Defaulted Malt Barley Contracts

[classicalliberal]

I have heard a lot about last year's $6.50/bu malt barley contracts are not being paid however, that same barley can go into the pool or the cash plus contracts with the CWB. This makes me think that the maltsters are defaulting on the barley that they bought for this year because the price is lower. Anyone help me out on the details of this as I have never had a malt contract before and sounds to me like I don't want to ever have one.

[charliep]

From the CWB district meeting, maltsters have been honoring the CWB cash plus contracts. The ones they have been walking on is the production contracts (promises if you like) not backed by cash plus.

I did ask the question about what happens with a cash plus contract if a farmer is not able to fill the contract given it is a 3 way contract (actually 3 bi lateral contracts - CWB with maltster, maltster with farmer, farmer with the CWB). My understanding (still not 100 5 sure) is the contract becomes null and void. But will note that I suspect the maltster still have the contract with the CWB. Not sure on the dance. Farmers will also have a better idea around terms including whether an act of god clause is included.

[Hopperbin]

http://www.ag-chieve.ca/drozd_report/barley_feb10/barley_feb10.html

So your saying David Drozd is full of shit, interesting.

[Hopperbin]

Charlie I am probably wrong, but maybe you can educate me on the Malt Cash Plus.
If the farmer could not deliver would he have had to make up the price difference if it worked against him?

[classicalliberal]

Unless there is an "Act of God" in the contract with regard to production, you will have to fill the contract either with grain or the difference in the cash price between the contract price and the buy-in cost. If the cash price on the contract is higher than the market, companies will just assume that it will be easier for you to find it from local farmers or from somewhere else where you can make some money buying it in. Otherwise they will go out and buy in the cash or it could be a combination of the difference in cash, futures and currency like in oats, soybeans and corn. My question is that if the so-called barley is chitted, why can't farmers have a chance to fill the contracts with grain that will make the specs. I would really like to read one of those contracts.

There are some companies, mainly in the US but some in Canada that are members of the National Grain & Feed Association which has grain trade rules and arbitration. The actions of these maltsters, Anheuser Busch being a member of this association, are contrary to the grain trade rules and farmers should take them to arbitration. The arbitration is there to avoid the costs of the court system and beside, what does a judge know about grain business or malt barley. It is people in the industry and they will rule in the favour of the farmer under this circumstance and the grain company will be ordered to pay the difference between today's price and the contract price.

[charliep]

Hopperbin

I suspect that hell would freeze over before malster paid out on a contract even in the case of no act of god (realizing there may be a farmer price top up if prices went higher). I also think a malster would not allow someone to reassign a malt barley contract to a neighbor. As a farmer highlighted this afternoon in telephone call, the contract is written by and for the malster (also applies to an exporter but they have more alternatives in terms of a blended product).

If there is an act of God, then the responsibility for the maltster is first right of refusal but once the refusal is granted, the farmer should have the ability to submit samples to other buyers/be released from their commitment.

Had the discussion a year ago but will ask the question again - What needs to happen with malt barley to make the contracts more liveable for farmers and maltsters?

[bgmb]

Yes this happened to me cost me about 200,000

[Hopperbin]

BGMB What are you referring to, the Cash Plus Price was higher this spring than the current price, so in that case you should be let out of the contract no charge. Am I wrong??? I was charged 10 grand on a fixed price contract of Soft Wheat that I could not find a delivery point for and at year end it cost me the 2 dollars per bushel with no option to deliver new crop on the contract one month later. I was pissed still am and always will be.

[norton17]

They are looking for every loophole to get out.
We had some barley that was 0.1% chitted that they rejected on the $6.50 contract...but accepted it if we put it in the pool.

We had some that made all qualifications of the $6.50 production contract, but they strongarmed us by saying that they wouldn't take it until July 31st...and if anything didn't meet specs it would immediately be sold as feed. We decided to put the rest of our barley into the CWB pool too, b/c it sounded like they were going to find a way out of the $6.50 stuff anyway.

We've bent over backwards to accomodate them, and they keep bending us over. We have now moved 12 loads of barley out of about 75. Pretty pathetic by Apr 3rd.

[bgmb]

No I mean I had bly contracted at 6-6.50 that met specs. But they wouldn't accept It So now I get to sell at the lower price.

I didn't have to pay 200,000 but that's what they cost me by not taking the grain that was contracted.

[bgmb]

Another thought along these lines...

even though it will never happen it would be nice if all farmers stopped forward contracting. I know it lowers our price risk a bit but I think it lowers risk more for buyers and end users. They are the ones who benefit most from forward contracts not farmers.

This malt thing last year is a classic example, put out a big price to get farmers to seed acres then there is lots around and they don't have to buy the high priced contracted stuff. Make an excuse not to take it and buy the cheap stuff.

They didn't want another 2007 where they took barley that looked like rat shit.

[charliep]

Just curious as to how not contracting will help. The fact is that 4 mln tonnes out of the 11.8
mln tonnes of production (11 if you count w. canada) was selectable. I suspect what is
needed is better contracts, mechanisms for ensuring performance on execution and farmers
willing to stand up for rights by not growing the crop without reasonable guarantees around
acceptance/profit. Listened to a maltster from the UK at WBGA annual meeting in 2008 and
they have had to contract to guarantee supplies.

I did look at the video and was just commenting on what I heard at the CWB district meeting.
Even to bgmb and others - have companies waffled on cash plus or simply their production
contracts with guaranteed minimum prices? What does the contract say?

[bgmb]

I'm done talking about this, its time to move on....

Bottom line is allot of guys got screwed out of allot of money by maltsters this year.

Until we see some real contracts with discounts for specs.(like in the US) rather than arbitrary numbers any contract by a maltster won't be worth the paper its written on.

[bgmb]

Bgmb

Why would the malsters honor these contracts, when down the road they can buy the same barley from our good old CWB for 1.10/bus less.

If the losers in Winnipeg would've kept a $6.50 PRO all Malt contracts would've been honored.

They should've kept the $6.50 PRO, and made a $3.50 cash plus problem solved.

I know a bunch of guys in the Cash Plus are flaming mad I said this, but this would've saved all these malt contracts being broke.

They dictate the price.

[mcfarms]

Biggest issue with this ongoing problem and it's been happing for years is the inability of producers to have an independant 3rd party decide quality issues as the final arbiter of malt quality or specs under the current system is the Maltster.( Anyone know the testing protocol for chitting? Answer there is none) I would advise looking at the system and asking some hard questions on standards and testing protocol try starting here.


http://www.grainscanada.gc.ca/gscommittee-comiteng/bsc-sco-eng.htmls.