Wanted: More Cheap Barley

[Burbert]

If I was a cowguy, I would be rubbing my hands with glee, finally the export malt market for barley has been destroyed, more for me and bessy. Wow, you ain't seen nothing yet, all this cheap feed suddenly available! Confusion at home, confusion abroad, can't wait. I drove a hard bargain last year, cause of all the grass this year it will be even tougher. Way to go Alberta Barley Comm, you guys really know what is good for us and are earning every single levy dollar that you take. Agriculture and marketers are stupid, stupid, stupid, stupid....the FORKERS have prevailed, glory be, now all the race horses can be happy, no wonder the guy needs security even on civvy street.

[parsley]

Gee Burbert, there is a huge demand for malt barley thorughout the world, it's just that the CWB won't give farmers the export license so we can get the malting barley out of the country.

Make sure you get your CWB friends to sell to the CWB right now, for how much a tonne? They will hardly want to receive the open market price come August 1, 2007.

Parsley

[chaffmeister]

Kamichel:
Responses to your comments – one by one.

<i>I know that law changes policy changes have positive as well as negative effects on industries.</i>
Just like the Crow. And the Feds made reparations to both farmers and processors.

<i>What I cannot figure out is how the malt industry is negatively affected by an open market.</i>
They’re not. This is a positive change. Just ask them. The negative impact comes from the open contracts with the CWB in the transition (as a result of the policy change) and the lack of honour at the CWB.

<i>I thought the Maltsters always wanted to deal more direct with producers.</i>
They do.

<i>The CWB's claim to fame is that they get better prices for producers.</i>
Evidence is to the contrary.

<i>On the flip side maltsters would pay more, so why then would malsters think that they will be harmed by an open market?</i>
They don’t.

<i>In fact an open market would have supplied the malt that was imported from Europe in 02 03, likely for a lower cost to the maltsters.</i>
If we had an open market in 02-03, the maltsters would have been bidding increasingly better prices throughout the year. They wouldn’t have needed to import.

<i>And I will say it again, I do not believe that there is much if any unsecured grain, I believe the malsters contracts have all the commitments from the farmers.</i>
I don’t have that information. Would be good for this discussion to have it.

[AdamSmith]

"Oh What a tangled web we weave when first we practice to deceive."

This quote just came to mind when I read the following from Flaten,

Gord Flaten, the wheat board's vice-president of marketing, said this might solve the problem from the malting industry's perspective. But if his organization bore the brunt of these liabilities, it would incur "huge financial losses," which it cannot afford and which would come directly out of farmers' pockets. (The wheat board deducts its costs from payments to Prairie farmers for the grain it sells on their behalf.)

"I think it's important to point out that the wheat board doesn't have a bunch of money to cover losses like this," Flaten said. "The only money we have is money that is owing to farmers (from the sale of their grain)."


Doesn't this just sum up the value of the cwb to farmers? They spin and they spin and they spin but at the end of the day the only real deal they can offer farmers is either A) take a loss or B) take a loss.

That's the real choice the CWB offers farmers.

Does Flaten Line offer a profitable deal to farmers? Nope, because there is none to be offerer by the cwb the only thing they can offer is deception and disapointment.

As far as the malsters are concerned, I realy don't have much sympathy for them.

Considering both parties knew the odds were very high that the marketing regulations concerning barley would change come Aug.1 The Malsters should have practiced a little caution before building a years business plan around a deal with the cwb which they had to have known was almost impossible for the cwb to fulfill considering the negotiated price.

I equate it to whinning because the Rolex you just bought from the trunk of some guys car doesn't work and it really isn't a Rolex.

In my opinion the malsters should just suck it up and move on with life an learn a lesson from this, that dealing with shaddy and dishonest characters never pays.

As far as the CWB goes, well there really is no hope for them. They are what they are and they will never change.

[AdamSmith]

What's the difference between the two following negotiations in buying barley?

Scenerio #1

CWB salesman: Hello, Mr. Malster, this is the cwb calling, I'm sure you have noticed the appreciation in the price of barley lately but we would like to reasure you that we will still be able to supply you with all the barley you will need for the 2007/08 season at 2005 prices.

Malster: Ooh goody, I'll take 2 million tonnes.

CWB salesman: Excellent!

Scenerio #2

Some Guy on the Street: Hey! Buddy! Want to buy some barley? Cheap!

Malster: Ooh goody, I'll take 2 million tonnes.

Some Guy on the Street: Excellent!

[parsley]

TENDERS: FARM GRAIN TRUCK BEFORE AUGUSI 1, 2007

Specifications:

One large tarped green farm grain truck, with a pressure-sprayed clean box, in the Ottawa region, with interprovincial license plates, for delivering large amounts of Government payouts, approximately $2B, as compensation for an anticpated loss, to grain companies across Canada.

Load will not exceed 2 billion one dollar bills.
Guarantee:
The compensation to grain companies will be forthcoming even if a loss should not be incurred, in order to prevent any disintegration of the well-established symbiotic relationships within the the grain trade

Considerations:
1. This tender is designed to meet the needs of the Environmental community by requesting a GREEN truck.
2. This tender is designed to meet the needs of the farm community by specifying a farm truck. Gas expenses and $7.00 per hour will be paid to the farmer winning this lucrative contract, and earnings will be pooled in the 07-08 malt barley pools.

This tender is subject to passing an RCMP criminal check.

Apply in writing to:
graintraitors@theboard.wnp

Parsley

[Burbert]

parsley; Gloat till you bloat, from the looks of it, you seem to think that you have the CWB on the ropes and are going for knockout punches, with all the weird rants and raves that currently appear on the barley issues. Who should we sue if barley prices continue to drop and drop, if the malty's don't start beating down our doors? Oh well, to bad, so sad the farmers lose again, just when, things seemed to be poised to get better, even with the involvement of the CWB..... @#$%$#$$%$%%$$% Bye the bye how is the world of organic malt progressing these days, bet it is just ducky eh!

[AdamSmith]

Chaffmeister, are we talking only about 06/07 malt barley contracts? or are we talking about 07/08 and beyond malt barley contracts?

Because if this is only about 06/07 contracts, what's different about this time than every other time the cwb returns have been poor compared to the domestic feed price, and farmers welched on their contracts and delivered for better money into the open domestic feed market?

Were the malsters demanding compensation in those other years?

This all just seems too bizarre, and to have such a staunch open market advocate like yourself defending a bad deal for farmers is a bit disconcerting.

So as far as 06/07 goes, the claim for compensation is completly bogus at this stage because how can any claim be made until the crop year ends and you know what the level of loss actually is and if there is in fact any loss at all, right? And if there is a large loss, get it out of the contigency fund that way it leaves less there for the cwb to fiddle with.

As far as 07/08 and beyond, the malties were nothing but suckers if they thought the cwb could deliver on any terms that may have been so sweetly negotiated.

Either way it's time for the Cargill's of the world to turn the page and get on with business and start building goodwill towards the growers of the barley.

I'll support Cargill when they are acting in the best interests of farmers, but in this instance they clearly are not being seen as acting in the best interest of farmers.

But I guess when it comes to the malting industry, old habits die hard.

By the way if the malsters can sue for damages because of non compliance to a contract,

Can I (as a farmer) sue the malsters for non complance as well, when I stored accepted malt for over a year only to have them refuse to take it in 2005/06 and I lost good opportunity to sell earlier in the feed market?

I wonder how many millions of farmers dollars have been lost under that scenerio?

[chaffmeister]

AS:

There are clearly two issues here: first, the issue of the ridiculous, effectively unmanageable contracting scheme that the maltsters have had to put up with under the CWB. And second, the issue of how Cargill et al are approaching it through the transition period.

<b>FIRST:</b> It doesn’t matter which crop year we’re talking about – 06/07 or 07/08 – or 02/03 for that matter. The CWB contracting scheme for processors has been flawed for years. Prior to 02/03, it worked reasonably well for maltsters because the feed market never really threatened the malt market. But in 02/03 the maltsters got their first real taste at how poor the CWB system is. And they’re getting it again right now.

Think about it for a moment - as a maltster. You’ve sold malt and “covered” it from the CWB (or so you think) – back-to-back. No other tools or price mechanisms are in play – or even available. And as you try to complete the purchase/sale, you find you have to pay more than you contracted for with the CWB - but of course you can't raise the price of the malt to compensate. This comes right out of your bottom line. The price on the original contract with the CWB is meaningless.

In what other industry are materials bought under contract but the “agent” setting the price for the suppliers is not held accountable when the suppliers choose not to supply at the negotiated price?

I’m sure you remember that no less than three US malt companies were considering building malt plants in Western Canada a while back. What happened to the Canadian maltsters in 02/03 at the hands of the CWB system clearly played a role in putting an end to those plans. Who would invest under those terms? Would you?

<b>And Parsley and others think the maltsters want to keep this system around forever!?</b>

Before you suggest how stupid the maltsters are, consider this. As a maltster, you’ve never had a problem with getting barley from farmers under the CWB system before. The malt premium always took care of that. And even if you’re smart enough to think that it may happen sometime, you’re far too busy running a business to try solving a problem that has never occurred before and may not ever. And even if you’re smart enough to come up with a solution, you still need to get the CWB to agree to make the appropriate changes. And that’s gonna happen real quick, isn’t it?

<b>This is not about keeping malt barley prices low.</b> Those that think the CWB “gravy train” is all about low prices should stop and think.

How can you acknowledge the existence of the “malt premium” as we’ve seen for years and years, and yet also make the “leap of suspicion” that the maltsters want the CWB around to get cheap barley? How does that add up?

Do you think that while the domestic brewers are “complaining” about <b>high malt prices</b>, the maltsters are actually enjoying <b>cheap barley prices</b>?

If the maltsters have been getting “cheap barley" all these years, why has Canadian malt capacity utilization and exports dropped? With “cheap” barley, shouldn’t the maltsters be humping along at capacity and exporting like hell? Shouldn’t "cheap barley" attract new investment?


<b>SECOND:</b> Why has Cargill (Prairie Malt) and Canada Malt chosen NOW to complain and threaten further action? And why are they trying to delay the open market?

I can’t answer that directly. But I’m pretty confident that they tried everything they could to get the CWB to comply/assist/honour their contracts – before going to Ottawa.

If Cargill is trying to get the open market delayed to get compliance and closure on <b>existing</b> contracts – I say go for it. It is clearly not the best route to take but I don’t see that as Cargill’s fault. The feds clearly did not factor this event in their “transition plan” and seem reluctant to satisfy the needs of the market through the transition. And the CWB seems blind to any culpability or responsibility. BTW – as I’ve said before, the most favourble outcome would be the CWB paying market prices to farmers for new deliveries of malt barley to satisfy existing contracts. (And this should be done without lowering the PRO or the ultimate pool return.)

The policy/regulation change by the federal government has created a situation where the CWB is taking a position that it can’t (or won’t) do anything to help the industry through the transition. (Just look at Gord Flaten’s comments.) Under the circumstances, where is Cargill – or anyone else in this situation – supposed to go to get relief from a change in policy/regulation/posture, etc? At a bare minimum, Cargill’s action has gotten the industry focused on the issue and has vilified the CWB further. Is that such a bad thing?

Now if Cargill is trying to get the single desk extended for some form of corporate gain beyond existing contracts, I certainly would not support it. But without hard evidence that’s a “leap of suspicion” that I can’t make.


TAKE NOTE AGAIN: This is not about wanting to pay farmers less than what the stuff is really worth. It’s about managing a business in an unmanageable environment (the transition to an open market).

As for Cargill’s “claim” for damages:
Why are you guys so upset about Cargill wanting to claim with the government or the CWB for losses? “Bogus” was the term you used. But isn’t it better than delaying the open market? And doesn’t it tell you that Cargill is considering its options and isn’t stuck on extending the single desk, as Parsley seems to believe?

And further, you don’t need to know the actual level of loss before you determine how it will be covered. If the government or the CWB protected the maltsters at the CWB-contract price, and the maltsters then went out and paid market prices, it would be a simple calculation, right? But think about this: if Cargill doesn’t get a firm idea of what the government and/or the CWB will do, there may be other options for them to consider that may not be as good for farmers or for the industry. (Remember in 02/03 the maltsters paid Danish farmers big premiums – not Western Canadian farmers.) At least the current discussions could eventually lead to farmers getting market prices for malt barley. If the idea of the CWB paying market prices were supported by farmers, it could be a reality much sooner than by fighting it (by attacking Cargill).

And I agree about using the Contingency Fund – much of which came from the barley pools anyway.

Re your comment <i>This all just seems too bizarre, and to have such a staunch open market advocate like yourself defending a bad deal for farmers is a bit disconcerting.</i>

First, I’m applauding commercial culpability and responsibility - as any staunch open market advocate would.

I don’t see ensuring a smooth transition to an open market as a bad deal for farmers. Neither the CWB nor the government is doing what is necessary. Under the circumstances, it makes sense to expect some bumps along the way.

Farmers are losing right now as there are some excellent market opportunities that few if any traders are grabbing because of the "transition".

What I find bazaar is that choice-farmers, immediately upon entering an open market, are vilifying those that they’ve yearned to work directly with for so long. Wouldn’t it make more sense to push together in the same direction – toward a smooth transition to the open market?

I don’t see how Cargill’s natural reaction to being painted into a corner by the CWB and the government is any indication of being anti-farmer.

All I am doing is supporting the idea of an open market – one where contracts mean something and all the players are free to act in their own best interests. And thankfully, there are usually a number of options for them to select from. Now I only hope that this government eventually sees that its posture on this very topic will go a long way to demonstrate the type of market we have. And hopefully it will do the right thing to encourage more investment in the future.

So far it has failed.

[parsley]

Thanks for identifying one of the problem, and providing the answer.

PROBLEM:
"I don’t see ensuring a smooth transition to an open market as a bad deal for farmers. "

ANSWER:
"And I agree about using the Contingency Fund – much of which came from the barley pools anyway"

I provided the translation and encapsulation, I hope you don't mind, considering the cFund is considered by some as public domain.

TRANSLATION:
Taking money out of the contingency fund means FARMERS PAYING.

ENCAPSULATION:
So, if there's a problem, some want to let farmers pay because Cargill needs a break. So does Pioneer and P&H. The CFund isn't for farmers anyhow.

Parsley

[chaffmeister]

Parsley - follow the money.

Contingency fund was built by "taking" money from farmers.

Using the contingency to PAY FARMERS current market prices for malt barley puts this farmers' money back into farmers' pockets.

And this is a bad thing?

[JohnKenneth]

chaff, you provide some valuable insights and obviously have done a lot of thinking about the transition of the barley industry. but amidst all the detail and opinion, you fail to convince me that the malting companies didn't take a big, stupid risk in buying and re-selling that malt for 07/08 in the first place. and yes, i understand about back to back sales and the rest of it - point is the regulatory change was known before the cwb started contracting 07-crop barley.

not a big deal; just a simple difference of opinion, but in reading your post carefully a light bulb finally went off in my head about what's funny-sounding in some of your posts - you are not or ever have been a farmer. not saying you don't sincerely think you have our best interests at heart, you just know and care a lot more about the 'industry', private commercial companies in particular, than the perspective of a farmer-seller.