - will work for all ag commodities including livestock.

For those of you who are not familiar with the clearing house concept, the following is a brief description from last summer.

http://www.wbga.org/NV_AgClearS19.pdf

[JohnKenneth]

i realize it's being set up for all commodities, but have special crops processors been involved in the negotiations so far? small-volume crops like pulses, canary, mustard, etc. in addition to organics is where the problem lies. i don't worry about getting paid for barley or canola or oats and the prices in those markets are more consistent.

[parsley]

The Western Barley Growers Association have devoted time and money to this project. Doug McBain is the Chairman of the Project Management Committee for the WBGA Claearinghouse project.

His mandate should be to serve the barley growers first, in my observation. As an organic grower, I would not dream of expecting the barley growers to give priority to concentrating on organics instead of barley.

I'm just appreciative the WBGA is including organics if we are smart enough to move it forward for ourelves.

Parsley

[chaffmeister]

The WBGA received federal funding (Private Sector Risk Management Partnership - part of Ag Canada) to assess the Clearing House concept on barley only. Other farm/crop groups (wheat and flax growers specifically) have applied for (and received) funding to assess the concept on their specific crops. The project team is simply leveraging the work already done onto the other crops.

[charliep]

Just to back up a couple of paces, the project is sponsored and managed by the WBGA association but funded by the federal government under the private sector risk management program. The mandate was to not develop a risk management product for barley specifically but rather something that could be applied to any agricultural commodity. Strangely enough, the initial clearing house idea started with the cattle industry but their project moved more to cattle price and basis insurance (also an interesting concept).

The project management team (Carman Read - Project Manager and Russ Crawford/Sheldon Fulton - Designers) have done extensive surveys of all members of the farm community and from there commodity groups and have found wide acceptance for the concept. Can't comment directly on the pulse industry - would have to talk to the project team directly. There was recognition of the special challenges of the pulse industry and as you indicate, this may be where the program starts.

[Burbert]

Are we trying to reinvent the wheel? After all, I thought we all want to go it alone, you and me and our PC. The world is our oyster, I don't need or want any government sponsored support of any sort. My marketing agency, which already exists, by the way, is the CWB @$$%%##@#$%$%$ a steeringhouse, no way man, no controls, no more levies forget it!!!!!!!!!!!!!!!!!

[wilagro]

Yes, the "Grain Mafia Group" on this forum ARE trying to re-invent the wheel. And all along, I thought that the grain buyers were "our friends" and that we could "trust" them to be honest square shooters who had our best interests in mind at all times.

If they need a "clearing house", it would seem that they are going to have to cough up some kind of FEE for this service. What better group to oversee the whole project than the WBGA. I am sure that they can "take over" what the CWB was doing all along. You know, the same CWB that the WBGA tactics have practically destroyed.

[chaffmeister]

Burbert & wilagro:
Get a grip.

The clearing house does not replace the CWB nor would it be "overseen" by the WBGA. The WBGA simply saw a gap in the value chain that this could fill - and then acted on it.

The CWB itself is looking (positively) at the clearing house concept to see if it can be of benefit in its contracting programs.

Also - the Canadian Grain Commission is seriously reviewing it as a possible replacement / adjunct to CGC bonding.

If this replaced CGC bonding, and maybe replaced security requirements on futures deliveries at WCE, and maybe was used by the CWB as well on its contracts, then this would certainly prove to be a good thing. And a low cost one as well.

In addition, the clearing house could be used to back cash advances on deferred delivery contracts - beyond what the Federal APP program allows/provides.

Just ask anyone who was owed money by Naber Seeds just how well CGC bonding worked for them....

[charliep]

Just a gentle reminder that the CWB marketings only represents about 20 % feed barley production. They have no involvement in the domestic feed market.

Perhaps what you are suggesting is the CWB should handle all domestic feed barley including farm fed. Farmers who feed their own or sell to their neighbors should deliver to an elevator, get paid an initial payment, do a buyback at the CWB price of the day, sell into the domestic market and finally wait for adjustment/final payments. I am quite sure this process will put more money in farmers pockets.

Curiously enough, the CWB would likely be one of the first to use the Ag clearing house in backstopping their producer pricing options.

[charliep]

Mistake.

Not 20 % feed barley production. 20 % total barley production. As a residual market, the CWB has 0 % impact on the domestic feed barley market.

If you like the transaction protection of the CWB, contract and deliver to them. Chaffmeister also highlighted (with the caveats described) that delivering to a grain company offers similar protection (CGC bonding). Both these routes have costs too but is a way of reducing risk.

[parsley]

wilagro,

Continue to use the CWB. You wanted it. You've got it. Deliver that malting barley to them next week. You love it. Use it!

I am interested in the clearing house. Banks use clearing houses. Visa uses a clearing house.

You want the CWB. We know.

Parsley

[just_wondering]

As I understand the fee that they would be looking at would be around 50 cents/tonne. Not unreasonable at all to ensure delivery on both sides of a contract. as far as dealing with grain Co's it like Regan said "trust but verify".
It would be in the best interests for both sides of the clearing house to see success as it guarantees supply for the processor and delivery and payment for the producer a win/win situation

By the way we do need to reinvent the wheel the old one never worked in the first place

Good work of the barley growers to try and do something, and not just opine for the old days.